Is a new tax on large fortunes feasible? The main economies are discussing it

Finance ministers met in Rio de Janeiro to discuss controversial plans for raise up to $250 billion (230 billion euros) through a new tax on billionaires.

Activists say it will be aA big step forward to solve the problem of inequality, although the Group of Twenty Major Economies (G-20) is blocked by the United States when it comes to approving the tax on extreme wealth.

The EU Tax Observatory proposed the new tax last year as a way to address loopholes in the current tax system, and last month the Brazilian G-20 presidency asked its researchers to to explain their plans in more detail.

“A progressive tax system “It is truly a pillar of our democratic societies,” Gabriel Zucman, director of the Observatory, told reporters when presenting his findings.

How much tax do the rich pay?

“The super-rich pay proportionally less taxes than other socioeconomic groups,” Zucman added, and his study cites the case of Holland, where billionaires pay less than 20%compared to a typical worker whose tax bill is close to 50%.

Zucman argues that a 2% tax on wealth would ensure that this segment of the economy will pay what is due, and that international coordination would prevent the global elite from moving abroad to circumvent it.

The plan does not violate national fiscal sovereignty, Zucman adds. Each country decides whether to participate, but can also raise rates to take into account wealth accumulated in jurisdictions that do not.

How much would be raised with a wealth tax?

In global terms, the $200-$250 billion that would be raised from some 3,000 contributors is not huge, as the United States alone raised more than $200-$250 billion. Four trillion dollars in taxes federal last year.

But Zucman argues that the new source of income will help fund vital issues such as health, education and climate change, and has many supporters.

Chiara Putaturo, advisor of Oxfam’s tax policy in the EUsays: “We have seen an increase in inequality,” citing figures showing that the richest 1% of the world amassed $42 trillion of new wealth in the last decade. “This is related to the unfair tax system.”

She is encouraged by the progress made at the G20, even if the formal conclusions of the meeting do little more than point to the existence of the Zucman report.

“Recognizing that this type of problem exists already It’s a good step”Putaturo said, adding that the tax itself “It takes a little more time to be designed and agreed.”

Which countries support a tax on large fortunes?

Although the plan was supported by ministers from important countries such as France, Germany and Spain, U.S. Treasury Secretary Janet Yellen cooled the idea in May. But earlier this year, the Treasury He also proposed a minimum tax of 25% for the extremely wealthy, which Zucman says is in line with his own plans.

The political moment that the United States is going through, a dilemma in this matter

Putaturo argues that Yellen’s public opposition could simply be due to the “delicate political moment” as the United States prepares for elections. Proponents of the estate tax are encouraged by the global agreement to impose a minimum level of tax to companies, who see it as proof that the concept can work, and is gaining political traction.

Speaking to reporters this week after being elected to chair the tax subcommittee of the European ParliamentMEP Pasquale Tridico praised Zucman’s work.

“Those who work are not rich… most of the inequality within our economies is not determined by work,” he said, citing the work of Thomas Piketty, a fellow economist who has also proposed a wealth tax.