Presidential tax proposals will widen America’s wealth gap, Oxfam warns
Tax reforms proposed by Donald Trump would increase the gap between rich and poor and see the US slip below Greece on a global inequality index, researchers warn.
The US is already doing “very badly” at addressing inequality, but it could fall a further six places from its ranking of 23rd on the commitment to reducing inequality index if the tax plan is passed.
Compilers of the index, which was developed by Oxfam, spent a year looking at policies on taxation, social service spending and employment for 152 countries. “When you already have countries like Portugal and Slovenia ranking higher than the United States, we think that’s a concern,” said Paul O’Brien, vice-president for policy and campaigns at Oxfam America.
The Trump administration plans to slash corporate tax rates from 35% to 15%. With its parallel proposed cuts in individual income tax, the index’s researchers says this would see the US falling behind Greece, Spain and Argentina.
O’Brien said: “The reason we did this comparative index is in large part to challenge policymakers like President Trump to look to other economies and other societies; to give people smarter ways to give everyone an opportunity to lift themselves from poverty.”
The UK is ranked 17th, but comes 109th in terms of the proportion of budget it spends on education – just below Kazakhstan and Cambodia. In 2014, the UK spent 11.78% of its budget on education, while Zimbabwe spent almost three times that proportion. Achieving the UN’s sustainable development goals for education is estimated to require a 20% spend. The UK’s tax structure is ranked only 96th in the new index, on account of its relatively low corporation and income tax rates, but it rises to 33rd on tax overall because of its relatively robust ability to collect tax revenues.
Sweden is the country most committed to reducing inequality, with Nigeria – Africa’s richest country in terms of GDP – 152nd and bottom of the list. One in 10 Nigerian children still die before their fifth birthday, and an estimated 112 million of the 182 million population live in poverty.
Threaded through the new report are stark facts that explain some of the ways the US has earned its low ranking. In 2012, 43.3% of corporations in the US paid no federal income tax. US employers are required to provide zero days of paid maternity leave, while Sweden offers 480 days. The US federal minimum wage of $7.25 (£5.50) is well below the $10.60 an hour reckoned to be needed for a family of four to stay above the federal poverty line.
“Inequality is not inevitable but the direct result of a government’s policy choices,” said Max Lawson, head of global policy at Oxfam. He said rich countries particularly fall down on corporation tax: the G20 average has declined from 40% in 1990 to 28.7% in 2015.
“We only found one country which had actually raised corporation tax, and that was Chile,” Lawson said. “If we don’t do something pro-active about this global trend, we could see the de facto end to corporate tax in our lifetimes.”
The report also identifies successful efforts to turn around inequality in countries such as Namibia, where secondary education is free to all, and Palestine, which has the highest relative spend on minimum wage in the world – and also scores highly on labour rights. Austria, where at least 4% of staff must be classed as disabled in any concern employing more than 25 workers, tops the index’s employment rankings.
A woman and child in Lagos, Nigeria – at the bottom of the Oxfam index