World’s richest face tax squeeze after 40% run-up in fortunes
AMAZON.COM INC. founder Jeff Bezos has the resources to launch himself into space. Elon Musk does, too. In many ways, though, the world’s richest people left the rest of us behind long ago.
The world’s wealthiest 500 individuals are now worth $8.4 trillion, up more than 40 percent in the year and a half since the global pandemic began its devastation. Meanwhile, the economy’s biggest winners, the tech corporations that created many of these vast fortunes, pay lower tax rates than grocery clerks, and their mega-wealthy founders can exploit legal loopholes to pass huge windfalls onto heirs largely tax-free.
Now, a group powerful enough to challenge the supremacy of the tech titans is on the verge of taking action. The leaders of the Group of Seven, including US President Joe Biden and UK Prime Minister Boris Johnson, meet in southwestern England this weekend, where they’re expected to endorse a plan to plug holes in the world’s leaky tax system.
While the changes still need approval from a larger group of nations, including China, before becoming reality, the agreement by the G-7 marks a historic turning point after decades of falling levies on multinational corporations.
“It is very easy for multinationals and the richest people to escape tax. What we are seeing with the G-7 is that the time has come for politicians to take back power,” said Philippe Martin, a former adviser to French President Emmanuel Macron who now heads the Conseil d’analyse Economique. “There is a window of opportunity, a turning point at which they are realizing they need tax power and they need to spend more.”
The deal would bolster Biden’s own plans to boost taxes on corporations and the wealthy by raising rates, making heirs pay more, and equalizing rates between investors and workers.
The proposals are part of a global revival of initiatives to target the rich, from Buenos Aires to Stockholm to Washington, including new taxes on capital gains, inheritances, and wealth that have gained momentum since Covid-19 blew massive fiscal holes in government budgets around the world.
US Treasury Secretary Janet Yellen framed the G-7 deal as a way for governments to protect their national sovereignty to set tax policy.
“For too long there has been a global race-to-the-bottom in corporate tax rates,” Yellen said following the G-7 finance ministers’ meeting in London last week, ahead of this weekend’s gathering.
Amazon and some other tech companies, meanwhile, have endorsed the agreement, believing the global regime will be more manageable than costly alternatives being pursued by individual countries. Bezos has also voiced support for higher US corporate taxes to pay for infrastructure.
Advocates for higher taxes say the steps are necessary to stave off a rise in populism and even for the sustainability of capitalism.
“The most visible and prominent winners of globalization are these big multinationals whose effective tax rates have collapsed,” said University of California at Berkeley economics professor Gabriel zucman, who tracks wealth and inequality. “That can only lead to a growing rejection of that form of globalization by the people.”