A Viable Billionaire Tax?

New paper makes the case that a global billionaire tax is ethical, good for growth, and could solve a lot of the world’s problems. Oh and politically viable. 

At the end of Thomas Piketty’s 2013 blockbuster Capital in the Twenty-First Century, the French economist makes a compelling case for a global wealth tax. Levying a tax on wealth, Piketty explains, would be a preferable alternative to global war or economic calamity, the only other drivers for a significant redistribution of wealth he could find in the historical record.

A global tax on wealth back in 2013 sounded quaint to many seasoned wealth researchers, a nice idea but something destined to go nowhere. The election of Donald J. Trump seemed to only confirm this political assessment.

But Oxfam economist Didier Jacobs has a distinctly different perspective in his new discussion paper, The Case for Billionaire Tax. Jacobs sees a global tax on concentrated wealth as something that could fund universal access to basic education and health care and spur economic growth, an ethically justified and politically feasible catalyst for change.

Jacobs envisions a 1.5 percent tax on net wealth over $1 billion, a levy that could in theory generate $70 billion in annual revenue from the 1,800 or so billionaires around the world.

“Such revenues would be sufficient to secure an education for all the 124 million children not going to school in low- and lower-middle-income countries,” the Jacobs paper estimates, “and save 6 million lives a year.”

In simpler terms, a global billionaire tax could ultimately end “dollar a day” extreme poverty in every country in the world.

That stat alone should give serious policy makers and organizers reason enough to consider a global billionaire tax. In essence, we are today choosing to subjugate millions of families to dreadful poverty by not placing a small levy on a tiny group of people who have more money than they could ever spend in a dozen lifetimes.

Jacobs reminds us that billionaires currently account for 2.7 percent of the world’s wealth and 0.00002 percent of the world’s population. He also reminds us that many billionaires want to help.

About a hundred of our billionaires have signed the Bill Gates giving pledge and committed themselves to give away half their fortunes. But this pledge group makes up just 6 percent of the world’s billionaires, and philanthropy, while important to solving many global problems, remains wholly insufficient in the fight to really bring down global inequality.

Okay, so revenue from a billionaire’s tax could do a lot of good. But how exactly could such a tax be feasible, especially in the Trump era?

No international organization like the United Nations, Jacobs acknowledges, has the legal authority to levy taxes. But he sees the UN playing a key role in a billionaire tax over the course of a three-step implementation.

The first step, Jacobs argues, would be for the UN General Assembly to ask for individuals to annually contribute 1.5 percent of their net wealth above $1 billion to international development and to ask for member states to process such contributions.

This move would only require a simple majority of states to get the ball rolling. Some billionaires would likely heed such a call and bring the idea some much needed momentum and legitimacy.

The next step in the Jacobs plan would involve having major corporations incorporate the billionaires tax notion into their social responsibility agendas and ask their wealthy founders to commit to the idea. Again non-binding, but building momentum and pushing the idea of a billionaires tax into the mainstream. [pullquote]A global billionaire tax could ultimately end “dollar a day’ extreme poverty[/pullquote]

Finally, the last step would require real legislation, passing the UN resolution at the national level in the tax code of each country.

“By translating the international ‘soft law’ into ‘hard’ national law,” writes Jacobs, “the billionaire tax would become a true tax, legally enforceable.”

To be viable, a billionaire tax would require public mobilization and a shift away from the austerity politics dominating many countries worldwide. Jacobs sees the idea as “highly campaignable” and draws hope in the rising viability of the financial transactions tax, an idea that had been seen for years as an obscure longshot.

Ten of the 28 countries in the European Union are today in the process of adopting a financial transaction tax.

The longer we wait to act on global wealth inequality, the more wealth will concentrate into fewer and fewer hands. The process of implementing a global wealth tax will not be easy and certainly won’t be quick, but it will be necessary if we’re going to reverse our severe contemporary maldistribution of wealth.

The Jacobs plan offers us a valuable nudge towards that end.

Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies.