The inequality problem
Over the past two centuries, the world has become dramatically wealthier. But the problem is that not everyone has equally benefited from this increased wealth. As books like Steven Pinker’s Enlightenment Now and Johan Nordberg’s Progress show, poverty has been dramatically reduced in virtually every country. This means that even the poorest areas have benefited from the increased wealth. However, at the same time, inequality has grown too, implying that the riches have benefited much more than the poor.
- The richest 1% own 45% of global wealth.
- The top 0.003% own 11.3% of global wealth.
- The top 10 billionaires own more wealth than many countries, including Switzerland, Argentina and Taiwan.
- The world’s 22 richest men have more wealth than all women in Africa combined.
- 162 billionaires own as much as half of the world’s population together.
- Men own 50% more wealth than women.
- The top 1% captures twice as much growth as the bottom 50%.
This inequality is a problem. It is an ethical problem—one of fairness. Everyone with a conscience can see that such unequal distribution of wealth is just not fair. But it is a social problem too. Inequality drives dissatisfaction and disrupts social cohesion. Within countries it leads to developments such as polarization, exclusion, protest and distrust. And between countries it leads to developments including international tensions, protectionism, instability and inaction when it concerns global problems such as our climate.
The tax problem—and solution
One of the important drivers of inequality is the fact that a large share of the income and wealth from the richest people on this planet isn’t taxed. Due to the (abuse of) tax havens, tax avoidance and tax evasion, governments miss out on large amounts of money. To give an example that I also referred to in my recent post on “Proud to Pay Taxes,” an analysis of Fortune 500 companies showed that 60 of them payed no taxes on a total of $79 billion of profits earned in 2018.
Taken globally, this problem adds up to astounding numbers. As the two studies referred to in the Millionaires against Pitchforks letter estimate, at least $8 trillion (about 10% of the world’s GDP) is hidden in tax havens and about 40% of foreign direct investment ($15 trillion) passes through empty corporate shells.
Furthermore, as they emphasize in their letter, tax receipts for the ultra-rich and corporations have actually declined over the past few decades, in some nations leading to the wealthiest of them even pay lower effective tax rates than the less-wealthy. Along these lines, the Millionaires see fairer national and international tax systems as the best and only solution for solving the inequality problem. This is what they say:
“It is time for us to act. Despite vocal protests to the contrary, most reasonable people understand that philanthropy has always been, and always will be, an inadequate substitute for government investment. Taxes are the best and only appropriate way to ensure adequate investment in the things our societies need.” (their emphasis)
and, directed at their fellow millionaires and billionaires around the globe:
“For that reason, we urge you to step forward now—before it’s too late—to demand higher and fairer taxes on millionaires and billionaires within your own countries and to help prevent individual and corporate tax avoidance and evasion through international tax reform efforts.”
Who is on the list—and who is not?
Today, 169 millionaires have signed the pledge—which is open for others to sign too. The large majority of them is from the US and the remaining ones are mostly from European countries including the UK, Germany, Denmark and the Netherlands. The complete list of signatories can be found here.
As important to see who is on the list, is looking at who is not on the list. As it turns out the entire top 100 of the list of wealthiest people in 2019 is missing. And going down that list further, it appears that hardly any billionaire has signed it.
Of course, signing the list is not the only way to put pressure on governments for higher and fairer taxes for the wealthy. At the same time as the Millionaires presented their pledge, for example, Apple’s CEO Tim Cook urged for a fairer international tax system too.
However, the absence of virtually all billionaires on the list suggests the initiative is indeed largely an initiative by millionaires. In that respect, their name Millionaires against Pitchforks was rightfully chosen. This leaves us waiting for the next initiative: Billionaires against Pitchforks. For those who want to get started: the domain name billionairesagainstpitchforks.com is still available.
This post was published earlier here on my forbes.com page.
Image credit: Getty