Since 2020 the richest 1% have captured almost ⅔ of the wealth produced. In the meantime, extreme poverty has increased and nearly 2 billion workers now live in countries where inflation is outpacing wages.
But numbers speak louder than words: in 2018, Elon Musk, the second-richest person in the world, paid no federal income taxes. Just like Jeff Bezos, who did not pay a penny in federal income taxes in 2007 and in 2011. In France, a country renowned for its high level of taxation, the 370 richest families are actually only taxed around 2% or 3%.
And the reason for that is quite simple: the very wealthy can use elaborate tax arrangements to reduce their tax rate to the bare minimum - which ordinary households cannot do - while countries have gradually given into a tax race to the bottom. A situation that reminds us of the difference between multinationals and SMEs. On average, the tax rate for SMEs in the EU exceeds 20% while it remains around 9% for multinationals of the digital sector for instance.
To put an end to this situation, 136 countries and jurisdictions reached an agreement through the OECD, to ensure that Multinational Enterprises (MNEs) would be subject to a minimum tax rate of 15%. Quickly after, the EU adopted a directive to effectively implement this minimum tax rate at the European level (EUROPE 13083/27).
What we managed to do for multinationals, we must now achieve for the very wealthy individuals.
Our proposal is simple: introduce a progressive tax on the wealth of the ultra-rich in order to reduce inequalities while financing the necessary investments for the ecological and social transition. It could also be implemented at the European level with an exit tax applied by a group of voluntary countries.
There is already a flourish of academic research on what this might look like, including proposals for a tax of 1.5% for those with over $50 million. But it is up to us to collectively and democratically decide on the fair and adequate level of this tax.
Not only will this tax on wealth and capital reduce inequality, they will also provide the much needed revenue required for addressing social and environmental inequalities and for the investment needed to align ourselves with the 1.5 degrees of warming foreseen by the Paris Agreement. Moreover, a growing number of multi-millionaires are also asking to be taxed more: “ The solution is plain for all to see. You, our global representatives, have to tax us, the ultra rich, and you have to start now.”
To those who say it's impossible, we respond that we already succeeded once to reach an agreement on global minimum taxation of multinationals, when everyone was also saying that it was impossible. But the implementation of such an agreement requires real political will, especially from our elected officials and government. The same will that President Biden showed, right after his election, when he put the OECD negotiations back on tracks.
This is why today we call on international institutions such as the OECD and the UN to launch a round of negotiations on the taxation of extreme wealth. Why we call on the Member States of the European Union as well as the Commission to work towards the completion of these negotiations as soon as possible.
Aurore Lalucq is a French MEP member of the S&D Group
Gabriel Zucman is a French economist
See list of signatories: https://aeur.eu/f/5sf