Wealth tax generates sufficient revenue to combat climate change, public health, and global humanitarian efforts.

For the first time in a quarter of a century, extreme wealth and extreme poverty have increased simultaneously. This has been driven by a seismic wave of inequality, exacerbated by recurrent crises and an economic system that concentrates resources at the top rather than allocating them where they are most needed.

The numbers are astonishing. In the past two years the richest 1% of people have acquired nearly twice as much new wealth as the rest of the world’s population put together. Oxfam found that, for every $1 of new global wealth earned by a person in the bottom 90%, each billionaire gained roughly $1.7m (£1.4m; €1.6m). Meanwhile, the combined fortune of billionaires has increased by a staggering $2.7bn a day.1

As the cost of living soars, 95 food and energy corporations more than doubled their profits last year. They made $306bn in windfall profits, paying out 84% of that ($257bn) to rich shareholders. The world’s biggest pharmaceutical companies continue to hold the world to ransom by fiercely defending their monopolies and charging inflated prices for covid-19 vaccines and other drugs. This has delivered them record profits of $1000 a second, while leaving people in poorer nations abandoned and unprotected.2 Millions of people have died unnecessarily as a result.

As the wealth of this tiny elite surges, billions of people are struggling to survive, with one in 10 people in the world going hungry every day. At least 1.7 billion workers now live in countries where inflation is outpacing wages.1 Entire nations are facing bankruptcy, with the poorest countries spending four times more on repaying debts to rich creditors than on healthcare. Three quarters of governments worldwide are planning austerity driven public sector spending cuts, including on healthcare and education, totalling $7.8tn over the next five years.

This is irrefutable, damning proof that the global economic system is not so much broken as entirely unfit for purpose. When you consider that the major, negative side effect of governments pumping trillions of dollars into their economies during the pandemic was that much of it ended up in the pockets of the richest people, it’s clear that systemic change is needed and that those who are richest must start paying their fair share.

History and precedent

Progressive taxation of a population’s richest members is not a new idea. Nor is it without precedent. Historically, taxation of the wealthiest people has helped to create more equal societies and prevent an extreme gulf emerging between the haves and the have-nots. For example, as recently as 1980, the top marginal income tax rate on the richest people was 70% in the US and 60% in the UK.

Taxes on wealthy people are one of the most important levers that a government has at its disposal to reduce economic inequality. Not only that—they are popular among voters: 69% of people polled across 34 countries in Africa support increasing taxes on rich people.3 During the World Economic Forum’s recent meetings, more than 200 millionaires and billionaires from many nations signed a letter calling for higher taxes on rich people.4

However, in the decades before the covid pandemic, progressive taxation collapsed. The top rate of personal income tax has halved to around 30% across 100 countries.1 Taxes on gains from capital are little more than half that. Just four cents in every tax dollar comes from wealth taxes, while VAT, a tax paid disproportionately by poorer people, has filled the gap. We live in an upside-down world where Jeff Bezos, founder of Amazon, paid a true tax rate of less than 1% from 2014 to 2018, while a flour vendor in Uganda pays 40%.15

Wealth taxes could raise a significant amount of money. A wealth tax of up to 5% on the world’s billionaires and multimillionaires could raise $1.7tn a year. Imagine what that could do for investment in public health or combating climate change. It could also fully fund all existing UN humanitarian appeals, including for eastern Africa, where as many as 28 million people face extreme hunger.

This is money that can benefit not just rich nations but lower income nations too: in Nigeria and India, for example, this revenue could boost health expenditure by 14% and 33%, respectively. Those are the two countries where the most women die trying to have a baby. Imagine how many skilled midwives could be funded by that money, and what suffering could be avoided.

To turn back the wave of inequality engulfing so many, and to provide the healthcare and other public services that are vital in tackling poverty, governments must stop looking the other way. The super-rich elite are long overdue in paying their fair share and setting us all on the path to a more equal future.