The law of the richest by OXFAM International

Conclusions of a larger text focused on taxing extreme wealth to end inequality are presented

Inequality is a complex phenomenon and, as we have pointed out in previous reports, various changes in policies and practices are needed to build a more equal world and redistribute power in real terms. However, in this paper we have identified an essential and courageous step that governments could take to drastically reduce inequality and promote investment in a fairer and more sustainable future for people and the planet: taxing the super-rich more.

This measure is perfectly feasible for governments around the world, and even a new wave of progressive tax systems seems to be taking shape. This trend has to consolidate and grow.

Oxfam is urging governments and international agencies to work together to urgently implement these five recommendations:

1. APPLY SOLIDARITY TAXES ON A TEMPORARY BASIS ON WEALTH AND WINDFALL BENEFITS (OR PROFITS) IN ORDER TO PREVENT THE RICHEST FROM CONTINUING TO PROFIT FROM CRISES

Billions of people are suffering the consequences of the multiple crises we face, and meanwhile, big businesses and the richest people continue to accumulate more and more wealth. To ensure additional fiscal resources to fund mitigation programs and to prevent the wealthiest from profiting further, Oxfam recommends taxing excessive profits and extreme wealth growth in times of crisis. To achieve this, it is necessary to:

• Tax extraordinary profits of large companies when crisis contexts occur, without sectoral restriction.
• Urgently tax the distribution of dividends to wealthy shareholders at rates much higher than today. Tax rates on income from the payment of dividends should be at least at the same level as those on earned income.
• Approve temporary solidarity taxes on the wealth of the richest 1% of the population.

2. SYSTEMATICALLY INCREASE THE INCOME TAX OF THE RICHEST 1%, TO ACHIEVE EFFECTIVE TAXATION OF FOR EXAMPLE 60% CALCULATED ON ALL THEIR INCOME (DERIVED FROM BOTH LABOR AND CAPITAL), WITH HIGHER TAX RATES FOR MULTIMILLIONAIRES AND BILLIONAIRES.

In addition to applying temporary solidarity taxes on the richest, governments must permanently increase the income tax of the richest 1%, in order to achieve a much higher effective taxation calculated on their total income (derived from both labor and capital), with higher tax rates for multimillionaires and billionaires. A recent IMF report (note 296) highlights that “studies calculating [the] optimal rate (personal income tax for top earners) estimate that it is usually between 50% and 60%… and other economists such as Thomas Piketty recommend higher rates, up to 80%.” (note297) To achieve this, it is necessary to:

• Tax capital income (income derived from shares and participations, rentals, and other income that are mostly its source of income) at rates at least equal to those taxed on labor income and, preferably, higher.
• Expand the progressivity of the tax system in the design of the personal income tax, and that the super-rich are taxed at much higher rates than middle-income workers.
• Introduce marginal rates of at least 75% on all personal incomes of top earners (e.g., those with incomes above $5 million dollars a year, or the richest 0.1% of the population), in order to discourage exorbitant salaries for senior executives.
• Eliminate from our tax systems tax exemptions and loopholes, which mainly benefit the rich.

3. TAX THE WEALTH OF THE SUPER-RICH AT TAX RATES HIGH ENOUGH TO REDUCE INEQUALITY.

Economic elites exert undue influence over politics and policymaking, allowing them to accumulate even more wealth. We must break this vicious circle. To achieve this, it is necessary to:

• Tax wealth at tax rates high enough to systematically reduce wealth inequality, curb the overconcentration of wealth, and prevent the proliferation of billionaires.
• Permanently tax the net wealth of the richest 1% of the population, applying higher brackets and rates to millionaires, multimillionaires, and billionaires.
• Adopt and effectively enforce progressive taxes on inheritance and property, including land, in order to balance opportunities and avoid the emergence of a quasi-aristocratic class.

4. STRENGTHEN PUBLIC AND TAX ADMINISTRATIONS SO THEY CAN SUPERVISE THE RICHEST PEOPLE AND BIG COMPANIES

It is impossible to tax the richest if public administrations and tax authorities do not have the autonomy, capacity, and support to identify and track their real wealth. To achieve this, it is necessary to:

• Reveal who the true owners of wealth are through public records of the real owners of companies and other legal entities; ban instrumental anonymous corporations, or “shell companies,” and put in place a global register of assets that exposes who the true owners of physical offshore assets are.
• Demand more transparency from multinational companies and that they make public their profits, income, number of people employed, and other key economic data in all countries where they operate, through public reporting on a country-by-country basis.
• Strengthen tax administrations, providing them with the necessary financing so that they can guarantee that the rich pay what is rightfully theirs, as well as to create special units for large taxpayers.
• Improve automatic exchange of information, ensuring that it is also effective for low-income countries.

5. BREAK THE VICIOUS CIRCLE OF POLITICAL CAPTURE AND ENSURE EQUAL PARTICIPATION IN FISCAL POLICY-MAKING

If fiscal policies are not changed, they will remain in the hands of wealthy elites. We must rebalance power so that the needs of society as a whole are the top priority. To achieve this, it is necessary to:

• Design more transparent and inclusive tax policymaking processes that eliminate the disproportionate influence of the richest 1% of the population and reduce the potential for corrupt practices and, at the same time, create a new space for real participation by society as a whole.
• Ensure representation of excluded groups in fiscal policymaking processes, including feminist and racial justice organizations, to address intersectional inequalities in current tax systems.
• Usher in a new era of more ambitious and fair tax rules through the adoption of a UN Tax Convention providing for the creation of an intergovernmental tax body with universal participation.

Finally, Oxfam urges donors and international agencies to support countries in promoting progressive tax systems, and to end the practice of requiring regressive tax reforms as part of the conditionalities they impose on low- and middle-income countries that apply for their assistance.

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