16 January 2023   2 comments

Oxfam has published its annual global economic report, entitled “Survival of the Richest: How we must tax the super-rich now to fight inequality”. It is a depressing read. It documents the ongoing process of extreme concentrations of wealth in the global economy, a process thats began in the 1980s and has accelerated in recent years. The summary is damning:

  • Since 2020, the richest 1% have captured almost two-thirds of all new wealth – nearly twice as much
    money as the bottom 99% of the world’s population.
  • Billionaire fortunes are increasing by $2.7bn a day, even as inflation outpaces the wages of at least
    1.7 billion workers, more than the population of India.
  • Food and energy companies more than doubled their profits in 2022, paying out $257bn to wealthy
    shareholders, while over 800 million people went to bed hungry.
  • Only 4 cents in every dollar of tax revenue comes from wealth taxes, and half the world’s billionaires
    live in countries with no inheritance tax on money they give to their children.
  • A tax of up to 5% on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year,
    enough to lift 2 billion people out of poverty, and fund a global plan to end hunger.

The concentration of wealth is simply staggering:

  • The richest 1% hold 45.6% of global wealth, while the poorest half of the world have just 0.75%.
  • 81 Billionaires hold more wealth than 50% of the world combined.
  • 10 billionaires own more than 200 million African women combined.

More importantly, the process is not simply a natural consequence of market capitalism–it is a process that has been facilitated by the political power associated with great wealth. Specifically, the tax systems of most countries in the world are structured to provide significant tax relief to the rich through loopholes, tax havens, and lax tax enforcement. Evan Osnos has written an essay for the New Yorker which outlines the ways the Getty family has evaded taxes through the creation of trusts. Osnos begins by highlighting how rich families have increased their wealth in recent years:

“And yet, in recent times, the fortunes of many prominent American clans have soared. Between 1983 and 2020, the net worth of the Kochs, who prospered in fossil fuels and became right-wing mega-donors, grew twenty-five-fold, from $3.9 billion to $100 billion. The Mars-family fortune, which began in the candy business, grew by a factor of thirty-six, to $94 billion. The Waltons, of Walmart, expanded their fortune forty-four-fold, to $247 billion. The financial triumph of such clans helps explain how the imbalance of wealth in the United States has risen to levels unseen in a century. In 1978, the top 0.1 per cent of Americans owned about seven per cent of the nation’s wealth; today, according to the World Inequality Database, it owns eighteen per cent.”

Osnos points out how the tax system has favored the rich: “According to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, the average tax rate on the top 0.01 per cent has fallen by more than half, to about thirty per cent, while rates for the bottom ninety per cent have climbed slightly, to an average of twenty-five per cent.” He goes on to an important conclusion:

“Scholars of wealth and taxes say that the golden age of élite tax avoidance has contributed to the turbulence in American politics, by hardening social stratification; reducing public resources for education, health, and infrastructure; and eroding trust in America’s mythologies of fairness and opportunity. Edward McCaffery, a tax professor at the U.S.C. Gould School of Law, said, ‘Tax, which is supposed to be a cure, is in fact one of the problems. This is a pattern that recurs throughout history. Capital keeps getting more and more unequal, until there’s a crash.’”

The Institute for Policy Studies provides an informative list of the ways the tax system is manipulated in the US:

  • The U.S. is host to an estimated $5.6 trillion in trust assets. Much of these assets belong to the uber-wealthy — both international and domestic — and are held in trust in states subservient to the trust industry. The concept of the “offshore” tax haven has very much washed ashore.
  • U.S. trust-subservient states enable illicit wealth hiding and tax avoidance. As the International Consortium of Investigative Journalists’ Pandora Papers investigation revealed, some U.S. states have aided international kleptocrats to avoid accountability at home and hide their ill-gotten wealth abroad. These states also enable wealthy Americans to avoid federal taxation, cheating the U.S. out of revenue with which it could combat poverty or invest in infrastructure. Trusts, therefore, affect every U.S. citizen and resident.
  • Three key ingredients — low or no taxes, secrecy, and trust longevity — make certain U.S. states particularly attractive to wealth defenders. These states pass laws to cut or abolish taxes or hide trust records from prying eyes. More than two thirds of states allow trusts to last for at least 150 years or forever. Additionally, more than a third of states allow trusts to be established by the person benefiting from the trust, shielding their assets from creditors and tax authorities.
  • There is a significant correlation between regressive state taxation systems, which hurt the poorest residents, and trust-subservient state laws. Of the 13 states captured by the trust industry we have profiled here, eight are among the 15 most regressive tax states in the country. These states often cut taxes for the wealthiest residents and instead rely on the low and middle class, who pay a disproportionate amount of their income in taxes.
  • The trust industry says it simply helps its clients obey laws — but in reality it often writes the laws. As our report shows, the trust industry is the driving force for trust deregulation. Trust and estate lawyers regularly lobby state legislatures and sometimes work in official capacities with states to write legislation favorable to the industry. In small states with part-time or “citizen” legislatures, there is no countervailing power that matches the clout of the financial services industry. And this trust deregulation is often bipartisan.
  • The trust industry offers little benefit to states. Contrary to what trust and estate lawyers may claim about increased economic development and boosted state revenue, states largely do not benefit from trusts. Though billions may be held in trust in a state, state coffers — and the public — will never see it. States charge only small fees to trust companies; the trust industry creates very few jobs; and trust owners have no reason to physically move to or even visit the states where they have established trusts.
  • States are engaged in a rapid race to the bottom, so federal action is needed. States may see a few jobs created by the trust industry and determine that is worth the detrimental effect of trusts on the rest of the country. It is in the federal government’s interest, therefore, to curb state laws that enable illicit wealth hiding and tax avoidance.

This process cannot end well. The consequences of the concentration of wealth after the financial crisis in 2008-09 was a series of elections that led to populist and nationalist leaders such as Donald Trump in the US and Boris Johnson in Great Britain. We are now in the second phase of this political process–more violent political expressions such as the riots in the US on 6 January 2021, the protests in China against the Covid restrictions, and the violence in Brazil most recently. These violent protests were not well-organized and the third phase of the protests against the concentration of wealth will likely see the emergence of political parties dedicated to more radical redistributions of wealth.

Posted January 16, 2023 by vferraro1971 in World Politics

2 responses to “16 January 2023

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  1. Sobering, to say the least. Scary is more like it, especially when one considers the moral bankruptcy necessary for such conditions to arise.

    Like

  2. We’re entering another age of Feudalism.

    Like

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