Economists say creating a 2% tax minimum for the extremely wealthy would unlock an extra $250 billion per year.

Economists say creating a 2% tax minimum for the extremely wealthy would unlock an extra $250 billion per year. / Getty Images

Over the last decade, calls to tax the rich have grown louder around the world — but the needle hasn’t exactly moved.

Billionaires are still amassing huge amounts of money each year and they’re paying less in taxes than they have in decades.

Now, the Brazilian government has a new proposal: a 2% global wealth tax on the uber-rich. It would impact the 3,000 wealthiest people in the world.

And while 2% might not sound like much, consider how little billionaires are paying in taxes right now: something like 0.3% of their wealth, according to a new report commissioned by the G20.

Economists say creating a 2% tax minimum would unlock an extra $250 billion per year, which could go toward addressing a number of issues, like climate change or global poverty.

But there’s a question of feasibility. How do you coordinate a global tax — especially when key countries like the United States are saying they’re not on board?

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The man behind the plan

The idea of a global wealth tax was put forward by Brazil earlier this year and discussed during a recent G20 meeting, ahead of the summit in November.

The person behind the plan is Gabriel Zucman — an economist at the Paris School of Economics and the University of California at Berkeley.

He told All Things Considered the starting point was the “overwhelming evidence” that the super rich have very low effective tax rates today and pay much less tax than middle class people in the U.S. and throughout the world.

This, he said, is a problem for two reasons:

  1. The money: "There is a big loss of tax revenue for governments. That's money that we could spend on education, on health, on infrastructure and that we can't because they don't pay tax.”
  2. Fairness: "It's difficult to understand why the very individuals with the highest ability to pay taxes should be allowed to pay less than ordinary people."

The idea generated a lot of interest at the recent G20 meeting. France, Spain, South Africa and several other nations have voiced support.
But it was also met with skepticism. U.S. Treasury Secretary Janet Yellen, for example, said she wasn’t on board with the idea. Germany also expressed opposition.

But Zucman believes it could still become a reality.

A (possible) path forward

First, Zucman says no one expects a global wealth tax to happen soon — he’s talking about years down the road — and it’s not without complications.

“There is a risk of a race to the bottom. Of some countries just choosing not to tax billionaires to try to attract them,” he says.

But Zucman also believes there doesn't need to be a global consensus for it to work. Instead, there just needs to be a critical mass of countries that would do two things:

  1. Agree to tax their own billionaires.
  2. Then also tax the billionaires of other countries if they are undertaxed at home and also derive some of their wealth abroad.

That could be a tall order, given changing leadership and the run of elections in key G20 countries, including the United States later this year.
Still, Zucman remains hopeful.

“Leadership might change, but what does not change is the overwhelming popular demand everywhere for this type of policy, for fixing this big tax injustice of our time,” he said. “That's what fundamentally makes me optimistic that at some point, and I hope it will be sooner rather than later, we will reach a common agreement.”

Tags: tax  G20  Wealth