Left-wing parties, legislators, activists, and academics are introducing new proposals with the goal of imposing direct taxes on their assets rather than increasing income taxes, for example.
The fortunes of the world’s richest have risen in 2020, even with the economic crisis caused by the epidemic. It’s a notable trend that is reviving calls to tax all that new wealth.
From Chile to the United Kingdom, left-wing parties, legislators, activists and academics are presenting new tax proposals to millionaires and billionaires, with the goal of taxing their assets directly rather than raising income taxes, for example.
Argentina passed a one-off wealth tax last month, and Bolivia’s legislature, fulfilling his campaign promise from its new socialist president, passed an annual tax on big fortunes at the end of the year. Lawmakers in other parts of Latin America, such as Chile and Peru, have recently pressed for similar action.
In the United States, while President-elect Joe Biden does not endorse the wealth tax, progressives are lobbying statewide. They start in two Democratic-dominated states, California and Washington, where at least six of the ten richest people in the world reside.
“Around the world, there is a growing awareness of rising wealth and income inequality, along with an increased awareness that our tax system is not up to the task,” said David Gamage, a professor of law at the university. From Indiana, who helped develop the wealth tax proposals.
The debate over these taxes has a complex history. Most of the previous experiences with the concept, including in Germany and France, were later abandoned. Critics have cited the costs and intricacies of valuing wealth, while arguing that the measures create incentives for wealthy residents to move into the system or mess with tax evasion strategies.
Progressives say past efforts by Europe have fixable design flaws. Tax administration can be made easier, for example, by targeting a small group of the extremely wealthy and relying on advances in financial transparency and technology to assess wealth. And avoiding one-off taxes, like those in Argentina, is more difficult than avoiding annual taxes.
What drives this idea to re-emerge is the need for income. The pandemic has devastated the financial resources of governments around the world, increased spending by trillions of dollars, from India to Canada, and reduced tax collection.
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