Tax The Ultrarich To Solve Poverty? Easier Said Than Done
A new report from Oxfam says that just 1 percent of Amazon owner Jeff Bezos' fortune — estimated at $112 billion — would cover Ethiopia's entire annual health budget. That's health care for 105 million people.
So, Oxfam proposes, let's tax the rich to help the poor.
It's not a new idea. In fact, Oxfam has been making the recommendation for a few years now, pegged to its annual report that compares the wealth of those in the top 1 percent of humanity — $8.4 trillion in 2018 — with the combined assets of the poorest half of humanity — $1.4 trillion. The reports coincide with the World Economic Forum, where elites gather in Davos, Switzerland, to discuss the world's most pressing problems.
The latest report — published on Monday and called "Public Good or Private Wealth?" — says that in 2018, the world's 26 richest people had as much as the poorest 3.8 billion combined. In 2017, it was 43 individuals.
But would a 0.5 percent global tax on the wealthy solve inequality?
Oxfam thinks so. Its report says that if the world's richest 1 percent just paid an extra 0.5 percent in taxes, there would be enough money to educate all 262 million children who are out of school according to U.N. calculations and provide enough health care to save the lives of 3.3 million people who are likely to die from lack of proper treatment for medical conditions.
"The rich are doing very well — thank you very much — and those on the wrong end are working harder and harder for less and less everywhere we look," says Paul O'Brien, Oxfam America's vice president for policy and advocacy.
Reducing the wealth gap would be a boon to poverty eradication, Oxfam argues.
And that's certainly a pressing issue. Even though the number of people living in extreme poverty (under $1.90 a day) has declined dramatically over the past few decades from 2 billion in 1990 to 705 million in 2015, the World Bank has warned that progress is slowing. What's more worrying, according to Oxfam, is that while the fortunes of billionaires grew by 12 percent last year according to Forbes (or about $2.5 billion a day), 3.4 billion people who were living on less than $5.50 a day saw their wealth shrink by 11 percent.
But is a global wealth tax realistic?
O'Brien agrees that it would take an enormous amount of political will among the world's leaders. But he is optimistic about the odds. Major agencies like the International Monetary Fund are discussing the need for it, whereas less than 10 years ago, he was told at the World Economic Forum that it would never even become the subject of public conversation.
But until that day comes — if ever — there may be other ways that taxation could bring more funds to the poor. The Oxfam report estimates that ultrawealthy individuals are currently hiding $7.6 trillion in offshore accounts.
According to Alex Cobham, chief executive of the Tax Justice Network, many governments have repeatedly expressed a willingness to address this problem, and some have introduced measures as well.
For example, a couple of years ago, the Tax Justice Network worked with the Australian Taxation Office to challenge deals that multinational corporations had set up through Singapore. Oil and gas giant Chevron ended up with a $1 billion tax bill.
But not everyone is convinced that taxing corporations and the wealthy is the solution.
"Proper taxation is important, but it's one thing among many that we need to do to address poverty," says Vijaya Ramachandran, a senior fellow at the Center for Global Development.
Ramachandran says she is not sure that just addressing inequality is the solution to poverty and that a lot of pieces have to work together for poverty to disappear, including a functioning government that uses tax revenue appropriately and institutions that deliver health care, education, water, electricity and services. The Oxfam report agrees that funding of public services — especially ones that protect and empower women and girls — is crucial to reducing inequality.
Cash transfers have also been gaining momentum as a mechanism to reduce poverty. The idea is that recipients know best how to spend the money — whether on meals, school fees, health care or whatever else they need most — to lift themselves out of poverty or keep themselves from falling into it. India, Kenya, Finland and other countries have also been exploring the idea of providing cash stipends for all citizens (or a universal basic income) as a social safety net to reduce inequality. The stipends are usually not enough to live on, but a couple of hundred dollars a month, while pocket change for a millionaire, could mean never missing rent for someone living paycheck to paycheck.
Then there are what Harvard Business School professor and co-author of The Prosperity Paradox Clayton Christensen calls "market-creating innovations." Christensen says that a lot of money right now is being poured into making good products or services cheaper through strategies like outsourcing, for example. But outsourcing can actually worsen inequality if there aren't new jobs for the laid-off workers.
On the other hand, Christensen says, innovative types of businesses can solve social problems while creating local and global jobs — like a chain of one-stop-shop privately run diabetes clinics in Mexico that are much cheaper than the public option for treatment. These types of business innovations, he says, have the potential to lift entire countries out of poverty by providing employment as well as social benefits.
Whether through a global wealth tax or other practices, Oxfam's O'Brien just wants to see inequality reduced now.
"Hopefully, we won't have to talk next year," he told me, "because we'll have solved global extreme inequality!"
Joanne Lu is a freelance journalist who covers global poverty and inequality. Her work has appeared in Humanosphere, The Guardian, Global Washington and War Is Boring. Follow her on Twitter: @joannelu