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Taxing the richest, “a logical option” to counterbalance the effects of the Covid-19 crisis

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Millionaires around the world on Wednesday called on governments to increase taxation on the wealthiest to compensate for social inequalities. An idea certainly not new, but which is gaining ground with the Covid-19 crisis, which has impoverished the overwhelming majority of humanity.

They are fighting an “unfair” taxation system. Almost two years after the start of the Covid-19 pandemic, a hundred millionaires around the world have called on governments to raise wealth taxes to combat inequality. “Most of us can say that, while the world has gone through immense suffering over the past two years, we have in fact seen our wealth increase during the pandemic”, underline the signatories, in this joint opinion piece published on Wednesday. January 19, claiming not to pay “their fair share of taxes”.

This initiative, orchestrated by three collectives with evocative names – Patriotic Millionaires, Millionaires for Humanity and TaxMeNow – has obtained support in a dozen countries including the United States, Canada, the United Kingdom, Germany, Austria , Denmark, the Netherlands, or even Norway.

Among them are Abigail Disney, granddaughter of the co-founder of the famous American studios, Nick Hanauer, one of the first investors in Amazon, the German writer and businessman Simon Hermann, as well as the English actress Julia Davis. .

This publication comes in a particular context: right in the middle of the World Economic Forum in Davos, which is being held virtually this year, and a few days after the publication of a report by the NGO Oxfam which underlines the explosion of inequalities during the pandemic to the benefit of the richest.

Can this additional taxation on the greatest fortunes correct the social inequalities generated by the pandemic? France 24 takes stock with Éric Meyer, economist at the French Observatory of Economic Conditions (OFCE).

This is not the first time that some of the wealthiest people have made this type of appeal. Is there nevertheless a stronger awareness today with the Covid-19 crisis ?

Eric Meyer : First of all, it should be remembered that the idea that growing inequality is a threat to the economy is not new. For several years now, major bodies such as the OECD (Organization for Economic Co-operation and Development), the ECB (European Central Bank) or the IMF (International Monetary Fund), have pointed out that this phenomenon must be combated to maintain growth.

The novelty is that this situation has been greatly accentuated with the pandemic. While wealth usually declines in times of crisis, this has not been the case over the past two years as governments have invested heavily to keep their economies afloat. This aid policy has benefited the greatest number, including the very wealthy who did not need it. The latter have seen their savings increase, with in addition a strong growth in their assets, in particular in the stock market and in real estate. Conversely, some of the most precarious citizens, such as students or temporary workers, have sometimes received little or nothing.

In this context where the State has considerably widened its public debt, the question of repayment arises. Increasing taxation on the biggest fortunes is a logical option, at least temporarily, to offset the effects of the crisis.

>> Read also: How the super-rich got rich during the pandemic

Many Americans have signed this appeal, is the context particularly favorable to this type of measure in the United States ? We know that Joe Biden, unlike Donald Trump, spoke out for this idea.

Even beyond the political divide, the situation of social inequalities in the United States is extremely worrying and disproportionate to France. Admittedly, we had the Yellow Vests crisis which highlighted this problem, but in the United States, several million Americans are on the verge of extreme poverty and economic actors are well aware that this situation does not is not tenable. The richest who benefit greatly from the system in place must make it last, and they know that the feeling of downgrading is a major factor of social instability.

Furthermore, it is important to note that the United States has the highest concentration of multi-billionaires in the world. However, if the gaps are widening among the general population, this is even more the case among the 10% of the richest citizens. Many millionaires have a lifestyle closer to the middle class than that of the richest billionaires and consider that the latter represent a threat to their entire social class. As such, the call to tax the wealthiest can be interpreted as an attack by millionaires against billionaires, who would have to pay almost the entire bill.

While most Western countries are represented among the signatories of this call, no French are included. The NGO Oxfam, however, reports a record explosion in the fortunes of our billionaires during the pandemic. Are they less susceptible to this cause ?

In France, the richest have the feeling of being less well treated than elsewhere because the tax rate is higher than in most neighboring countries. This argument, put forward by Emmanuel Macron to abolish the wealth tax, is nevertheless difficult to quantify because there is an extremely complex system of tax loopholes in France which allows large fortunes to significantly reduce their taxes.

It is also very easy for the wealthiest French people to benefit from a more favorable tax rate within Europe, by settling in Luxembourg, Malta or even the Netherlands, for example. As such, some of them consider that staying in France is already in itself a financial effort.

Finally, we note that there are fewer large internationally competitive companies in France than in our neighbours, particularly the Germans and Italians. These are often family businesses that have been built over several generations. Some consider that the gap with France is due to the higher inheritance tax, which would harm the French economy.

Again, this argument should be handled with caution. Because if this type of company promotes the economic stability of countries, they perpetuate, even accentuate social inequalities by allowing dynasties to continue and grow rich.

>> To read also, on our site in English: ‘Tax us now’ to reduce wealth inequality, say global millionaires

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