There’s a little something unsettling about the number 0.3%. That is the real tax rate, expressed as a share of wealth, that the world’s richest people pay right now. Not 30%. Not even 3%. The number comes from research that was paid for by the Brazilian government and was led by the French economist Gabriel Zucman. It has a way of stopping conversations in their tracks.
The wealth tax idea that is at the heart of the G7 and G20 debate is simple to understand on paper. People who are worth more than $1 billion would have to pay a tax every year that is at least 2% of their wealth. Zucman’s team thinks that this would bring in between $200 billion and $250 billion a year from about 3,000 taxpayers around the world. If you lower the bar to centimillionaires, you add another $100 to $140 billion. That many people are dying is hard to ignore in a world where public infrastructure is falling apart and inequality is growing.
The technical novelty of the idea lies in the fact that it does not call for a huge new multilateral agreement. Countries could use tools they already have, like a wealth tax, a broader measure of income, or a presumptive income tax, to put it into place. The flexibility is on purpose. The people who came up with this idea know that making every country redo its tax code from scratch is the fastest way to break an international agreement. Brazil worked hard to get this agreed upon by the G20 in Rio de Janeiro last November, and the language made it into the Leaders’ Declaration. That wasn’t nothing. It is really hard to get twenty-one governments to agree on anything.
But things get tricky between making a statement and actually following through on it. Based on how things have been going over the past year, it seems like the political will is only in a few capitals. At the Rio summit, Argentine President Javier Milei said he would block the whole communiqué because it included language about a wealth tax. As Biden was in charge, the US voiced concerns. These were not small-time complaints from outsiders. They showed that governments were feeling more uneasy because they have gained competitive advantages and a lot of capital in part by keeping taxes on the rich low.
As an example, the global minimum tax on corporations that starts in 2021 is often used. Over 130 countries agreed to a 15% cap on the profits of multinational companies. The OECD helped make this happen. For years, people had said it was impossible. It did happen, and a lot faster than most people thought it would. Others, including Zucman, say that the billionaire minimum tax is the next step that should be taken because it uses similar infrastructure, enforcement mechanisms, and reporting tools that are used in each country. They might be right. The technical foundation is stronger than it seems at first glance.
Still, taxing businesses is not the same as taxing people. Structured reports are filed by multinational companies. They have defined legal entities in places that can be found. Billionaires, on the other hand, often keep their money in private companies, trusts, art collections, real estate in a dozen different countries, and financial instruments that are designed to delay or defer income recognition. It is really hard to get an accurate measurement. This isn’t impossible; most countries already do it for inheritance tax reasons. But it is harder.
This idea is morally important because it fits with how taxes work in almost every country in the world. The wealthiest people actually pay less of their income in taxes than middle-class workers. This isn’t a story about a loophole or a few bad people. It’s about structure. There are different tax rules for income from capital and income from labor. Gains that aren’t used aren’t taxed for years. International financial systems are hard to understand, but they pay off for people who can afford to learn how to use them.
It’s still not clear if G7 leaders can move from recognizing to working together. There are real political costs. The technical problems can be solved, but they are not small problems. Most of the time, the richest people in the world have a say in whether or not governments should tax them. These are the people who are most affected. There won’t be any relief from that tension any time soon.
