Now Is the Time to Tax the Super-Rich

Most people have suffered through the pandemic, but the world's richest have seen their wealth rise by a combined $5 trillion. No one needs to hoard that kind of money – it's time to tax it for a fairer world.

Credit: Vasyl Dolmatov / Getty

With Jeff Bezos and Richard Branson blasting into space on their private rockets, the ever-growing gulf between the world’s mega-rich and the billions of people sinking economically in this global pandemic is starker than ever.

There has been huge suffering in our society over the past year, yet the very wealthiest in society have exploited this crisis to further line their pockets. The world’s billionaires added more than $5 trillion to their wealth over the last year alone. To put such vast sums into some context, the size of the UK’s economy is around $3 trillion.

British billionaires have done very well too out of this crisis. In May, the Sunday Times Rich List revealed they had increased their wealth by £106 billion during the pandemic – an eye-watering £290 million per day. In contrast, a record 2.5 million food bank parcels were given to people in crisis in the past year.

As we come out of this pandemic, if we are to really learn the lessons and build a more inclusive society, we need to address our rigged economic model.

First, that means acknowledging that trickle-down economics has been a lie. Instead of wealth trickling down, it has been funnelled up into a smaller and smaller number of hands. This robbery of the wealth produced by workers has been achieved through an era of deregulation, privatisation, and outsourcing, the driving down of working conditions, the weakening of trade unions, and lower taxes on the rich.

Higher taxes on the wealthiest have an important role to play in building that fairer society. Contrary to the spin doctors of the right, decades of keeping taxes low for the very rich did not boost economic growth – it deliberately allowed inequality to run out of control.

Recent research by the London School of Economics and King’s College London looking at tax cuts over the past fifty years shows that lower taxes on the rich led to higher income inequality, because the top one percent captured nearly all of the gains. But those tax cuts had almost no effect on boosting economic growth or lowering unemployment.

That’s why, with the Labour Assembly Against Austerity, I have launched a petition that I will be presenting in parliament this week calling for a radical package of tax increases on the super-rich and for a more progressive tax system to help tackle the widespread poverty and inequality that scar our society.

The petition has three main demands: a Wealth Tax on the super-rich, a Windfall Tax on the superprofits made during this crisis, and higher income taxes on the top earners.

A Wealth Tax is clearly an idea whose time has come. In a keynote economic speech earlier this year, the UN General Secretary called on governments to ‘consider a wealth tax on those who have profited during the pandemic, to reduce extreme inequalities.’ Progressive economists like Thomas Picketty and Joseph Stiglitz have backed the call.

But support goes well beyond the centre-left. The in-house journal of the capitalist class, the Financial Times, has run a number of articles with titles such as ‘Why the toughest capitalists should root for a wealth tax’, ‘A wealth tax is the economic buffer rich nations need’, and ‘The case for taxing the rich more’. Leading financial news site Bloomberg said ‘The Wealth Tax is going global’ after Argentina imposed a one-time levy on millionaires in December, with other countries seriously considering similar moves.

The Sunday Times has even created a calculator so you can see how much you could raise if you were given ‘permission to launch a one-off wealth tax on the super-rich’. Their basic model of a 5% tax on wealth above £100 million, 10% on wealth above £500 million, and £20% on wealth above £1 billion would raise £97 billion. That alone would be enough to pay for 215 hospitals.

The UK Wealth Tax Commission last year recommended a one-off tax on net wealth, but payable over a number of years. They too provided a calculator which shows that, for example, a one-off wealth tax on the top 1% of individuals with net wealth of over £2 million, and starting at 1% a year for five years, would raise over £120 billion.

Of course, as socialists, we don’t wait for the newspapers of the rich and powerful to be on board before fighting for progressive measures. But it would be remiss of the labour movement if we didn’t step up the fight on this terrain when even sections of the powerful are conceding the argument. This is a fight we can win.

The second demand of the petition is for a one-off windfall tax on corporations that have seen profits soar above their average during the pandemic.

It’s certainly needed. Last year Oxfam highlighted this startling fact: ‘Jeff Bezos could personally pay each of Amazon’s 876,000 employees a one-off bonus of more than $100,000 – and still be as wealthy as he was at the beginning of the pandemic.’

One idea for a windfall tax has been put forward by the Resolution Foundation through a ‘pandemic profit levy’ of 10% on unexpected gains made by companies during the crisis. Oxfam is calling for a significantly higher ‘Pandemic Profits Tax’ after its study found 32 of the world’s most profitable companies were set to rake in $109 billion more during the pandemic than the average of the four previous years.

Labour has a good record of imposing such a one-off tax, and should advocate for it now. Gordon Brown as Chancellor famously implemented a one-off windfall tax on ‘the excess profits of the privatised utilities’ in 1997.

Even the Tories have delivered such a Windfall Tax in the past. As Labour’s former Policy Director Andrew Fisher recently pointed out, the Tory Chancellor Rab Butler stated in his 1952 Budget speech, ‘We are not prepared to see excessive profits being made’, and targeted them with a special tax. Such an emergency tax was used by numerous countries during World War II.

The third demand of the petition would be to make the income tax system much more progressive. This would introduce a new 55% income tax rate on all income over £200,000 per year, as well as the Labour manifesto promises of a 50% income tax rate for those on over £123,000 and a 45% rate on income over £80,000.

Based on the calculations from Labour’s last manifesto, this package would raise over £6 billion per year. All this could be boosted by measures to tackle tax avoidance, ensure corporation tax is set at least at the G7 average, and end the injustice that sees income from wealth taxed at lower rates than income from work.

Labour cannot shy away from this necessary debate on taxation. Nor can it allow itself to be on the wrong side of the public argument as it was earlier this year over corporation tax. Labour needs to lead this debate. And there is huge public sympathy if it does: the public overwhelmingly back a wealth tax.

This crisis has not only shone a spotlight on the huge inequalities in our society – it has deepened them. We have heard a lot about ‘building back better’, but so far it’s been a lot of hot air. The Left needs to take advantage of this debate and use it in our fight for a better society. Let’s start by demanding higher taxes on the super-rich.