taxes

[OPINION] Tax the rich, not the poor: A call to institute a wealth tax

Lidy Nacpil
[OPINION] Tax the rich, not the poor: A call to institute a wealth tax
'It is only fair and practical for...the wealthiest individuals and corporations, who have profited immensely during the pandemic and even before, to contribute their fair share to the well-being of society'

As inequality and poverty grow in the Philippines, in Asia, and across the globe, so too does the call for a wealth tax. 

A wealth tax is a potent tool for equality and justice. A wealth tax is a tax on the market value of assets owned by an individual taxpayer rather than on his/her income. Taxable assets may include cash, bank deposits, shares, land, real property, cars, and furniture. By taxing the wealth of high net-worth individuals and not just income, governments will be able to raise more domestic revenues for funding essential public services that are needed so urgently today. 

A wealth tax is one of the most direct ways to stem inequality by reversing the highly regressive tax system that governments across Asia have long depended on to sustain basic public services. Regressive taxes such as Value-Added Tax (VAT) and excise taxes have long been known to hit those with smaller incomes harder, and have thus helped to widen the gap between poor and rich, women and men, marginalized sectors, and influential elites. 

Governments across Asia have combined this reliance on anti-people taxation with austerity measures that have gutted funding for public services year-on-year. At a time when state provision for health care, education, green infrastructure, and other basic public goods are so crucial to sustain the lives and livelihoods of billions, the continuation of regressive taxation and austerity cannot be accepted.

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Around the world, wealth inequality has been rising to historic levels within the past decade. This trend has been abetted by governments that have doggedly pursued neoliberal policies to accelerate growth. They are working with the simplistic assumption that the bigger the economic pie, the more people will benefit. The failure of this assumption has been made glaringly evident time and time again, most recently in the World Inequality Report 2022, where the richest 1% of individuals all across the globe have raked in a whopping 38% of the world’s total economic growth since the 1990s. In the same timeframe, the bottom 50% have received just 2% of economic growth. To call these crumbs is an insult.

The COVID-19 pandemic has further exposed and widened the global economic divide. If governments across Asia and the world want to build back better from the pandemic, if they want to ensure sustainable development in the coming years, if they want to adapt to climate change, if they want to make good on their promises to their citizens, then they must end their dogged dependence on neoliberal austerity and regressive taxation. Now is the time for bold and decisive action to tax the rich and not the poor.

Many movements across the globe are urging legislators and policymakers to establish wealth taxes as vital policy instruments for economic and social recovery from COVID-19. In the face of the multiple gripping crises we face, the struggle to bring about a people’s recovery is a test of governments’ political will and capacity to reduce social inequality and realize socio-economic justice. 

A wealth tax will:

  • help governments raise more domestic revenues to fund public services, and make health and education more accessible and available for all, and ease the tax burdens that fall most heavily on marginalized sectors.
  • help curb inequalities, by sharply taxing the wealth of billionaires (and millionaires), and help curb the continuing amassing of wealth, profits and power in the hands of an elite minority at the expense of the majority.
  • help generate public finances so urgently needed for a just, inclusive, transformative and sustainable people’s recovery.
  • help build stronger, resilient, sustainable economies that move away from aid and debt-dependence.

As the Asian region prepares to host the summits of G20 – which together represent the world’s largest economies – this year in Indonesia and next year in India, wealth tax advocates call attention to the growing inequalities in the Asian region and the deepening divide between the economies of the richest countries and the cash-strapped economies of developing countries that are barely able to make public services available to all, even as they are home to some of the world’s richest billionaires. 

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By adopting progressive tax policies such as a wealth tax and fixing the fundamental flaws in national and global tax systems that are currently marked by elite biases, national governments and the international community will be in a better position to reduce inequalities and fulfill their sustainable development commitments and human rights obligations. 

Proposals for a wealth tax have now been introduced in both houses of the Philippine Congress. While there are different formulas proposed, legislators would do well to undertake bold action towards progressive taxation, and heed people’s demands to ensure that revenues collected will be used to fund crucial public services, including health and education services and social protection for the poorest sections of society.

The institution of a wealth tax is a major part of the broader call for tax and fiscal justice, as well as to make taxes work for people and the planet. It is only fair and practical for the burden of working households and of small-to-medium enterprises – of those who have suffered the most under the pandemic – to be lifted, and that the wealthiest individuals and corporations who have profited immensely during the pandemic and even to before contribute their fair share to the well-being of society. Now more than ever is the time to institute a wealth tax. Tax the rich, not the poor! – Rappler.com

Lidy Nacpil is coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD).

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