Untaxing the rich

Untaxing the rich

Taxation is inherently political, as not only how tax income is spent, but more importantly, how it is collected reflects political choice. However, one would be hard pressed to find an example where an individual, or a group of individuals, voluntarily ask to pay more taxes and are rejected by their governments.

The picture becomes even more puzzling when those same governments are in dire need of income, as there’s a general consensus that they may be unable to fulfill their debt obligations if they do not find a sustainable way to shore up their finances.

Yet this is exactly what is happening, and in more than one country. Groups of wealthy businesspeople in the United States, France and Germany have been actively campaigning to pay more taxes – and are apparently being turned down by their respective states, which are in dire need of tax income.

In the U.S., the “struggle” has been going on since at least November 2010, when more than 100 wealthy individuals “organized” to urge President Barack Obama to let the Bush-era tax cuts expire for people making more than $1 million a year. They are still campaigning through the patrioticmillionaires.org website. There are other groups, such as “Responsible Wealth,” which have hundreds of wealthy Americans as members.

Warren Buffett, one of the wealthiest persons on earth, wrote an article for the New York Times on Aug. 14, saying that Washington should stop “coddling” the rich and raise the top income tax rate.

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Buffett wrote. “Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as ‘carried interest,’ thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.”

Luca di Montezemolo, the chairman of Italy’s Ferrari, announced his support. “I am rich and I am ready to pay more taxes, for reasons of fairness and solidarity,” la Repubblica quoted him as saying.

A total of 16 French businesspeople, including the CEOs of Total, Societe Generale, Airbus, Peugeot-Citroen and Liliane Bettencourt, the heiress of L’Oreal, signed a petition, asking to pay more taxes.

In Germany, around 50 wealthy individuals have been “campaigning” to have the government raise the top tax rate since 2009.

In stark contrast, income tax rates for top earners have been falling steadily. In the U.S., this rate was nearly 70 percent in 1981 – today, it is 35 percent. In the same period, tax rates for the richest individuals fell from just below or above 60 percent to around 40 percent in Japan, Germany, France, U.K., Italy and Australia. In Turkey, the figure is also 35 percent.

According to a 2008 International Labour Organization report, the average corporate tax rate worldwide was cut by 10 percentage points between 1993 and 2007.

Needless to say, the years of decline in taxes for top earners were also the years that the gap in incomes has surged. Today, as most of the economies mentioned above face crippling debt crises, their policy makers are working to load the burden on the working classes, even as prominent members of the club of the rich beg to be taxed more!