G-20 Finance Ministers Discuss New Billionaire Tax Proposal in Brazil

Global Finance Ministers Gather in Brazil to Discuss Billionaire Tax

On July 25, finance ministers from around the world convened in Rio de Janeiro, Brazil, to deliberate on a contentious proposal aimed at generating up to $250 billion (€230 billion) through a new tax on billionaires. Advocates for this initiative argue that it marks a significant step towards addressing the growing issue of inequality, although there are concerns that resistance from the United States may hinder the G-20’s ability to formally endorse this levy on extreme wealth.

The concept of this new tax was introduced by the EU Tax Observatory last year, designed to address existing loopholes within the global taxation framework. Last month, the Brazilian G-20 presidency requested the Observatory’s researchers to provide a more detailed outline of their proposal. Gabriel Zucman, the Director of the Observatory, emphasized the importance of a progressive tax system, stating, “A progressive tax system is really a pillar of our democratic societies.” He highlighted how the ultra-wealthy often pay a lower percentage in taxes compared to other socioeconomic groups, citing the example of the Netherlands, where billionaires contribute less than 20% in taxes, while an average worker faces a tax burden nearing 50%.

Zucman proposed a 2% tax on wealth, asserting that this would ensure the affluent pay their fair share. He emphasized the need for international cooperation to prevent wealthy individuals from relocating to avoid taxation. Importantly, he noted that the plan does not infringe upon national tax sovereignty, as each nation would have the autonomy to decide on its participation, with the option to increase rates for wealth stored in countries that opt out.

While the projected $200-250 billion in revenue from approximately 3,000 taxpayers may seem modest—especially when compared to the $4.4 trillion collected in federal taxes by the US last year—Zucman believes that these funds could significantly contribute to essential services such as healthcare, education, and climate change initiatives.

Supporters of the proposal include Chiara Putaturo, a tax policy advisor at Oxfam EU, who noted, “We’ve seen a level of inequality growing,” referencing statistics that show the top 1% of the global population accumulated $42 trillion in new wealth over the past decade. She attributes this phenomenon to an inequitable tax system and is optimistic about the discussions unfolding at the G-20, even if the meeting’s conclusions may only acknowledge Zucman’s report. “Recognition that there is this kind of problem is already a good step,” Putaturo stated, while adding that the design and agreement on the tax itself would take more time.

While ministers from key nations like France, Germany, and Spain have expressed support for the wealth tax, US Treasury Secretary Janet Yellen expressed skepticism about the proposal back in May. However, earlier this year, the US Treasury suggested implementing a 25% minimum tax on the ultra-wealthy, which aligns with Zucman’s vision.

Putaturo speculates that Yellen’s public opposition could be influenced by the “sensitive political moment” in the US, especially with elections approaching. Advocates for the wealth tax draw encouragement from the recent global agreement on a minimum corporate tax, viewing it as evidence that such concepts can gain traction and be successfully implemented.

This week, newly elected European Parliament tax subcommittee chair, MEP Pasquale Tridico (Italy/Left), commended Zucman’s work, stating, “Who works is not rich … most of the inequality within our economies is not determined by labor.” He referenced the influential work of economist Thomas Piketty, who has also proposed a wealth tax, and expressed hopes that Europe and the subcommittee could play a pivotal role in understanding these dynamics and advocating for solutions consistent with the ideologies of Zucman and Piketty.

In addition to these discussions, a petition advocating for the introduction of a new wealth tax in the EU—supported by Piketty and Aurore Lalucq, the chair of the European Parliament’s economics committee—has garnered significant attention, amassing a quarter of a million signatures, particularly from citizens in Germany, France, Belgium, and Denmark.