The Right-wing case for wealth tax

In the near future, possibly before the end of the year, Elon Musk will become the first trillionaire in history. According to Forbes , Musk’s fortune already exceeds $500 billion, more than the GDP of his native South Africa. But with the impending IPO of SpaceX, that is set to climb higher still. If the spaceflight and AI company floats for $1.5 trillion, as is widely anticipated, then Musk would become four times wealthier than that other rocket-obsessed svengali, Jeff Bezos.

The scale of such riches is new, at least in the democratic age. At the turn of the millennium, it was Bill Gates who held the mantle of the world’s wealthiest person. Yet back then, when Britney Spears was a break-out teen sensation, and Vodafone was one of the world’s most valuable firms, Gates’s personal worth stood at a mere $60 billion, around $116 billion in today’s prices. Soon, though, Musk will possess a fortune ten times that.

Musk’s rise, as well as that of his fellow tech barons, is thus an object lesson in wealth inequality. While that is most glaring in the United States, where Wall Street rubs shoulders with Mississippi, a state where women are more likely to die in childbirth than Uzbekistan , Britain is far from immune. According to the Sunday Times rich list, the combined fortune of the country’s 200 wealthiest families stands at 20% of GDP. In 1994, long after the Thatcherite revolution had prevailed, it was a mere 6%. In France, meanwhile, the 500 most affluent families had a combined wealth equivalent to 6% of national output 35 years ago. Today, by contrast, that figure is 42%. If Musk is an eye-catching luminary of our gilded elite, his personal rise is just the most visible expression of a far broader transformation.

While there’s little doubt these have been boom years for the ultra-rich, a conclusive explanation as to why that happened remains elusive. Some point to the demise of organised labour in the West, others to the increased centrality of high-value services in the economy, meaning productivity gains accrued to elite-tier knowledge workers. Then there’s long-term shifts in asset values over the last five decades, primarily driven by a decades-long collapse in interest rates, and more recently compounded by quantitative easing.

Whatever drove the growth of a globally mobile super-rich — and it likely includes all of the above — it’s important to clarify such a shift isn’t limited to countries with a low-tax “Anglo-Saxon” model of capitalism. If that were the case, then Finland, Sweden, Denmark and Norway, all high-tax, high-welfare economies, wouldn’t boast more billionaires per capita than Britain. The same applies to France. While it has numerically fewer billionaires than here, the wealth of the billionaire class across the Channel is around three times greater. Yet tax still matters. Because whatever the other explanations for the West’s spiralling inequality, the fact remains that billionaires, and multi-millionaires too, pay relatively less of it than the rest of us.

The extent of such “tax efficiency” is shocking. In France, the average citizen hands over 51% of their income to the state once you account for consumption taxes. You might think that’s reasonable: given the republic’s outstanding healthcare system, high-speed rail and public infrastructure. Or you might feel it’s excessive, a moral affront to self-reliance and hard work. But that’s not really the point, because the kicker is this: the effective tax rate for the country’s billionaires , which includes the two wealthiest families in Europe, is less than half that, with just 13% going to authorities in Paris. Prefiguring today’s rhetoric of a rigged economic system, Marx once wrote that the modern state is a committee for managing the affairs of the bourgeoisie. Given the deal billionaires now get, such an outcome would be outlandishly egalitarian.

What explains such a misalignment? The answer is income tax, and how it’s become a thing for the little people. As data compiled by Gabriel Zucman and his International Tax Observatory concludes, billionaires in France, Italy and the Nordics pay an effective income tax rate of between zero and 2%. Zucman suspects the figure for Britain is roughly the same, though the relevant data has, so far, proved challenging to collect.

For inequality campaigners, this isn’t merely an issue of fairness, but of recursive dysfunction. By taxing incomes more than we tax wealth, we let the ultra-rich get wealthier, at a faster rate, by allowing them to re-invest capital into yet more assets. Often yielding rents, which in turn bring higher returns than government bonds or public equities, altogether contributing to pervasive rent-seeking across the economy — from land and private equity to the pursuit of monopolistic business models with venture capital.

That all means wealth inequality widens further still. If you aren’t an oligarch, your best bet is to try something similar, albeit on a…