Happy Saturday!
Happy Saturday!
I’m Achol – one of the newest journalists here at The Daily Aus. This is my first weekend newsletter, so I thought I’d start with some light reading: billionaires’ taxes.
According to Forbes’ 2024 annual rich list, there are 2,781 billionaires in the world… at least that we know of. That’s 141 more than last year. This cohort of individuals are together worth $AUD21.4 trillion, up $AUD3 trillion from last year.
For the average person, these stats are nothing more than numbers. It can be hard to conceptualise just how much money that is and, more specifically, what it can do for not only one person but an entire country.
Today we’re talking about what taxing them more could mean for the broader population, after a group of world-leading economists released a report calling to introduce an international “billionaire tax”. They believe if countries came together to make the world’s richest people pay their “fair share”, it would have a massive impact on the global economy.
First, what could a billionaire tax actually look like?
The new report is from the European Union Tax Observatory – it looks at the effectiveness of different tax systems with a specific “focus on tax evasion and fraud”.
It found that “contemporary tax systems fail to tax ultra-high-net-worth individuals effectively”. In other words, it argues that when we tax all high-income earners the same, we're letting the mega-rich, the billionaires, off the hook.
This group of experts created a blueprint for what a “billionaire tax” could actually look like.
It proposes individuals with a net worth of more than $1 billion should pay a mandatory “minimum amount of tax annually” that would be “equal to 2% of their wealth”. Right now, they’re paying the equivalent of 0.3%.
The report predicts this would result in at least an extra $200 billion in the global economy— enough money to end world poverty.
How realistic is it?
The next question is whether this is actually realistic.
Tax systems work in different ways for every country and asking countries to revamp tax rules, some of which have been established for centuries, is no small task.
However, technically, something like this has been done before.
In 2021, more than 130 countries, including Australia, joined forces to introduce a minimum 15% tax rule on big multinational companies.
The shared goal was to limit corporations from creating tax havens – which is when companies stash profits in countries where they pay little or no tax.
Three years on, 37 countries have implemented or have begun the process of implementing the rule into their national laws.
Drawing on this, the report argues that in the digital world we live in today, and thanks to globalisation, it would be easier than ever to implement the billionaire tax.
So, if the plan is possible and economists think it’d do wonders for the international community, what’s the problem?
Some worry that the tax may disincentive hard work and stump productivity.
For example, billionaire Elon Musk shared his opinion on this topic in 2022, in response to Biden’s proposed wealth tax.
While he has said he believes tax avoidance schemes should be illegal, he agrees that wealth taxes on billionaires would deteriorate productivity. Or in some cases, completely prevent companies from being able to get off the ground without large amounts of money.
Speaking about his personal experience, he said “SpaceX & Tesla would probably have died, since both narrowly escaped bankruptcy in 2008.”
One thing to clarify is that this was in response to a proposed “wealth tax”, but it speaks to a similar idea.
What’s the story back home?
In Australia, there are 159 billionaires, with their combined wealth being $503 billion. Mining magnate Gina Rinehart is the country’s richest person.
We’ve seen and heard years of political and geopolitical debate about taxing the mega-rich. For example, the Federal Greens have been pushing for a “billionaire tax” for years.
In 2021, they proposed for the government to introduce a 6% tax on billionaires and a 40% tax on multimillion-dollar corporations they own.
They argued the extra money funnelled into mental health and dental could be included in Medicare, building affordable housing and raising the rate of JobSeeker.
The Greens consequently put the question to then-Prime Minister Scott Morrison during a question time in Parliament. They were, unsurprisingly, dismissed.
The Coalition’s stance mirrored Elon Musk's attitude towards wealth taxes. They believed tax cuts and subsidies were a sure path to creating more jobs and keeping the economy healthy, and those beliefs were evident in their following Federal Budget.
The billionaire tax will continue to be a hot debate topic in Parliament House, but for the rest of the country, the gap between household incomes only continues to widen.
What do you think?
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