New billionaire minted every 2 days as poor lose wealth
Income inequality is creating what charity Oxfam International calls a “deeply shocking” trend: Billionaires are not only growing wealthier and adding to their ranks, but the poorest half of the world is losing wealth at a time when the world’s economy is expanding.
The economic climate is accruing outsized gains to billionaires, whose fortunes rose by 12 percent last year, while the poorest half of humanity — 3.8 billion people — saw their wealth decline by 11 percent, Oxfam found. Its report will be released at the World Economic Forum in Davos, Switzerland, which begins Tuesday and draws billionaires like Microsoft co-founder Bill Gates, policymakers and corporate leaders.
With the benefits of the economic expansion shifting to the world’s richest people, billionaires are adding $2.5 billion in wealth each day. And every two days, a millionaire jumps into the ranks of the billionaire class, Oxfam said.
Oxfam, which has been studying the dynamics of wealth inequality since 2011, said the latest findings suggest that a new economic approach is needed to help recenter the wealth distribution. Many policy makers and economists have believed that economic growth will lift all boats, but that isn’t playing out for billions of people across the globe. One reason: Tax rates have dropped to recent historic lows, allowing the rich and corporations to hold on to more wealth, said Paul O’Brien, vice president for policy and advocacy at Oxfam America.
“The economic figures are going in the wrong direction. This isn’t just another year of the same old reality — it’s getting worse in terms of the accumulation of extreme wealth,” O’Brien said. “It’s deeply shocking to us.”
Tax cuts and trickle-down theories
The top-heavy distribution of wealth has coincided with a drastic reduction in tax rates for the world’s richest, Oxfam said. It found that the top rate for the rich in developed countries plunged from 62 percent in 1970 to 38 percent in 2013. In 2017, President Trump reduced tax rates for individuals and corporations, a decrease that favors the rich and businesses.
“The leadership we’ve had has put in place the policies that widen the inequality gap,” O’Brien said. “What we are calling for is leadership and policies that slow the gap.”
To be sure, conservative policy makers believe that lowering tax rates on the rich and businesses will spur growth, eventually providing more jobs and higher wages to middle- and lower-income workers. Yet there’s little economic evidence that such policies deliver on their promises.
A “human economy”
Instead of an economy that stresses growth at any cost, Oxfam is pressing for what it calls a “human economy.”
“Fundamentally the human economy is built from different principals than the growth economy,” O’Brien said. “For years, the consensus was, ‘Growth solves everything.’ But that has fallen apart. Our planet has limited boundaries. We can’t burn more, use more, and break through ecological boundaries that are essential for sustaining human life.”
The “human economy” would provide health care, education and gender equality to people across the globe, he said. “All the data show that educating your children is the best way to build a healthy economy and create genuine shared wealth. We need to get kids into quality schools, and get rid of these legal and cultural barriers to women being treated unfairly in the workplace, being burdened and discounted.”
Raising taxes on the world’s richest people and corporations would help fund those programs, with Oxfam calculating that boosting taxes on the richest by 0.5 percent would raise enough money to educate the 262 million children who currently don’t receive an education and provide healthcare that would save 3.3 million people from preventable deaths.
Higher taxes on the rich?
Whether the rich should pay higher taxes entered the political discourse this month after freshman Congresswoman Alexandria Ocasio-Cortez said the U.S. should raise taxes on the rich to their highest level since 1980, just before Ronald Reagan started hacking rates.
The top tax on the wealthy should rise to as high as 70 percent, Ocasio-Cortez told “60 Minutes” earlier this month. That approach stands in stark contrast to Mr. Trump’s 2017 Tax Cuts and Jobs Act.
Yet higher marginal rates on the richest Americans would mark a return to the more progressive tax structure of the 1950s and 1960s — under Presidents Harry S. Truman, Dwight D. Eisenhower and John F. Kennedy, for instance, the rate on those in the top bracket topped 90 percent.
“We totally agree with the congresswoman,” Oxfam’s O’Brien said. “We think higher taxes for the extremely wealthy have to be a fundamental element of a healthy economy.”