Inequality and Taxes

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It all started in 1990 when the World Bank proposed to make poverty reduction the main priority for development cooperation, after ten years of disastrous ‘structural adjustment’. Most UN organisations followed.


There was some criticism, surely. And even if the World Bank and the UN Development Programme radically and explicitly rejected any social protection organised by public authorities, they did change their mind some ten years later. They now promote social protection though they also have hollowed out its meaning and its scope. In fact, what they propose is a limited social protection for the poor and limited labour rights in cooperation with the State and employers.


From this point of view, the ILO’s Social Protection Floors are much more interesting, though here again, there are severe limits.


Moreover, whatever perspective you take, there is the problem of resources. States do need money to offer to all their citizens and residents free schooling, health care, housing, public services of water, energy, transport, communication, that is, the whole range of economic and social rights. And with the fiscal austerity rules that remain in place in most parts of the world, this is not easy to provide.


We all know of course the solution: taxes. In most parts of the world taxes have been lowered in the past decades, following the neoliberal dogmas. And tax havens have been very successful! Illicit flows of money from the South to the North remain shockingly high!


There is no reason this should remain this way.


In the context of the Financing for Development Conferences, civil society has made several very good proposals for financing development needs, but till now nothing or very little has materialised.


Taxes are a national competency, though this does not mean that international cooperation is not of the utmost importance. It is indeed too easy to react with a ‘yes, but this is a national competency’ whenever international cooperation proposals are made, or with ‘yes, but there will be capital flight’ whenever a national proposal is on the table.


In order to finance social protection, Isabel Ortiz from the ILO already listed a whole series of possible sources for financing, such as the re-allocation of public expenditures; Increasing tax revenues; Expanding social security coverage and contributory revenues; Lobbying for aid and transfers; Eliminating illicit financial flows; Using fiscal and foreign exchange reserves; Managing debt: borrowing or restructuring existing debt and; Adopting a more accommodative macroeconomic framework.


Here, I want to point to an interesting initiative taken by two French researchers in Berkeley, California, Emanuel Saez and Gabriel Zucman.


Because inequality is high on the agenda during the election campaign in the U.S., they used the data of their academic research to show how much difference taxes can make.


We know from Thomas Piketty’s books how the big inequalities in Europe and the U.S. came to an end after the first world war and the crisis of the 1930s and how high taxes on income and property kept them down till the 1980s. Rates went up to 80 and even 90 %! With the introduction of neoliberal policies, taxes were lowered and inequalities were able to grow again.


What Saez and Zucman did was calculate what the wealth of some rich people would be if policies like those proposed now by Bernie Sanders or Elisabeth Warren had been introduced in 1982. Well, with Sanders’ plans, Jeff Bezos (Amazon) would not have 160 billion US$, but ‘only’ 52.2 billion US$. Bill Gates (Microsoft) would only have 13.5 billion US$ instead of his current 97 billion US$. With Pete Buttigieg’s plans, nothing would change …


Just imagine the huge amount of money that would have been available for social policies, for health care, etc!


What these researchers want to make clear is that high tax rates existed in the past and it is perfectly possible to introduce them again today.


What is needed though is a better coordination of policies and a better cooperation between social movements. Globalisation is no excuse for lack of equitable tax policies, and global or continental tax initiatives should not be made impossible by national vetoes.


What it means is that social movements should learn to articulate their actions between different political levels, from local to national to continental and global. It is not an easy task, but it is perfectly possible.


It is a very positive thing to note that inequality is high on the agenda today. Inequality is a much more serious problem than poverty. One should know that the problem of poverty cannot be solved with ‘fighting poverty’; what is needed is a fully fledged social protection policy and a fight against inequality. With taxes. This is where it begins.


More cooperation is certainly needed, at the global level. Why not think of a big campaign at the next World Social Forum in Mexico City in 2021, at the 20th anniversary of the Forum? Actions are needed to give new life to this WSF, a coordinated action on taxes seems to me to be a very welcome initiative!


And for those who want to make their own calculations: look at Success!

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