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Global Wealth Tax Could Raise $2.1 Trillion Annually for Climate Action and More
"To make our economies secure and protect the earner way of life that has defined the modern era, we need wealth taxes that end the two-tier treatment of wealth," says a new report.
Aug 19, 2024
With countries set to focus heavily on climate finance for the Global South at the 2024 United Nations Climate Change Conference in November, the Tax Justice Network on Monday offered a proposal that could raise double the amount of money needed to help developing countries transition to clean energy and adapt to extreme weather—and there's already proof the idea is effective and politically feasible.
The "featherlight" wealth tax introduced in Spain less than two years ago raised hundreds of millions of euros last year by taxing the net worth of the 0.5% richest households, and the group's report argued that the law should serve as a model for a global wealth tax like the one increasingly supported by finance ministers in wealthy countries.
Spain's wealth tax, also called the "solidarity surcharge" by Prime Minister Pedro Sánchez, applied a tax of 1.7% to 3.5% to the richest 0.5% of the country's households—turning away from the "two-tier treatment of collected wealth and earned wealth" that TJN said is "the root of the problem" of growing inequality.
"Collected wealth—i.e. dividends, capital gains, and rent gained from owning things—is typically taxed at far lower rates than earned wealth—i.e. salaries gained by working," said TJN. "At the same time, collected wealth typically grows faster than earned wealth. Today, only half of the wealth created around the world each year goes to people who earn for a living—the rest is collected as rent, interest, dividends, and capital gains."
The two-tier tax system allows billionaires to pay tax rates that are half the rates paid by the rest of society, which has allowed the wealth of the richest 0.0001% people in the world to quadruple since 1987 "to the detriment of economies, societies, and planet," said TJN.
Because the richest 0.5% of households control, on average, more than 25% of any given society's wealth, the report states, if countries around the world replicated Spain's solidarity surcharge, governments could raise $2.1 trillion annually—enough to pay for climate finance as well as other pressing needs.
"By definition, a billionaire owns more wealth than an average U.S. household could spend in 10,000 years. Wealth contributes a lot less to the economy than it can when it's pharaoh-tombed like this, making economies poorer than the sum of their parts."
"To guarantee a good life for all citizens and preserve social cohesion despite these challenges, governments around the world need the fiscal space to transform economies in a socio-ecological manner, ensure high-quality education for all, guarantee access to modern health services, and fulfill basic needs like affordable housing, food, and transportation at the same time," reads the report. "Such measures are only feasible with sufficiently endowed and stable public budgets. A moderate, progressive wealth tax could help countries to raise these urgently needed funds."
The report shows, said Oxfam International, that "E.U. governments can no longer excuse their 'lack of funds' for failing to fight the climate crisis and end poverty. The money they need is in the pockets of the super-rich!"
In each country, half the population holds only about 3% of the wealth—a persistent inequality that is "making economies insecure and is directly linked to people having to spend more than they bring in."
The current global tax system treats billionaires as though they "earn wealth like everybody else, they're just better at it," said Mark Bou Mansour, head of communications for TJN. "This is bogus."
"It's impossible to earn a billion dollars," Bou Mansour said. "The average U.S. worker would have to work for a stretch of time 13 times longer than humans have existed to earn as much as wealth as the world's richest man has today. Salaries don't make billionaires, dividends and rent money do. But we tax dividends and rent money much less than we tax salaries, and this is destabilizing the earner model our economies are based on."
"By definition, a billionaire owns more wealth than an average U.S. household could spend in 10,000 years," he added. "Wealth contributes a lot less to the economy than it can when it's pharaoh-tombed like this, making economies poorer than the sum of their parts. To make our economies secure and protect the earner way of life that has defined the modern era, we need wealth taxes that end the two-tier treatment of wealth."
On the BBC, which featured TJN's report in a segment on Monday, Bou Mansour debunked the common claim that taxing the richest households would harm countries' economies by pushing rich people to move away.
"This is an area where public perception has been lagging behind the evidence," said Bou Mansour. "Recent wealth taxes in Norway, Sweden, and Denmark all resulted in a migration rate of 0.01% among the super-rich who were taxed. So what the data shows is that the super-rich do not leave en masse, and what's more striking is that the data shows if countries do not implement wealth taxes, that is far more harmful to the economies."
The report notes that concerns about the super-rich simply hiding their wealth in tax havens are valid, and called on countries to ensure that the U.N. tax convention currently being negotiated "delivers robust tax transparency standards."
"Countries should collaborate to combat tax abuse by the ultra-rich, a challenge addressed in another strand of literature," reads the report. "A straightforward starting point for combating this form of tax abuse in the context of a wealth tax is the implementation of full beneficial ownership transparency, at least within the country itself."
While a number of G20 finance ministers have come out in support of a global wealth tax this year, leaders in some wealthy countries including U.S. Treasury Secretary Janet Yellen have refused to back the proposal.
"The vast majority of countries are currently working on what can be the biggest shakeup in history to global tax rules, to end the scourge of global tax abuse by multinational corporations and the superrich. But a minority of rich countries still seem to be holding back from support for a robust framework convention on tax," said Alison Schultz, research fellow at TJN and co-author of the report. "This needs to change now—the climate can't wait, and nor can the people of the world."
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Spanish PM Urges NATO Leaders to Eschew 'Double Standards' on Gaza and Ukraine
"If we demand respect for international law in Ukraine, we must demand it in Gaza as well," asserted Pedro Sánchez.
Jul 11, 2024
While joining leaders of fellow NATO countries in voicing support for defending Ukraine from Russian aggression, Spanish Prime Minister Pedro Sánchez on Wednesday implored Western nations to avoid "double standards" in the application of international law regarding Israel's war on Gaza.
Sánchez, a member of the Spanish Socialist Workers' Party who has led his country since 2018, said during the NATO Public Forum in Washington, D.C. that Western leaders must have "consistent political positions" on Ukraine and Gaza.
"If we are telling our people that we are supporting Ukraine because we are defending the international law, this is the same that we have to do toward Gaza... say that we are backing the international law, especially the international humanitarian law," Sánchez said, drawing applause from the audience.
We cannot have double standards in our approach to Ukraine and Gaza - international law must be upheld in both situations, Prime Minister of Spain @sanchezcastejon said in his conversation with GMF Trustee Steve Biegun at the NATO Public Forum. pic.twitter.com/VdNa4laImY
— German Marshall Fund (@gmfus) July 10, 2024
"We need to create the conditions for an immediate and urgent cease-fire," the prime minister stressed. "There is a real risk of escalation to Lebanon."
Sánchez urged his fellow NATO leaders to do everything they can to "stop this terrible humanitarian crisis" in Gaza and called for an international conference for the establishment of an independent Palestinian state.
In late May, Spain, Norway, and Ireland formally recognized the state of Palestine, brushing off Israeli Foreign Minister Israel Katz's threat of "severe consequences" for the three nations. Earlier that month, the United Nations General Assembly voted overwhelmingly in favor of a resolution supporting full U.N. membership for Palestine.
Nearly 150 of the world's 193 nations now officially recognize Palestinian statehood, with more considering the move amid what South Africa and dozens of other nations say is Israel's genocidal war on Gaza. Last month, Spanish Foreign Minister José Manuel Albares announced that his country had applied to join the South African-led genocide case against Israel before the International Court of Justice (ICJ) in The Hague.
As the ICJ determines whether Israel is committing genocide in Gaza, the tribunal has ordered Israel to prevent genocidal acts in the embattled enclave, to "immediately halt" its offensive in Rafah, and to stop blocking humanitarian aid from entering Gaza in the face of worsening "famine and starvation."
Israel has been accused of flouting all three orders.
In November, Ione Belarra, then Spain's minister of social rights, called on the International Criminal Court (ICC) to investigate Israeli Prime Minister Benjamin Netanyahu for alleged war crimes. In May, ICC Prosecutor Karim Khan said he is seeking arrest warrants for Netanyahu and Israeli Defense Minister Yoav Gallant for alleged war crimes and crimes against humanity including extermination and using starvation as a weapon of war. He is also pursuing arrest warrants for three Hamas leaders for alleged extermination, rape, and other crimes.
According to Palestinian and international agencies, Israel's nine-month bombardment, invasion, and siege of Gaza has left more than 137,500 Palestinians dead, injured, or missing. Around 90% of Gaza's 2.3 million people have been forcibly displaced. The majority of homes and other structures in the embattled strip are destroyed or damaged. Children are starving to death amid a severe shortage of food, water, and medical treatment.
Israel's war—which is a response to the October 7 Hamas-led attacks on Israel that left more than 1,100 Israelis dead and over 240 people from Israel and other countries kidnapped—has sparked ongoing protests around the world, including in Spain.
In November, the city councilors in Barcelona, Spain's second-largest city, voted to suspend relations with Israel in a resolution asserting that "no government can turn a blind eye to genocide."
Sánchez isn't the first political leader to call out the West's double standards on Gaza and Ukraine.
"Two years ago, when Americans across the country rallied to offer support and aid to Ukraine in the face of Russian aggression, so did we," Abdullah Hammond, the mayor of Dearborn, Michigan—home to the highest Muslim population per capita in the U.S.—wrote in a February New York Times guest opinion essay decrying the Biden administration's "unwavering" support for Israel.
"There are still blue and yellow flags fading against the facades of homes and businesses across my city," Hammond added. "But when Dearborn residents flew the Palestinian flag this past fall, they were met with threats."
On the world stage, U.N. Secretary-General António Guterres told European Union leaders at a March summit in Brussels that "the basic principle of international humanitarian law is the protection of civilians."
"We must stick to principles in Ukraine as in Gaza without double standards," he added.
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'We Want Peace': Spain Applies to Join ICJ Genocide Case Against Israel
"We do it out of commitment to the United Nations and to international law," said the Spanish foreign minister, calling for an end to civilian deaths.
Jun 06, 2024
Spain's foreign minister announced Thursday that the country had applied to join the genocide case against Israel at the International Court of Justice, just over a week after formally recognizing a Palestinian state alongside other European countries.
South Africa brought the case and has led it through its early stages, which culminated on May 24 with the ICJ, the United Nations' highest court, ordering Israel to halt its military offensive on Rafah in the southern Gaza Strip—an order that Israel ignored. Mexico, Colombia, Nicaragua, Libya, and the Palestinians have already applied to join the case, while Chile and Ireland have also announced plans to intervene in support of the case.
"We do it out of commitment to the United Nations and to international law," José Manuel Albares, Spain's foreign minister, said Thursday in a social media post that included a video of his announcement speech. "To support the work of the court. To avoid more civilian deaths. For the peace."
"We take the decision because of the ongoing military operation in Gaza," Albares said, according toThe Associated Press. "We want peace to return to Gaza and the Middle East, and for that to happen we must all support the court."
España va a intervenir en el procedimiento del Tribunal Internacional de Justicia ante la situación en Gaza.
Lo hacemos por compromiso con @ONU_es y con el Derecho Internacional. Para apoyar la labor del Tribunal. Para evitar más muertes de civiles. Por la paz. pic.twitter.com/WQRI1tDyrk
— José Manuel Albares (@jmalbares) June 6, 2024
Albares is a member of the Spanish Socialist Workers' Party (PSOE), a center-left party that leads a coalition government. Sumar, a new left-wing party that is the junior partner in the coalition, has been strongly pro-Palestine; the party's ministers have called Israel's war in Gaza a genocide. Podemos, a left-wing party that was part of previous coalitions but now holds only five seats in parliament and has been largely replaced by Sumar, has taken a similarly strong position; its leader had previously called for Spain to back the ICJ genocide case.
The ICJ is one of several international institutions that pro-Palestine governments are using to try to isolate Israel and hold it to account for its ongoing assault on Gaza, which has killed more than 36,000 people, mostly women and children, in the last eight months. Israel's military killed dozens early Thursday by bombing a school where refugees were sheltering. Most of the dead were women and children, the APreported.
Spain is one of several European countries that have recognized a Palestinian state in recent weeks; indeed, Madrid has been central to organizing the European effort. Israel responded by threatening "severe consequences" to nations that recognize Palestine, and it held out a special level of ire for Spanish leaders.
"Hamas thanks you for your service," Israeli Foreign Minister Israel Katz wrote in a message to Spain's Prime Minister Pedro Sánchez on social media, along with a video that, in Al Jazeera's description, "flipped between images of flamenco dancers and apparent scenes of the Palestinian group's incursion into southern Israel on October 7."
The move for recognition has widespread support among the Spanish public—78%, based on a Madrid think tank's survey, according to Al Jazeera.
Sumar has also pushed for Spain to support the arrest warrant applications for the leaders of Israel and Hamas submitted by the International Criminal Court (ICC), which like the ICJ is based in The Hague, Netherlands. U.S. President Joe Biden has been criticized by humanitarian groups for condemning the ICC's proposed warrants rather than supporting them. Neither the U.S. nor Israel recognizes the ICC's jurisdiction.
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