Income tax

Biden’s billionaire income tax has a lesson for India

At a time when socialism for business is the reigning mantra, US President Joe Biden has shown tremendous political courage to ensure that billionaires pay their fair share of taxes. After publicly denouncing the Trickle Down theory a few weeks ago, which, as we all know, is the very basis of the neoliberal economy at half mast, it is also the first time that an American president has strives to bring billionaires back into a reasonable tax framework. .

I hope President Biden’s monumental initiative inspires G-20 leaders to appropriately change their countries’ tax laws. As a disproportionate tax code adds to growing inequality, which results in one person dying every four seconds as the world’s 10 richest people added $1.3 billion to their wealth every day, As an Oxfam report revealed, the immediate need to tame tax laws becomes evident.

The billionaire minimum income tax, as it is known, was part of the budget proposals for the next fiscal year that the US president presented. It proposes a minimum tax of 20% on the wealthiest American households whose value exceeds $100 million. “The 20% minimum tax only applies to the hundredth of the top 1%,” President Biden said in his budget speech, adding, “The billionaire minimum tax is fair and it raises $360 billion that can be used to cut family costs and reduce the deficit.

Taxing the wealth of billionaires has always been considered inadmissible and treated more like a taboo. All previous attempts to impose a tax code on the rich rich, including a Democratic-backed proposal last October, have failed. Even now, it is uncertain whether President Biden’s proposal will pass through the US Congress, but one must admire the audacity and fearlessness shown by the US President who, setting aside the political ramifications that may arise , decided to take the bull by the horn.

“The tax code currently provides special treatment for the types of income enjoyed by wealthy people,” the president noted. And let’s not forget; At times, billionaire investor Warren Buffet had pointed out the glaring anomaly in tax laws that makes his secretary pay twice as much tax as he paid. He himself paid an effective tax of 0.1% between 2014 and 2018. Even today, working people pay more than twice as much tax on their income as the rich. This is not just an aberration, but in reality it is unfair and cruel to the millions of people who somehow struggle to survive and continue to pay their taxes. To give you an example of the economic inequality these anomalous tax laws lead to: In the first 19 months of the pandemic, nearly 89 million Americans lost their jobs. And yet, the richest 1% of Americans in October 2021 had as much wealth as the middle class, which makes up 60% of the population.

According to Forbes magazine, citing the White House Office of Management and Budget and the Council of Economic Advisers, the top 400 billionaires paid an average tax of 8.2% on their income, which was well below what paid by an average American citizen. Another estimate from the US Treasury Department states that last year alone $163 billion in taxes went unpaid by the top 1%.

The wealthiest don’t live on a big paycheck every month. Their income comes from stocks. But since the government does not tax the increase in value of the shares held until they are sold, which means taxing capital gains, the billionaire minimum tax will include unrealized gains on the shares. and bonds. But as Americans for Tax Fairness (ATF) explains: “Billionaires don’t need to sell assets to benefit from their increased value: they can live on borrowed money at cheap rates secured by their growing fortunes. And when all those wealth gains are passed on to the next generation, they disappear entirely for tax purposes.”

The new tax system will hopefully target this loophole. Indeed, the billionaire’s minimum tax will cover 0.01% of the richest 1% of Americans. Even that is sure to raise a chorus, with many calling it punitive.

Nonetheless, the ATF has calculated that since the start of the pandemic, the collective wealth of billionaires has soared by $1.7 trillion, a steep 57% increase, yet they have paid next to nothing in taxes. To illustrate, watch how billionaire Jeff Bezos continues to amass wealth without paying his fair share of taxes. According to Senator Bernie Sanders, Bezos owns a $500 million yacht, a $23 million mansion with 35 bathrooms and a rocket to blast a comedian into space. While Bezos has earned $81 billion in wealth during the pandemic, the new tax code will cost him $35 billion according to preliminary estimates.

Let’s go to India. The Global Inequality Report 2022 ranks India among the most unequal countries in the world. He finds that the richest 10% in India own 57% of the national income, while the richest 1% own 22%. To make it a bit more understandable, the report finds that the top 10% earn 96 times more income than the average bottom 50%. As I said earlier, one factor that plays an important role in wealth accumulation at the top is the pro-rich tax structure.

In her book ‘An Unkept Promise: What derailed the Indian Economy’, journalist and researcher Prasanna Mohanty claims that companies with profits over Rs 500 crore pay less efficient tax than companies with profits between Rs 50 crore and Rs 100 crore. This is on top of huge stimulus packages, colossal write-offs of bad debts and massive incentives in the name of growth.

Moreover, in September 2019, India cut corporate tax by Rs 1.45 crore lakh, and that too at a time when Nobel Laureate Paul Krugman made it clear in his columns that corporate tax cuts corporate tax that former US President Donald Trump had made earlier. had not created jobs nor had it stimulated industrial production. On the contrary, a large portion of these sops were used for stock buybacks and to increase senior management salaries and bonuses.

India therefore has much to learn from the way economic policies are evolving in America. This will help reduce budget deficits and provide resources for development. I only hope that in the years to come, the United States will expand the billionaire minimum tax to cover the entire top 1%, and that the G-20 leaders will also see merit in this and rewrite the national tax laws.

(The author is a noted food

policy analyst and expert in

farming issues

sector. He writes about food,

agriculture and hunger)