Is the call by David Abdulah, political leader of the Movement for Social Justice, for the implementation of a Wealth Tax a real and fair option? Abdulah sees the implementation of such a tax to achieve greater equity in the economy and society. A wealth tax will require those with super-abundant stored resources to make a greater contribution to public revenues. And this will be recompense too for the inadequacy of the payments made by the wealth owners to the national economy compared to their accumulation over decades and generations.
What is a wealth tax? Essentially, it’s an annual tax on resources garnered over decades, even generations by individuals and is different from the annual income tax paid on earnings during a financial year. One important element of such wealth is its ability to earn additional revenue through investment, even passive ownership of shares and other forms of equity, with the inheritors having added no real input into that handed down. A wealth tax can even be likened to estate taxes and the property tax this government has talked about for more than a decade now.
Wealth taxes have been instituted in France, Spain and Portugal and in other forms of tax regimes on property and wealth in certain states in the United States of America. US Democratic senator, Elizabeth Warren and her colleague senator Bernie Sanders are in the process of proposing a bill to have the one per cent who own 35 per cent of the wealth of the country and the ten who have gobbled up 80 per cent of economic benefits, pay a wealth tax in keeping with their accrued resources.
In societies in which there is an obvious gap between the earnings and the wealth-power of ethnic groups, a “racial tax” has been advocated to close the wealth gap between the overwhelming financial power of one group that has exploited other ethnicities in accumulating their fortunes over other groups in the economy and society.
It is not a stretch to conceive of the continuing advocacy by West Indian governments and academics led by historian Prof Hilary Beckles for reparations from Europe based on the wealth achieved and the leg-up given to Europe to lead off the process of industrialisation through slave trading and slavery as a form of wealth taxes.
Justification for a wealth tax is very arguable a case. The owners of super-abundant financial and other forms of wealth have secured their fortunes through the utilisation of the common resources of a country. Such people to be called upon to pay the wealth tax include those who have exploited the resources of a country while making an insufficient contribution to those who have been central to the generation of the wealth.
So too wealth owners who have utilised the patrimony of a country owned by the present and future generations without making sufficient input to allow those who will follow us to share in their inheritance will be required to do so through the wealth tax.
While the accumulators of wealth are required to pay income, value-added and other forms of taxes on annual earnings, a wealth tax will demand additional payments to generate growth and development in the economy.
There is a body of research that details what the richest pay in income taxes on their earnings compared to the salary-earning citizen in the lower-and middle-income brackets. Warren Buffet, the American billionaire businessman has consistently said that his secretary and assistants pay a greater percentage of their earnings in income taxes than he is required to pay. “I believe that huge dynastic wealth is not desirable for our society,” Buffet stated recently.
The establishment of foundations that contribute to scientific research and human needs has been real contributions by millionaires and billionaires with a conscience. The wealth tax will bring to the attention of the exchequer those who have created fortunes from their annual profits.
If the contemplation and research have not been done, it is unrealistic to expect Finance Minister Imbert with the support of the Government to propose a wealth tax in his budget statement for 2022. However, a minister of finance desperate for revenue to manage an economy in a free fall must certainly give a thought or two to the possibility of a future wealth tax.
Contemplation of a new tax, even though the Government has not been able to implement the property tax that it has talked about for many a year, is not biting off too much. Projecting a wealth tax will make the Opposition and others unable to claim it’s a tax that will further disenfranchise the widow with a small property.
Assuredly, a wealth tax can result in capital flight and be a disincentive to investment and entrepreneurship.
If the Minister and by extension the Government thinks that a wealth tax is an option for earning revenue, the returns must be envisioned for a fund for diversification projects and not for recurrent expenditure. A spudding of such potentially developmental projects can benefit everyone in the society and economy including those subject to the wealth tax.