The tycoons and the poor in a very uneven transition in the face of the pandemic. The US can reignite a global discussion about raising taxes on millionaires.
The world was unequal before the Covid-19 pandemic, and now it is worst. Those with the most amassed more money, and those with the least became more precarious. A little more than 60 percent of multimillionaires in the world saw their wealth grow significantly, and in the United States alone the wealth of millionaires grew more than 44.6% between March 2020 and February 2021, according to the Institute for Policy Studies in Washington. They ended with a combined wealth of 4.26 trillion, surpassing the combined Gross Domestic Product of Latin America's five strongest economies: Brazil, Mexico, Argentina, Colombia and Chile.
The concentration of wealth is insulting. Tesla founder Elon Musk alone saw his wealth grow from 24 billion to 182 billion during this period, greater than the GDP of Uruguay and Ecuador, or all of Central America. According to the World Bank, the number of people pushed into poverty during the first year of the pandemic was between 119 and 124 million. After 20 years of reductions in poverty, the year will mark the first that poverty rose.
This disparity hurts and erodes democracies, but also impacts the economic interests of those who have benefited from the pandemic. In the last year, we saw the global health crisis cause a profound economic crisis. This surprised nobody. With less money for the majority of people, there is less consumption, sales fall further, business suffer or close and social polarization grows.
The natural dynamic of the exacerbation of contractions follows a very simple logic and creates an ominous diagnostic. Governments will not be able to respond efficiently to the rescue of those who have the least, because they don't have sufficient resources, or a budget to resist unilateral efforts at economic recovery.
This route, without changes or adjustments, will make many nations unviable. The strength of the economies of the United States and China, which other industrialized nations will try reach, will not be sufficient to carry a world that is constantly heavier, which the global path is cementing so that those that have the most pay the most taxes.
Is it time that the rich pay part of the costs caused by Covid-19? No other path is on the horizon, except for a transfer of resources that have been obtained through a tax on the rich.
At the beginning of this week at the Chicago Council on Global Affairs, US Treasury Secretary Janet Yellen spoke about the need to increase taxes, the collection of which can finance the high budgets necessary to reactivate the economy.
President Joe Biden needs to finance his ambitious $4 million infrastructure plan through a tax plan for the rich that can support the most progressive parts of the Democratic Party. The moderates and the republicans, who are used to the opposite, can reduce taxes on those who have the most.
This is a formula to stimulate growth: if less taxes are paid, they have more money to invest. But not now, when the crisis caused by the pandemic has had a universal impact and its consequences cannot be addressed using traditional schemes.
A Democratic politician that is fiercely opposed to increasing taxes on the rich over concerns of lost investments, Governor Andrew Cuomo, opted to do what is possible and necessary and negotiated with state governments a strong temporary increase in taxes, through 2027, of 9.65% on those who earn more than $1.1 million per year, 10.3% on those who earn between 5 and 25 million, and 10.9% on those who earn more than $25 million.
It is true that this can lead to lost investments, but without doing it he will not reach the budget necessary for the state economy to recovery. Yellen believes that the effort of the United States will not have the desired impact and will not reach the anticipated results unless it is part of an international movement. Throughout the week, as was reported in the American press, she was in conversations with her counterparts from various countries to reach a minimum global corporate tax rate.
January of last year, Kristalina Goergieva, Director-General of the International Monetary Fund, said that it would be necessary to increase taxes on the rich to close the gap between those that have the most and those that have the last to avoid major damage caused by a widening gap. At that time, the coronavirus pandemic was just starting and the profound damage it would cause on the world was still unknown.
Reality finally reached those who have the most, and the time that they give a part of their riches to the world that has helped them amass it has arrived. It benefits them, and it benefits everyone. Looking higher and further, as Jose Ortega y Gasset said, is a call to action.
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