Does the Top 1pct of the Population Own 50pct of Wealth?

An axiom quoted often is that one percent of the world owns 50 percent of the wealth. It holds enormous policy implications, for both the world and Malaysia. At the most basic level, it means a considerable adjustment in wages. And it needs a major reform that will tax the rich at much higher levels than they have been used to.

 Oxfam, which works with 21 NGOs that have partners in over 90 countries, accepts and promotes this axiom. In a briefing paper titled “Survival of the richest: How we must tax the super-rich now to fight inequality”, it said the richest one percent hold 45.6 percent of global wealth, while the poorest half of the world has just 0.75 percent.  

Source: https://www.wikiimpact.com

 Since 2020, the richest one percent have captured almost two-thirds of all new wealth – nearly twice as much money as the bottom 99 percent of the world’s population. The gap is widening. 

A deeper dive reveals the following: 

· Billionaire fortunes are increasing by US$2.7 billion a day, even as inflation outpaces the wages of at least 1.7 billion workers, more than the population of India.

· Food and energy companies more than doubled their profits in 2022, paying out US$257 billion to wealthy shareholders while over 800 million people went to bed hungry.

· Only four cents in every dollar of tax revenue comes from wealth taxes.

· Half the world’s billionaires live in countries with no inheritance tax on money they give to their children.

· A tax of up to five percent on the world’s multi-millionaires and billionaires could raise US$1.7 trillion a year, enough to lift two billion people out of poverty and fund a global plan to end hunger.

· Eighty-one billionaires hold more wealth than 50 percent of the world combined.

· Ten billionaires own more than 200 million African women combined.

Each of these bulleted points is outrageous. This situation needs to be rectified. Otherwise, a popular revolution on the ground will happen. 

For comparison, labour’s income share in the European Union’s “Big Four” in 2021, namely Germany (61.4 percent), France (59.8 percent), Spain (59.1 percent) and Italy (58 percent) was much higher, an indication of the long way we have to go in terms of wage reform and giving labour a fairer share of GDP. 

The only way to do this as quickly as possible is to progressively keep increasing wages at a rate that the economy can bear. That will also mean the tough decision of cutting off access to cheap foreign labour. And the people who use this cheap labour will cry out loud. 

The other thing that the government needs to do is increase taxes at the top bracket for those earning billions of ringgits. Why does the marginal rate for these people have to remain at 28 or 30 percent? Why can’t those who earn more than RM5 million a year be taxed 40 percent on the margin? And those who earn above RM10 million annually are taxed 45 percent, and so on. 

As Oxfam points out: “Taxes on the richest used to be much higher. In the United States, the top marginal rate of federal income tax was 91 percent from 1951 to 1963; top inheritance tax rates stood at 77 percent until 1975; and the corporate tax rate averaged just above 50 percent during the 1950s and 1960s. 

The problem with all of this is that, no one nation wants to raise taxes, as they view cutting taxes brings in new investment. So, it has been a race to the bottom. Perhaps, it is time to work together to raise taxes, reduce inequalities and provide a decent standard of living for the B40 and M40.

 

Reference:

Comment: When 1pct of population owns 50pct of wealth, P. Gunasegaram, Malaysiakini, 8 October 2024