Global Wealth Tax Debate Heats Up
In a recent statement, U.S. Treasury Secretary Janet Yellen made clear the U.S. stance on the proposed global wealth tax, a measure aimed at billionaires to address economic disparity. Despite the push from countries like Brazil, France, and others to create a more equitable economic landscape, the U.S. has voiced its opposition to the initiative.
Brazil, currently at the helm of the G20, has been advocating for a unified strategy to tax the ultra-wealthy, similar to the global minimum tax on corporations agreed upon by around 140 countries in 2021. However, this corporate tax agreement has encountered obstacles in the U.S. and other nations. Yellen’s upcoming discussions with G7 finance ministers are expected to include this contentious topic, but she remains firm: “We believe in progressive taxation… But the notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way—we’re not supportive of a process to try to achieve that.”
Advocates of the wealth tax, including officials from Spain, Germany, and South Africa, suggest a minimum 2% tax on billionaires’ total wealth each year. This measure is seen as a way to prevent the wealthy from relocating assets to evade taxes, thereby increasing national revenues and tackling growing income inequality.
French Finance Minister Bruno Le Maire likened the proposal to the corporate tax framework: “It would be the same on the international taxation for the wealthiest individuals.” The U.S., however, already taxes its citizens on global income, which complicates the prospect of escaping domestic taxation through asset relocation.
While President Biden has proposed increased taxes for high-income Americans, he has not endorsed a wealth tax. Instead, his administration favors a plan where Americans with a net worth over $100 million would pay a 25% tax on all earnings, including unrealized capital gains. This contrasts with the current capital gains tax rate and timing of taxation upon asset sale.
The Supreme Court is poised to consider a case that might result in a constitutional ban on wealth taxation. Meanwhile, Yellen’s role in establishing the global corporate tax agreement—a 15% minimum tax for companies in their operating jurisdictions—remains unratified by Congress due to Republican opposition.
