Tangle - The global wealth tax debate.

Starting point is 00:00:00 Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is Chinatown is streaming November 19th, only on Disney+. yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.

Starting point is 00:01:00 From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle Podcast, the place we get views from across the political spectrum, some independent thinking, and a little bit of my take. I'm your host, Isaac Saul, and on today's episode, we're going to be talking about a global wealth tax. Yep, that is something that is being proposed by some very important people right now. We're going to break down exactly what happened, what the proposal is, what we know about it, and of course, some arguments from the right and the left. So to break down this story, we're going to bring in our trusty podcast producer and editor, and now kind of my co-host here, John Law, and I'll be back with my take and your questions answered.

Starting point is 00:02:08 Thank you, Isaac, and welcome, everybody. Here are today's quick hits. First up, Israel began its operation in Gaza's southern city of Rafah yesterday, where Hamas's army battalions are stationed and more than one million Gazans are sheltering from the war. Israel struck less than 24 hours after warning 100,000 residents to evacuate. Hamas had accepted a ceasefire proposal drafted by Qatar and Egypt earlier on Monday, but Israeli officials said it did not meet their conditions. Number two, Columbia University announced that it was canceling its main commencement ceremony due to campus safety concerns amid weeks of student protests over the war in Gaza. Number three, a U.S. soldier who was stationed

Starting point is 00:02:45 in South Korea was arrested in Russia over the weekend on charges of theft. The soldier traveled to Russia on his own between deployments, U.S. officials said. Number four, Senator Bernie Sanders, the independent from Vermont, announced he would run for a fourth term. Sanders, 82, is the second oldest senator behind Chuck Grassley, the Republican from Iowa. Number five, after finding he violated his gag order for a tenth time in his trial in Manhattan, Judge Juan Merchan threatened Trump with jail time yesterday. Tax avoidance will cost the world a total of $5 trillion over the next decade. That's the conclusion of a new report by the Tax Justice Network, a campaign group calling for global tax reform.

Starting point is 00:03:38 According to its research, the use of tax havens by multinationals and wealthy individuals deprived countries of $472 billion in tax revenue every year. Now, to put that into perspective, that is more than the entire world spends on public health annually. G20 ministers' proposal of a wealth tax on billionaires is gaining traction. Well, they argue that this would help fight poverty, inequality, and climate change. Late last month, G20 ministers from Brazil, Germany, Spain, and South Africa signed a motion and published an opinion piece in The Guardian,

Starting point is 00:04:16 calling for a global tax of 2% on the world's 3,000 billionaires. The proposal is to raise roughly 250 billion euro, or around 270 billion dollars, a year to fight against global poverty, and has also been backed by the head of the International Monetary Fund. The ministers argued the tax would reduce inequality and help the global economy rebound from the shock of the pandemic. It is time that the international community gets serious about tackling inequality and financing global public goods, they wrote. One of the key instruments that governments have for promoting equality is tax policy. Not only does it have the potential to increase the fiscal space governments have to invest

Starting point is 00:04:55 in social protection, education, and climate protection, designed in a progressive way, it also ensures that everyone in society contributes to the common good in line with their ability to pay. A fair share contribution enhances social welfare. The G20 ministers behind the push say they will attempt to build international consensus on the wealth tax and push for a joint declaration at a meeting of the G20 finance ministers and central bankers in July. Brazil, which currently chairs the G20, put the proposal on the agenda for a meeting of finance ministers earlier this year. Each year, the group selects a different member country to serve as president and set an agenda. Research from the non-governmental policy organization Oxfam has shown that billionaires

Starting point is 00:05:35 became 34% wealthier by the end of 2023 than they were in 2020, largely due to a boom in asset values. The collective gain was about $3.3 trillion. In the U.S., it is not clear if government officials or the Biden administration would back a global wealth tax, though Treasury Secretary Janet Yellen has already endorsed a global minimum tax on corporations. The plan already faces stiff opposition from critics who say that any kind of global minimum tax would amount to a form of taxation without representation. According to polling from Gallup, Democrats are roughly three times more likely than Republicans to favor heavy taxes on the rich, although all Americans

Starting point is 00:06:14 have expressed greater support for higher taxes on the wealthy in the past two decades. Today, we're going to explore some arguments about a global wealth tax from the right and the left, and then Isaac's take. We'll be right back after this quick commercial break. First up, we're going to start with what the right is saying. The right opposes any kind of wealth tax, suggesting it amounts to a power grab by left-wing governments. Some say more taxes on the wealthy won't have the effect progressives intend. Others say history shows wealth taxes are disastrous for economies.

Starting point is 00:06:56 The Wall Street Journal editorial board said, watch out for a global wealth tax. In our new socialist age, the demand to tax and redistribute income is insatiable. The latest brainstorm arrives in a proposal by four countries in the G20 group of nations to impose a 2% wealth tax on the world's billionaires, the board wrote. As you might expect, this would principally be a tax rate on Americans, who are the most numerous billionaires. It would also be taxation without representation, since it would be a body of global elites attempting to impose a tax without having passed Congress. The wealth tax proposal underscores the growing danger from the G20, which is increasingly at odds with U.S. interests. Founded in 1999 after the Asian debt crisis, the G20 is becoming a vehicle for the world's left-wing governments to gang up on the U.S., the board said. For the Hoover Institute, Richard A. Epstein argued,

Starting point is 00:08:00 Wealth tax proposals are a poor idea. Two years ago, at the height of the pandemic, billionaires accumulated capital at near-record rates. Now potential gains from a wealth tax have fallen because of the enormous declines in wealth, Epstein wrote. In sum, the American billionaires lost $660 billion this past year, about one-third of the $2 trillion in losses worldwide. Nothing guarantees that they will recover those losses anytime soon, if ever. Considering a hypothetical 3% wealth tax rate, close to $20 billion in domestic wealth tax revenue disappeared in 2022. This number would be far higher if the wealth tax also reached

Starting point is 00:08:36 foreigners. The effort to impose a wealth tax runs afoul of the fundamental principles of taxation put in place throughout the course of the income tax era, which now spans more than 100 years, Epstein said. Worse, the tax will damage the economy. Today's ableist entrepreneurs will be forced to devote their time to defending their fortunes against a predation by the one or more states that lay claim to their wealth. An overall decline in social wealth will likely lead to a reduction of investment and wages, and consequently to a lower standard of living and a loss of tax revenues from other sources. In Barron's, Scott Hodge called the wealth tax the worst form of sin tax. President Joe Biden wants a wealth tax, but it's not because he has anything against rich people, he says, Hodge wrote. Biden's words and actions reflect

Starting point is 00:09:22 progressives' competing motivations when it comes to taxing the rich. To some, a wealth tax is all about raising revenue. To others, it is an advanced form of sin tax aimed at punishing wealth and addressing inequality. But history shows taxes aimed at punishing behavior and raising revenues often fail at both while hurting the poor in the process. Progressives often look to Europe for inspiration on tax policy. Ironically, many European countries, including France, have abandoned their wealth taxes because of the unintended consequences, Hodge said. Much like the estate tax, the notion that a wealth tax addresses inequality is an illusion. In reality, these taxes cause a transfer of wealth among the rich while the government skims a little bit off the top from the transaction. All right, that is it for what the right is saying, which brings us to what

Starting point is 00:10:18 the left is saying. The left generally supports a global wealth tax, framing it as a necessary move amid rising inequality. Some say a wealth tax would be toothless without international cooperation. Others say the tax would be a step in the right direction toward addressing inequality, but wouldn't solve the issue outright. In the New York Times, Gabriel Zuckman wrote, It's time to tax the billionaires. One obstacle to taxing the very rich is the risk that they may move to lower-tax countries. In Europe, some billionaires who built obstacle to taxing the very rich is the risk that they may move to lower-tax countries. In Europe, some billionaires who built their fortune in France, Sweden, or Germany have established residency in Switzerland, where they pay a fraction of what they would in their own

Starting point is 00:10:54 home country, Zuckman said. There is a way to make tax dodging less attractive, a global minimum tax, so no matter where a company parks its profits, it still has to pay at least a baseline amount of tax. The proposal stays firmly in the realm of income taxation. Billionaires who already pay the baseline amount of income tax would have no extra tax to pay. The goal is that only those who dial down their income to dodge the income tax would be affected, Zuckman wrote. The idea that billionaires should pay a minimum amount of income tax is not a radical idea. idea that billionaires should pay a minimum amount of income tax is not a radical idea. What is radical is continuing to allow the wealthiest people in the world to pay a small percentage in income tax than nearly everybody else does. In The Guardian, Larry Elliott argued,

Starting point is 00:11:35 the global wealth tax plan makes perfect sense. U.S. billionaires make their money in ways that are often taxed at lower rates than the ordinary wage income of American workers. Overwhelmingly, their wealth comes from the rising value of their assets, and they use tax loopholes and legal accounting moves to minimize the tax they pay, Elliott said. The number of billionaires almost tripled in the 2010s and has continued to rise over the past four years. Even though people on much more modest incomes have also seen the value of their homes and pension plans increase, those with high levels of wealth to to begin with, were the biggest gainers. Even a 2% wealth tax would leave the rich much better off than they were a decade ago.

Starting point is 00:12:13 One objection to wealth taxes is that they stifle innovation and growth. This argument would be more compelling if there was evidence that the massive increase in wealth of the super-rich over the past decade had financed an investment boom. In fact, investment has been historically weak, Elliott wrote. Countries that have operated wealth tax in the past have found that they raise relatively small amounts of revenue, in part because the very rich can shift their money to tax havens. For the plan to work, there would need to be international cooperation to prevent capital flight. In Jacobin, David Moskrop said the wealthy's opposition to the wealth taxes is a good reason to pursue them further.

Starting point is 00:12:50 Wealth taxes are not a panacea. They won't dismantle the structure that produces billionaires and leaves workers struggling to feed themselves, Moskrop wrote. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease.

Starting point is 00:13:25 Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. A 2% tax would be a pittance. Of course, in a remotely just world, this small number would

Starting point is 00:14:03 be irrelevant because there would be no need of the tax in the first place. That's because there would be no category of billionaire, no class of wealth hoarder who enjoyed the capital, and the power that shape affairs in their interests while the many struggle to make ends meet. Despite the limits of a global wealth tax, there are virtues that make the undertaking worthwhile. For one, extracting hundreds of billions of dollars means there's more money for states to spend fighting climate change, funding social programs, building infrastructure, and so forth. More money for collective undertakings of social import is more money for good and necessary causes, Moskrop added. Successfully implementing a billionaire tax would indicate a modest but notable power shift,

Starting point is 00:14:42 an assertion that the many, and the states that are ostensibly meant to represent them, do indeed retain some control over the powerful few. Now we'll send it back to Isaac for his take. All right, that is it for what the right and the left are saying, which brings us to my take. So I actually tried a little experiment today with the newsletter. I decided to write down a few thoughts about this issue before I read a single opinion piece about it, and then I wrote the second half of my take after I read the various views that were out there. So let's start with how I was feeling before reading any of the other arguments

Starting point is 00:15:31 about this proposal. First, I'm fine with the premise in pure theory. I can certainly concede that billionaires have benefited greatly from the last few years of economic change, and that nobody needs a billion dollars, especially when so many people globally are starving and struggling. We're basically asking these people to give up a little, relatively, to do a lot of good. In principle, that doesn't offend my limited government sensibilities. At the same time, though, I just don't know how something like this would work. I'm not at all a fan of global economic rule that all or most countries are bound to. There are certain areas where global rules make sense, like

Starting point is 00:16:10 international rules of war. But even in those very sensible spaces, there is no authority to enforce those rules when countries violate them. I don't see how this would be any different. Even if we accept the idea that taxing the world's billionaires at a flat rate of 2% is a good policy prescription, my guess is that many billionaires would avoid paying it by simply moving themselves or their wealth to countries not participating in that tax plan. Who is going to actually go and collect this money? Plus, how do we decide who doles out the money? What government projects is this going to fund, and who gets to determine where it goes? In the United States, we vote for representatives who get to decide how to use our tax dollars. How can this system coexist with a tax imposed by

Starting point is 00:16:54 an international body that no one has voted for? And do the billionaires get a vote on what happens to their money? Funnily enough, when I was at the TED conference in Vancouver a few weeks ago, one of the few talks I actually got to see was Rory Stewart's address about poverty. Stewart is a British academic and a former member of parliament who helped oversee the United Kingdom's government programs to fight poverty. I'm sure his talk will be online soon, but the gist of his argument, which I found very compelling, is that governments are very bad at fighting poverty, and the best way to do so would just be to give impoverished people moderate-sized, one-time cash payments. Stewart spoke about how he used to be a government optimist, but his on-the-ground experience with government programs and simple cash transfer programs to fight poverty

Starting point is 00:17:42 convinced him that he was wrong. Which is just to say that I don't think giving these governments an extra quarter trillion dollars to fund some bloated anti-poverty projects is actually going to help much. Alright, so that is what I wrote before reading any of the opinions. After spending a few hours reading through all our research and the different arguments on this topic, I have to admit, my opinion didn't change much. I'm sorry, I thought this was going to be a little bit more exciting. On the whole, it seems like my gut reactions were very similar to the arguments under what the right is saying. Some of those writers added additional strength to my argument, like the obvious point that any global tax like this is sure to start with a small group of people, like 3,000 billionaires,

Starting point is 00:18:24 but will almost certainly expand to a larger group of people, like 3,000 billionaires, but will almost certainly expand to a larger pool of rich people to tax from. That is, historically, what taxes do. They expand. The New York Times opinion piece by Gabriel Zuckman was the most compelling piece I read in favor of the wealth tax, but not on the principles of the argument. Mostly, Zuckman illustrated just how wealthy these billionaires are, just how low their effective tax rate can be, and just how good they are at avoiding taxes. He did a good job of assuring me I should have absolutely zero sympathy for the billionaires being taxed, and he also made one important distinction about this proposal.

Starting point is 00:19:01 The 2% wealth tax applies only to billionaires who avoided paying income taxes. If, for instance, someone like Bernard Arnault, the French businessman and art collector who is worth about $210 billion, paid no income tax, then this proposal would collect roughly $4.2 billion from him. Therefore, Zuckman argues, this doesn't veer into a potentially unconstitutional wealth tax, but instead constitutes a penalty for not paying income tax. Still, Zuckman agrees that getting these billionaires to participate would be difficult, and he doesn't do anything to address my biggest concern, which is who gets the money and how do we decide what to do with it. His entire pitch is based on the idea that quote-unquote fixing capitalism includes a step

Starting point is 00:19:45 where we give hundreds of billions of dollars to hundreds of governments across the world and trust them to solve poverty. Ironically, because this actually sounds a lot more radical, I'd find this approach a whole lot more appealing if I was assuming that it was just a direct wealth transfer, i.e. giving money directly to the global poor. In other words, I'm not worried about scraping a couple billion dollars from someone who is stratospherically wealthy and avoiding paying taxes like Arnaud. I'm worried that the end result would be to inflate government coffers and not actually solve poverty. We'll be right back after this quick break

Starting point is 00:20:27 all right that is it for my take which brings us to your questions answered this one is from aaron in columbia missouri aaron said from student loan forgiveness to Title IX to social media coercion during COVID and just recently the FTC eliminating non-competes and the reclassifying of independent contractors, it seems as if the Biden administration is purposefully tying itself up in courts, knowing they most likely won't win. I'm curious if you have any perspectives on this. What is their endgame? Why keep pushing student loan forgiveness, for example, knowing it's likely to be challenged and fail again? It's all so very puzzling to me. Okay, so at the risk of being too reductive, the Biden administration is issuing rules and executive actions because after a strong first two years of lawmaking, it can't pass any

Starting point is 00:21:21 legislation. In 2023, Congress passed the fewest laws of any year in decades. That's due in part to the divided nature of the current government. Republicans have a slim majority in the House, Democrats have the White House, and an even slimmer majority in the Senate. But it's also caused by increasing partisanship. Congress has been on a general trend of passing fewer substantial laws since 1996. With the prominent recent exception of Speaker Mike Johnson, the Republican from Louisiana, navigating the passage of a foreign aid package, the Biden administration has been tied to a Congress that seems committed to working against any new bills. That's bad news for a president hoping to tout some fulfilled campaign promise going into re-election. So, I think Biden's

Starting point is 00:22:05 endgame here is actually simple. Try to follow through on the things you campaigned on doing as much as possible. Because if that platform was compelling enough to get you elected, then being able to say you delivered on it or tried and the Republicans stopped you might be enough to get you re-elected. Let's take the example of student aid. Yes, much of Biden's debt cancellation has already been struck down by the courts and much more is likely to be, but a lot of it has been successful. His administration has approved $146 billion of debt relief for 4 million borrowers. Whether you approve of that or not, it's something he campaigned on doing. The same is true for new Title IX rules, reclassifying marijuana and trying

Starting point is 00:22:46 to crack down on independent contractors or regulate the gig economy. I don't think Biden's endgame with trying to accomplish these goals via federal action is to tie the court system up. I think he's just trying to claim that he's taking action so he can tell voters he's enacting the platform that won him the presidency in 2020. And if things get caught up in the courts, he can point to that as evidence of his effort. All right, that is it for your reader question today. I'm going to send it back to John for the rest of the pod, and he'll hear from me again tomorrow. Have a good one. Thanks, Isaac. And here's your Under the Radar story for today. Are we talking too much about mental health?

Starting point is 00:23:28 Researchers at the University of Oxford are beginning to warn that we are in danger of overdoing the focus on mental wellness and instead encouraging kids to identify with disorders they may not have while over-interpreting their normal emotional responses as symptoms. The research has shown unexpected results in trials of school-based mental health interventions in the United Kingdom and Australia, where students who participated in training for mindfulness, cognitive behavioral therapy, and dialectical behavioral therapy emerged no healthier than peers who did not participate. Their view remains a minority position among specialists in adolescent mental health, who argue the more urgent problem is lack of access to treatment.

Starting point is 00:24:08 The New York Times has this story, and there's a link in today's episode description. All right, next up is our numbers section. The percentage of Americans who think the government should redistribute wealth via heavy taxes on the rich is 52%, according to a 2022 Gallup poll. The percentage of Democrats who think the government should redistribute wealth via heavy taxes on the rich is 79%. The percentage of Republicans who think the government should redistribute wealth via heavy taxes on the rich is 24%. The combined wealth of the world's 2,660 billionaires in 2021 was $13.76 trillion. The percentage of all federal income taxes paid by the top 1% of U.S. taxpayers in 2020

Starting point is 00:24:54 was 42.3%, according to the Tax Foundation. The amount of corporate profits shifted to tax havens in 2022 was $1 trillion, equivalent to 35% of all the profits booked by multinational companies outside of their headquarter country, according to the 2024 Global Tax Evasion Report. The percentage of global profits shifting attributed to U.S. multinationals is 40%. The estimated amount that a 2% global tax on billionaires would generate in revenue is 250 billion euro, or 270 million dollars. And last but not least, our have a nice day story.

Starting point is 00:25:35 Responding to something that makes you angry by writing about it on a piece of paper, then shredding it up, can help with controlling anger responses, according to a research team in Japan. The study, published in Scientific Reports, is the culmination of years of previous research on the association between writing and anger reduction. We expected that our method would suppress anger to some extent, lead researcher Nobuyuki Kawai said. However, we were amazed that anger was eliminated almost entirely. Science Daily has this story and there's a link in today's episode description. All right, everybody, that's it for today's episode. As always, if you'd like to support

Starting point is 00:26:13 our work, you can go to readtangle.com and sign up for a membership. We'll be right back here tomorrow. For Isaac and everybody on the Tangle News team, have a great day, everybody. Peace. for our podcast was designed by Magdalena Bacoba, who is also our social media manager. Music for the podcast was produced by Diet75. If you're looking for more from Tangle, please go to readtangle.com and check out our website. We'll see you next time. a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Thank you.

Tangle - The global wealth tax debate.

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