Should billionaires continue to exist?

How taxing wealth could tackle both wealth concentration and the climate crisis

 

Wealth taxation is back on the progressive political agenda. It is both a refreshing new idea and a return to vogue of a policy established decade ago in Europe. Some remember it as part of François Mitterrand’s 110 propositions pour France, a joint electoral platform in 1981 with the Communist Party that carried him into the Élysée Palace. The solidarity tax on wealth survived multiple right-wing presidents, only to fall recently to President Macron.

Even so, it is an idea whose time has come in North America. It continues to exist in three OECD countries, and both Bernie Sanders and Elizabeth Warren, two of the leading three Democratic contenders for U.S. president, have a plan to tax wealth in their platforms. The NDP also included a proposal for a wealth tax in its 2019 election platform, which was met with backlash and bad-faith critiques from the usual suspects.

Matthew Lau, who has written for the right-wing Fraser Institute and Atlantic Institute for Market Studies, called it “class warfare” and “confiscatory” in a Financial Post column. This was followed by another piece in the same publication by the Montreal Economic Institute’s Gael Campman, who claimed taxing wealth would be a “tragic mistake,” seemingly oblivious to the existence of property taxes in Canada. Calling it a “demagogic ploy that ends up being counterproductive,” Campman brings up the prospect of the widely discredited “Laffer effect” of falling tax revenues from increasing taxation.

In a slightly more serious challenge, Robin Broadway and Pierre Pestieau call the wealth tax “Over the Top” in their recent C.D. Howe paper of the same name, stating that it isn’t needed, and it would be more efficient to raise taxes on capital gains. Why not do both? Recent studies such as the CCPA’s Born to Win have shown that Canada’s wealthiest 87 families now own the same amount as the lowest-earning 12 million Canadians, which is approximately equivalent to what everyone in Newfoundland and Labrador, Prince Edward Island and New Brunswick collectively owns. In Canada, just two billionaires (David Thompson and Galen Weston) own as much wealth as a third of Canadians.

A bold tax policy package is sorely needed to address this kind of wealth hoarding, which contributes to soaring inequality. Along with a host of other progressive measures, the wealth tax in particular sits in the enviable position of being at the nexus of both good policy and good politics.

According to a recent Ipsos poll, 67% of Canadians believe that “Canada’s economy is rigged to advantage the rich and powerful.” Another poll conducted by Abacus Data found that 67% of Canadians also support the idea of a wealth tax, including 58% of Canadians self-identifying as “right-wing” and 64% of those who say they are in the political “centre.”

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In his critique of the NDP’s modest wealth tax proposal, Campman alleges it would force poor farmers to sell their land and cause capital flight. Lau asks how the tax could work when wealth in financial assets can vary day by day depending on the stock market. As the OECD has pointed out, there are ways of getting around all these problems.

The best wealth tax systems have a series of exemptions regarding most forms of middle class wealth, such as pensions and primary homes, as well as exemptions for agricultural property. Assessments can occur every 3–5 years with options to apply for reassessment if a significant change in value occurs, and payments can be made in instalments for those taxpayers facing liquidity constraints.

Wealth taxes can apply to both domestic and international assets, be tied to citizenship and be negotiated by international tax treaties—to eliminate the incentive for capital flight. As proposed by Elizabeth Warren, you can introduce an “exit tax” at the same rate as an estate tax to seize assets from those who do choose to renounce their citizenship. With a rigorous enforcement regime, along with legislation to tackle tax havens, taxing wealth isn’t a pie-in-the-sky or unrealistic idea. It just takes political commitment and good policy design.

Casting aside the nitty gritty, the fundamental question we really should be asking ourselves when we design our wealth tax is should we allow billionaires to continue to exist?

Gabriel Zucman and Emmanuel Saez, two economists at the University of California, Berkeley who advised Elizabeth Warren on her wealth tax proposal, write that the “revenue maximizing rate” runs as high as 6.5%—far beyond the NDP proposal of 1%. According to the economists, such a low rate would provide permanent revenues due to its quite limited effect on wealth concentration. Higher rates of wealth taxation, say, up to 10%, would more effectively dismantle entrenched wealth concentration over time with the trade-off being the loss of a permanent and reliable source of tax revenue.

Bernie Sanders’s recently unveiled wealth tax plan would cut in half the wealth of the typical billionaire over 15 years, according to Saez and Zucman. When the New York Times interviewed Sanders about his plan, they asked if he thought billionaires should exist in the United States. “I hope the day comes when they don’t,” he responded, adding, “It’s not going to be tomorrow.”

Sanders’s wealth tax (see box) is much more aggressive and much more steeply progressive than Warren’s plan, which begins at a 2% tax on wealth above US$50 million and adds an additional 1% surtax above the billion-dollar mark. The revenue differences are large: over 10 years, Warren’s plan would raise US$2.75 trillion while Sanders’s would raise US$4.35 trillion. The other significant difference is how the Sanders plan obliterates wealth concentration while Warren’s plan has a much more limited effect due to the fact that the wealth of the richest Americans grows at an average rate of 6.6% a year.

By comparison, the NDP’s plan for a 1% flat tax rate on wealth above $20 million seems quite modest. The Parliamentary Budget Officer estimates the NDP proposal would rake in approximately $70 billion over 10 years, a value that includes the assumption that revenues from the wealth tax will be reduced by about 35% due to tax avoidance.

Rather than being “confiscatory,” as Lau suggests, Saez and Zucman write that “the marginal utility of a billionaire’s wealth is close to zero” and therefore “the revenue consequences of taxing billionaires outweigh the welfare consequences on billionaires.” Imagine for a moment what we could do if Canada plowed $70 billion into reducing poverty, fighting climate change or tackling the housing crisis. Canada’s oil barons can manage with one less yacht.

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We can see that a wealth tax would be good for redistribution. What of wealth concentration? Should we not also tax inheritances in order to stop the out-of-all-proportion pooling of family wealth through massive intergenerational transfers? The issue here is political. Sometimes inheritance taxes poll poorly, even when the tax only targets the passing down of unearned wealth. Even so, should we continue to allow oligarchs to control so much wealth and power while other Canadians continue to live in poverty?

The proper design of any wealth tax system ought to both balance revenue generation and target wealth concentration. Which is why if we swear off an inheritance tax, we should be jacking up wealth tax rates. And if we shy away from steeply progressive wealth tax rates, we need to at least implement an inheritance tax.

French economist Thomas Piketty, best known for his best-selling book Capital in the 21st Century, has just put out a new book entitled Capital and Ideology. In it he proposes a wealth tax with a rate that goes as high as 90% for those worth over two billion euros (almost $3 billion). He also states that billionaires actually harm economic growth and should be completely taxed out of existence. In a world in the midst of a climate emergency, it may also simply be necessary.

Piketty writes in Le Monde that “it is increasingly clear that the resolution of the climate challenge will not be possible without a strong movement in the direction of the compression of social inequalities at all levels.” This is because, “at world level, the richest 10% are responsible for almost half the emissions and the top 1% alone emit more carbon than the poorest half of the planet. A drastic reduction in purchasing power of the richest would therefore in itself have a substantial impact on the reduction of emissions at global level.”

When designing our wealth taxes, we should perhaps consider not only their redistributive power but also how they can attack the entrenched power of economic elites—and how this might help us save the planet along the way. As Piketty suggests, a wealth tax could be instrumental in shifting carbon intensive and socially useless elite consumption patterns.

Looking forward into the next decade, when large-scale economic decarbonization is on the agenda, we should also ask ourselves if this should mean moving toward a billionaire-free world. In the future we want to build, if we are asked the question, “Should billionaires exist?”, we should be able to confidently and resolutely answer: no.

SOURCE

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The Vancouver Sun’s Op-ed Denying a Climate Crisis a Symbol of Wider Journalistic Malpractice

A journalist’s role is to seek truth, especially in the face of an emergency. But the media is not doing its job.

BC wildfire
‘By publishing op-eds such as this, their newspaper isn’t serving the truth. It is polluting the public square by propagating what the best science tells us are untruths about the most pressing problem of our age.’ Photo BC Wildfire Service.

Right now, Europeans are likely suffering because of the climate crisis. Sweltering heat waves have broken records across the continent, pushing temperatures into the 40s. Those temperatures have caused deaths, much disruption and misery.

So I was disappointed when that misery coincided with the Vancouver Sun’s publication of an op-ed column by University of Guelph economics professor Ross McKitrick claiming we only have a “vague inkling” that we “might” be in a climate emergency a “decade from now.”

That comment may surprise some readers of the Sun, which has a storied past and was the most-read newspaper in Western Canada according to the most recent report from News Media Canada. After all, many of them have already experienced that emergency as a result of the climate change-fuelled wildfires which devastated British Columbia in 2017 and 2018, cloaking the Lower Mainland in smoke. It may also surprise readers who have seen this summer’s satellite images of the Arctic on fire.

And it would almost certainly surprise the scientists who authored three major peer-reviewed studies on climate change that were published a day after McKitrick’s column. Commenting on those studies for the CBC, climatologist Gavin Schmidt said they underline the fact the global heating we are seeing is “unusual in a multi-centennial context” and that we are to blame for it.

In fact, we have much more than a “vague inkling” that there is a climate emergency given the voluminous scientific research and observable evidence supporting that conclusion.

For example, in October 2018, the Intergovernmental Panel on Climate Change warned our carbon emissions must be about 45 per cent of what they were in 2010 by 2030 to avoid increasing the risk of extreme heat and drought in the future. Seven months later, another United Nations group warned a million species are threatened with extinction due to human activity, including climate change.

And according to a 429-page report that the British Columbia government quietly released last week, climate change could have catastrophic consequences for the province.

Yet McKitrick seems to ignore this kind of research and evidence in his 655-word commentary, which was published online on July 23 beneath a headline that included the words “Reality check” and made it into print the following day.

Instead, the Fraser Institute senior fellow alleges those alarmed about the climate emergency make their case by rattling off “unsubstantiated slogans about the weather getting worse and more extreme.” Moreover, he appears to believe that because a handful of local conditions don’t indicate a climate emergency, the effects of global heating won’t be felt by all of us. This is the same as saying there isn’t an epidemic because your household hasn’t been infected yet.

McKitrick’s arguments benefit the corporate and political interests who have frustrated and continue to forestall attempts to take climate action.

And by publishing this op-ed and others like it, newspapers such as the Sun are creating a journalistic crisis.

Our principal responsibility is to find and tell the truth. Indeed, democracy hinges on us doing that because without the truth it’s impossible for the public to make the informed, rational and empathetic decisions expected of us in a democracy. And, in the coming months and years, no decision will be more important than how we decide to respond to climate change, both individually and collectively. MORE

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How Canada made the Koch brothers rich

Author’s note: Until this past February, I worked as a contracted television producer for Global TV and its current affairs program,16×9. Last fall, I was commissioned to do a story for the program about the Koch brothers, their holdings in Alberta’s oil sands and their interest in getting the Keystone XL pipeline built. In January, two days before the 22-minute documentary was about to air on16×9, Global’s senior management pulled the story. After Jesse Brown’s Canadaland published a story about its sudden disappearance, Global fired me, although I was not quoted in that story or had any involvement with it. What you’re about to read includes some of the material that has not yet been permitted to be shown on Global.

The attacks were nasty.

In the winter of 2011, Karen Kleiss, a reporter with the Edmonton Journal, wrote a story about how Koch Industries Inc. had hired a lobbyist in Alberta. The story provided background on the Wichita, Kansas-based energy conglomerate, its presence in Alberta, and its American billionaire owners, Charles and David Koch.

Kleiss reported at the time that no one from Koch Industries addressed her questions. Nevertheless, after her story appeared, Koch Industries went on the offensive. On their website, kochfacts.com – and in vivid red type – they lashed out at Kleiss’s article, claiming it was “slanted,” that it “parroted partisan political rhetoric and other distortions” and that its coverage of the Koch brothers registering a lobbyist in Alberta was a “purported story.” The Koch Industries representative summed up by saying:

“There is a place for opinion on the op-ed pages, on blogs, and on Twitter. It does not belong on the news pages of an objective journal.”

What the paragraph-by-paragraph rebuttal did not dispute was Kleiss’s assertion that Koch industries is “an American energy conglomerate owned by two powerful billionaire brothers who help fund the Tea Party and climate change denial movements in the U.S.”

The attack was so strong that Lucinda Chodan, editor-in-chief of the Journal at the time, felt compelled to write a lengthy response to Koch defending her reporter’s work. The company replied by taking further potshots at the newspaper and at Kleiss’s judgment.

Around the same time, a similar scenario was playing out after Reuters ran a story entitled “Koch Brothers Positioned To Be Big Winners If Keystone XL Pipeline Is Approved,” that also detailed Koch’s holdings in Canada. It discussed how the Koch brothers would benefit if the Keystone XL pipeline was built.

Written by David Sassoon, a journalist who runs InsideClimate News— a Brooklyn, NY-based, Pulitzer prize-winning website that covers climate change issues— the Reuters piece eventually elicited a ferocious response from Koch’s PR department. The company accused Sassoon of publishing “falsehoods” and of being an “environmental activist,” and Reuters of printing “advocacy journalism.”

Koch Industries even took out ads via Facebook and Google with a photo of Sassoon under the headline “David Sassoon’s Deceptions.”

Once again, a Reuters editor had to intervene with a lengthy letter to Koch defending their use of Sassoon’s reporting. These attacks went on for some months. Today, Kleiss and Sassoon refuse to discuss these events.

But at that time Koch Industries’ campaigns against the media were not unusual. Their website, KochFacts, criticized reporting in The New York TimesThe New YorkerMother JonesForbes.comThe Washington Post and Bloomberg’s Markets Magazine.

By 2011, the Koch brothers – currently the sixth richest people in the world, with US$42.3-billion apiece – were attracting attention because of their efforts at influencing the US political system, helping foster the Tea Party movement, and attacking attempts to curb climate change. They were also emerging as political kingmakers: two weeks ago, the brothers were in the news for endorsing Scott Walker, the governor of Wisconsin, as their choice for the Republican presidential nominee (Walker is well-known for his attacks on labour rights in his state).

 Tax records show that since 2007 the Fraser Institute, one of Canada’s oldest conservative think tanks, has pocketed a total of US$765,000 from one of Charles Koch’s foundations.

Koch Industries, the second-largest private company in the US, has become infamous for playing hardball.

Yet the broadsides on articles linking the Koch brothers to Canada might have had another purpose: to direct prying eyes away from their company’s history in this country. After all, few people know how Canada and its oil riches have been central to creating their vast fortune.

And what a fortune it is: today, Koch Industries is a global behemoth with annual sales of US$115-billion and a presence in 60 countries and employing more than 100,000 people worldwide. It has invested US$70-billion in capital expenditures over the past 12 years. They produce a wide range of products, and not only from the 750,000 barrels of oil they process every day: fertilizers, drywall, windowpanes, carpets, Brawny paper towels, Dixie cups, chemicals, and fibre optics.

As it turns out, Koch Industries also controls anywhere from 1.1 million to as much as two million acres of Alberta’s oil sands – or the equivalent of around 4,500 square kilometers – thereby guaranteeing the company’s prosperity for decades to come. The value of their oil sands holdings is in the tens of billions of dollars. MORE

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Deniers deflated as climate reality hits home

Image: Dunk/Flickr

Climate science deniers are becoming desperate as their numbers diminish in the face of incontrovertible evidence that human-caused global warming is putting our future at risk. Although most people with basic education, common sense and a lack of financial interest in the fossil fuel industry accept what scientists worldwide have proven through decades of research, some media outlets continue to publish inconsistent, incoherent opinions of people who reject climate science.

Over the past few weeks, Canada’s Postmedia chain has run columns denying or downplaying the seriousness of climate change, by Fraser Institute senior fellow Ross McKitrick; defeated politician Joe Oliver; and fossil fuel executive and Fraser Institute board member Gwyn Morgan, who is also former chair of scandal-plagued SNC-Lavalin.

McKitrick, an economist, has also signed the Cornwall Alliance Evangelical Declaration on Global Warming, which says, in part, “We believe Earth and its ecosystems — created by God’s intelligent design and infinite power and sustained by His faithful providence — are robust, resilient, self-regulating, and self-correcting, admirably suited for human flourishing, and displaying His glory. Earth’s climate system is no exception.” Other prominent deniers, including Roy Spencer and David Legates, have also signed.

South of the border, the Heartland Institute, a leading U.S. denial organization with ties to Canadian organizations such as the misnamed International Climate Science Coalition, still holds its annual denial-fest. But even that organization is feeling hard times in the face of evidence — similar to the proof that made it walk back its previous support for the tobacco industry to the point that its members now admit smoking is bad but defend vaping and other “smokeless” tobacco industry products.

Heartland’s 13th International Conference on Climate Change — held at the Washington, D.C., Trump International Hotel — was down from three days to one. It once attracted more than 50 sponsors, but this year drew just 16 — and one was fake! Fossil fuel companies have also cut funding, realizing denial is not an effective way to gain social licence. Attendance was limited to a couple hundred mostly older white men.

As usual, the conference speakers’ reasons for denying climate science were all over the map.

Some simply rejected all evidence. According to British eccentric Christopher Monckton, who has no scientific credentials, droughts, wildfires and hurricanes are decreasing; sea levels are falling, not rising; and rising carbon dioxide emissions are improving life on Earth!

Others argued that CO2 levels aren’t rising, while some claimed the planet is cooling. In other words, the arguments were mostly easily debunked, contradictory nonsense in service of the most profitable and polluting industry in human history.

You’d think Heartland would be riding high under a government that shares its anti-science views. But even holding the conference in a Trump hotel blocks from the White House didn’t gain it the profile organizers would have liked. Tom Harris, a discredited Canadian fossil fuel promoter who works with Heartland and the International Climate Science Coalition, penned a sad article with fellow denier, Heartland “science director” and convicted criminal Jay Lehr, crying, “no one from the Trump administration will be in attendance,” which, they whined, is “a huge loss since ICCC-13 will reveal that neither science nor economics back up the climate scare.”

Lehr, a groundwater hydrologist by training, also worked for The Advancement of Sound Science Coalition, an organization founded by Phillip Morris and by PR firm APCO Worldwide to cast doubt on the scientific evidence regarding harms caused by tobacco. Harris also worked for APCO Worldwide.

It’s getting harder for anyone to deny the reality staring us in the face. Those who continue to spread doubt and confusion about climate science are starting to look even more ridiculous with their many conflicting, insubstantial arguments.

Even some prominent deniers have come around. Political consultant Frank Luntz — who once advised the U.S. government to cast doubt on scientific certainty around climate change and to use the term “climate change” rather than “global warming” because it sounds less scary — now says, “I was wrong in 2001.” In recent testimony before the U.S. Senate, Luntz said, “Rising sea levels, melting ice caps, tornadoes, and hurricanes more ferocious than ever. It is happening.”

Yes, it is happening. And it’s time for deniers to accept evidence and reason or get the hell out of the way. SOURCE

‘The Big Stall’ details how neoliberal think tanks blocked action on climate change

Neoliberalism is a philosophy that says growth and investor returns not hindered by government taxes and regulations will lead to economic prosperity. It results in the welfare of ordinary citizens and protection of the environment being ignored. It has been suggested that economic prosperity will trickle down to all eventually. On the contrary,experience has shown that neoliberalism results inevitably in a growing income gap in society.

The Bill Stall: How Big Oil and Think Tanks are Blocking Action on Climate Change in Canada By Donald Gutstein, James Lorimer & Company Ltd. 2018 $24.95

The world’s biggest oil companies knew for years that climate change was real, but they did all they could to derail government action to limit greenhouse gas emissions. Donald Gutstein’s latest book, The Big Stall: How Big Oil and Think Tanks are Blocking Action on Climate Change in Canada is a deep dive into the strategies that Canadian oil companies and their friends have implemented to prevent political action to slow and reverse catastrophic climate change.

The author, a former communications professor and co-director of the media-monitoring project NewsWatch Canada at Simon Fraser University, follows the individuals and organizations that have shaped Canada’s energy and environmental policy over the last four decades.

Gutstein doesn’t neglect the politicians (he devotes a chapter to Alberta NDP leader and just-defeated Premier Rachel Notley), but he spends more time on the players who fly slightly under the public radar or whose impact is felt long after they’ve fallen from view. People like Maurice Strong, appointed the first head of Petro-Canada by Pierre Trudeau and the secretary-general of the UN Conference on the Human Environment, who said in his opening speech that “There is no fundamental conflict between development and the environment.”

That this position, articulated in 1972, could sum up current official Canadian climate change policy, wasn’t inevitable, argues Gutstein. Justin Trudeau’s “clean growth economy” — a mix of investing in ‘green’ technologies and “getting our oil to new markets,” — can be traced to the rise of neoliberalism in the 1970s. But we can’t only blame the ideological context Trudeau inherited. There has been a concerted campaign to stall and prevent significant action on climate change by fossil-fuel industry lobbyists and policy think-tanks. MORE

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