Arguments for and Against a Global Billionaire Tax

How would a global minimum tax on billionaires’ wealth work? What are the main arguments for and against the tax? Does the proposal have a shot at becoming a reality?

A proposal for a 2% minimum tax on billionaires’ wealth aims to raise revenue and address inequality, but faces skepticism. Proponents say the billionaire tax could generate $250 billion annually while critics argue that implementing the tax will require global coordination that will be tough to achieve quickly.

Continue reading to learn about the different opinions regarding a billionaire tax.

Taxing the Ultra-Wealthy

A controversial new proposal for a 2% tax on billionaires’ wealth is igniting debate worldwide about inequality, tax avoidance, and the funding of critical needs.

Background

The EU Tax Observatory, a research group co-funded by the European Union (EU) that aims to inform EU tax policy, has proposed a 2% global minimum tax on billionaires’ total wealth. The tax would function similarly to the 15% global minimum tax for multinational corporations agreed to by 140 countries in 2021. Billionaires would pay at least 2% of their total net worth in annual taxes to their main country of residence, without the possibility of reducing this amount through tax loopholes or strategies. 

Currently, billionaires, whose combined wealth is $13 trillion, can achieve effective tax rates as low as zero to 0.5% of their wealth—far lower than all other groups of the population globally. They do this by taking advantage of loopholes.

By targeting total wealth rather than income, the 2% tax aims to close these loopholes.

Support for the 2% Global Wealth Tax

Proponents of the 2% wealth tax include Nobel Prize-winning economist Joseph Stiglitz and progressive US politicians, who argue that when billionaires structure their wealth to minimize taxable income, they undermine democracy, worsen inequality, erode trust in institutions, and weaken the social contract. They believe the 2% tax could address these problems by:

• Generating significant revenue for pressing priorities like infrastructure, health care, education, climate change, and technology.
• Reducing rising inequality exacerbated by the pandemic. The tax could lessen the concentration of assets and investments among the ultra-wealthy.
• Improving tax compliance by closing loopholes, which could facilitate broader tax reforms.

Opposition to the 2% Global Wealth Tax

Critics counter that the 2% tax faces significant obstacles that could limit its implementation and effectiveness:

• It will be difficult to accurately determine the taxable value of billionaires’ non-cash assets.
• Countries wishing to attract billionaire wealth may try to circumvent the tax by offering special tax privileges and loopholes.

Some further argue that tax fairness should be handled domestically rather than imposed globally, allowing each nation to shape policy. Additionally, many contend that regulators should pay attention to another, more pressing issue instead: tax subsidies. When countries give tax breaks to encourage certain industries—often, green industries—they distort the economy, threaten their own governmental tax revenue, and end up increasing wealth inequality, since the shareholders who benefit from such tax breaks are often wealthy to start with. 

Looking Ahead

The 2% global minimum tax faces major challenges, but its vision could drive policy conversations for years.

Compared to the 15% corporate minimum tax, the 2% wealth tax may prove less complex since consensus on which jurisdictions collect revenue is clearer. If passed, the tax could eventually expand beyond billionaires.

However, negotiating and enacting any global tax agreement takes significant time, even decades. The 15% corporate minimum tax was years in the making and still has unresolved implementation issues.

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