Open Letter to World Leaders: “Taxing the Rich for Sustainable Economic Transformation”

Earth4All (An Earth for All
Transformational Economic Commission

Dear leaders,

In a few days, some of the richest people on the planet will gather in Davos to discuss humanity’s most pressing issues. However they are unlikely to have the courage to really discuss the root causes of these problems. This open letter is addressed to all leaders who want to build stable democratic societies in this century; companies capable of making long-term decisions for the common good. Democratic values ​​and institutions unite left and right. But the growing inequalities in income and wealth we experience around the world are contributing to the erosion of these very democratic values ​​and institutions.

During its work, the Transformational Economics Commission of the Earth4All initiative (in Italian, “A Earth for All”) has concluded that, if left unchecked, wealth and income inequalities will continue to grow in this century, leading to growing social tensions . We need a new social contract between citizens and governments based on a fairer distribution of wealth: fairer fiscal policies that tax great wealth to reduce inequality.

Why right now?

Although millions have died during the recent global COVID19 pandemic and billions have suffered from it, the ten richest men in the world have doubled their net worth (see here). The richest 10% of the world’s population now collect 52% of global income and amass 77% of the wealth. The poorest half of the world’s population earn only 8% of global income and own 2% of the wealth (see here). And this gap is widening.

Despite the world experiencing a climate emergency, the top 1% – 80 million people – are by far the fastest growing source of emissions (see here). This “luxury carbon consumption” comes at a time when every single month the world is burning up the 1% of the so-called carbon budget that remains if we are to stabilize the climate within the 1.5°C limit.

Despite the fact that the world has never been richer, most people are kept in a state of economic insecurity. The world is in the midst of a poly-crisis. Citizens around the world are suffering from rising costs of living, stagnant wages, a looming recession and enduring poverty, all of which contribute to a deterioration of democracy.

Despite the fact that the world is in the midst of an energy crisis exacerbated by the war in Ukraine, fossil fuel companies are making hundreds of billions of dollars (see here).

The world will not be able to get out of this situation by doing nothing. These crises will continue to evolve, collide and worsen rapidly, with unfortunately even bigger crises on the horizon: science has confirmed that humanity has already surpassed six of nine ‘natural planetary boundaries’ (see here).

The growing gap between a handful of the super-rich and everyone else is a recipe for deeply dysfunctional and polarized societies. It can’t go on. Concentration of wealth inevitably leads to concentration of power, giving the very wealthy disproportionate influence over government institutions.
This undermines trust in democracy, which then makes it more difficult for governments to make long-term decisions that benefit the majority of people.

More equal countries tend to do better in terms of trust, education, social mobility, longevity, health, obesity, infant mortality, mental health, homicide and other crimes, drug abuse, and respect for and protection of the environment.

Reducing wealth and income inequalities is key for our societies to respond to the multiple crises of our time and ensure greater economic security. A more equitable distribution of wealth and income will reduce social tensions and improve the well-being of all. It will also help make democracies more stable so that they are better able to deal with shocks and make long-term rational decisions for the common good.

If we value democracy, if we value stability, and if we value our future, governments must redistribute wealth and income more fairly.

We propose that by 2030 – in all countries – the richest 10% receive less than 40% of national income, with a further decrease in inequality in subsequent years. We know that there are many ways to achieve such a major transformation – but all of them need greater involvement from the public sector and public spending. Reducing inequality can be achieved through more progressive income and wealth taxation for individuals and businesses. The problem is that currently most of the tax systems in the world are regressive and outdated. They do not generate the necessary income, nor do they ensure that the rich pay relatively more than the poor. But there are ways to fix this situation, if there is the political will to take the right measures. This is why we are calling on world leaders to take some bold steps this year:

• Taxing wealthespecially large estates, wherever this wealth is held, including in tax havens, and make this possible by developing and sharing national registries of estates held in different forms.
• Tax incomeincluding investment income, more progressively.
• Taxing businesses – Applying a minimum global corporate tax in 2023 that is close to the global average rate of 25% and making multinational companies subject to the same tax rates as domestic companies by introducing unitary taxation of their global profits based on individual national sales shares , employment and assets held in each country.
• Tax windfall profits (ed windfall profits) across industries, especially profits made during times of scarcity and speculation when the rest of the world is in crisis.
• Taxing “carbon consumption and the luxury biosphere” and eliminate all tax incentives for fossil fuels.

Ultimately, governments must plug international tax loopholes once and for all, eliminate perverse tax structures of all forms, and ensure that the additional revenues from progressive wealth and income taxes are directed towards social programs, the empowerment of
women, decarbonisation, and the transformation of energy and food systems.

Private sector leaders meeting in Davos this week may feel that this strategy runs counter to their short-term and individual interests, but this is a very limited and ultimately self-defeating view. We ask them to support this agenda and be a positive force for democracy, stability and the long-term future of humanity.

Letter from the Transformational Economics Commission.

Signatories:
• Nafeez Ahmed, Director of Global Research Communications, RethinkX; and Research Fellows,
Schumacher Institute for Sustainable Systems
• Lewis Akenji, Managing Director, Hot or Cool Institute
• Tomas Björkman, Founder, Ekskäret Foundation
• Sharan Burrow, former Secretary General, International Trade Union confederation (ITUC) 2010-2022
• Robert Costanza, Professor of Ecological Economics, Institute for Global Prosperity (IGP) at
University College London (UCL)
• Sandrine Dixson-Declève, Co-President The Club of Rome, and Project Lead, Earth4All
• Lorenzo Fioramonti, Professor of Political Economy, Director of the Institute for Sustainability,
University of Surrey, y, University of
• John Fullerton, Founder and President Capital Institute
• Owen Gaffney, Earth4All Project Lead and Chief Impact Officer Nobel Prize Outreach
• Jayati Ghosh, Professor of Economics, University of Massachusetts Amherst
• Tim Jackson, Professor of Sustainable Development and Director of CUSP – Center for the
Understanding of Sustainable Prosperity – from the University of Surrey
• Garry Jacobs, President & CEO, World Academy of Art & Science
• Gaya Herrington, Author of Five Insights for Avoiding Global Collapse and Vice-President at the
Schneider Electric Sustainability Research Institute
• Andrew Hines, Professor of Environmental Change and Public Health, London, UK
• Steve Keen, Honorary Professor at University College London and ISRS Distinguished Research
Fellows
• Julia Kim, Director, Gross National Happiness Centre, Bhutan
• David Korten, Author, Active Citizen and president of the Living Economies Forum
• Roman Krznaric, Philosopher and author.
• Jane Mariara, Economist, President of the African Society for Ecological Economists
• Chandran Nair, Founder and CEO, The Global Institute for Tomorrow
• Kate Pickett, Professor of Epidemiology, University of York
• Carlota Perez, Honorary Professor – IIPP, University College London (UCL); SPRU, University of
Sussex and Taltech, Estonia
• Mamphela Ramphele, Co-President, The Club of Rome.
• Jorgen Randers, Emeritus Professor, Climate Strategy, BI Norwegian Business School
• Kate Raworth, Author of “The Donut Economics” and co-founder of Donut Economics
Action Lab
• Otto Scharmer, Professor, MIT, and Founding Chair, Presencing Institute
• Stewart Wallis, Executive Chair, Wellbeing Economy Alliance
• Ken Webster, Visiting Fellow Cranfield University and Univ of Auckland Business School
• Ernst von Weizsäcker, Honorary President, The Club of Rome