Brazilian Finance Minister Fernando Haddad recently introduced a proposal calling for a 2% annual tax on the ultra-rich. Hadad said that it would involve taxing about 3,000 individuals in plans that hold about $15 trillion in wealth and pay very little tax. Other members of the Group of 20 have supported the proposal, including Haddad's French counterpart Bruno le Maire. Haddad noted that their ambition is to succeed in asset-based wealth taxation.
But in an article of May 20 in Wall Street Journal, Treasury Secretary Janet Yellen said the United States opposes enacting an annual global wealth tax on billionaires. Her comments align with America's long-standing values of capitalism, entrepreneurship and achievement regardless of background or origin, says Rick Nottsenior managing director at Angeles Wealth Management. He believes this attitude reflects America's unique economic spirit, which continues to attract talent and innovation from around the world.
Effect of Global Taxation
A global tax could result in a redistribution of wealth, it says Howard Morinco-founder and partner in Helium Advisors. Assuming a global wealth tax would raise hundreds of billions of dollars, it could be applied to infrastructure, medical and disaster recovery efforts around the world. With so many plans to combat climate change, dollars can also be appropriated to contribute to that global effort. In Morin's experience, non-G20 countries tend to bear the brunt of these crises around the world.
Wealth inequality
How do we balance the “American Spirit” with the economic consequences of uneven financial success and ensure success in the next generation? Many counselors struggle with this topic on a smaller scale, notes Nott:
- How do financially successful individuals create an environment of achievement in the next generation without discouraging them?
- How do parents raise resilient children when growing up requires failure and pain, and parenting requires nurturing and nurturing?
- How does a business owner encourage an ownership mentality in the future leaders of a company they have no ownership of?
He admits that there are no simple answers to these questions. They seek a difficult balance.
A better way?
While the proposal noted that governments should promote equality through tax policy, one could argue that this should be done on a country-by-country or regional basis rather than through an arbitrary global tax on the rich. Morin agrees with Secretary Yellen that the thought of a “global deal” through some form of redistribution seems a bit murky and fraught with potential danger.
Other initiatives
President Joe Biden has considered other ways to tax high-net-worth individuals. For example, his 2025 Green Paper included a proposal for a minimum tax of 25% for taxpayers with net assets over $100 million. He also approved funding for the Internal Revenue Service to crack down on wealthy individuals and corporations who are delinquent on their taxes.