21 Jul 2024

What determines net wealth?

With my proposition for a standard 1% annual tax on all net wealth, the question arises of who will end up paying. To what extent would such a tax system help generate a fairer society by making the rich contribute more

Well, I found an amazing  dataset from the UK's Office for National Statistics called "Individual Wealth: wealth in Great Britain".  You can download the dataset as an Excel file here. I actually much prefer this to the "household wealth" measures that are often reported. And it makes the data directly comparable to the UBS Global Wealth Reports which also use individual data.

They provide data for 6 different periods, as you can see in this table, which contains both raw data and inflation adjusted figures for both the median and mean values.

So, you can see that there has been a roughly 23% increase in inflation adjusted median wealth in 20 years. Mean wealth has improved by 32% over the same period. 

In the following, I have only taken the latest data, although if you are keen, you can see how any of them has changed over 20 years.

I had already mentioned the importance of age, but the ONS provides four different ways of breaking down by age bands. Take your pick. The effect of age is clearly enormous. Young families would tend to  pay much less.

Another really important factor is ethnic origin. Just take a look at the results in the four different breakdowns provided by the ONS. Whites are clearly much wealthier than any other group. No huge surprises I guess, but it is amazingly clear just how bad things are.

Note that in all the following data sets, I have simply sorted the rows so you can see where individual wealth is highest.

Next comes regional variations. Here they are. Again, not really surprising, but amazingly clear.

You can also get a breakdown by type of region, again with various ways of doing it.

You would like to know how wealth depends on the educational and employment characteristics of your parents? Here are the details. Clearly, if your parents left school early, and did not have good jobs, your hopes of ending up wealthy are greatly diminished. No huge surprises I guess, but amazingly clear.

There are tables that show net wealth as a function of sex and sexual orientation. On average, men are 12% wealthier than women.

There are tables that show what sort of activity is associated with wealth. Clearly being inactive as a pensioner is the best option - if you manage to have a pension!

When you are working, here's what you should do to get wealthy.

And finally, three tables that show the impact of the your origins, type of family unit, and whether your own your own home, are paying off a mortage or renting. The figures are sobering. On average, home owners are 21 times more wealthy than renters.

It's all absolutely fascinating. But it also shows that the degree to which people are wealthy or not depend enormously on factors that are beyond their control. You are not necessarily wealthy because of your talent, or how hard you work. There are other factors that mean that the playing field is anything except level. So much for the ridiculous idea that people are poor because they are lazy.

For every one of these factors, it seems obvious that a simple 1% annual tax on net wealth would help build a fairer society by allowing governments to help the less fortunate. With £148 billion of revenue coming from this simple measure, the UK government could do a huge amount to help improve society.

You want to bias things in favour of young families? A 1% wealth tax would help.

You want to level up the country? A 1% wealth tax would help.

You want to reduce the inequalities due to your parents? A 1% wealth tax would help.

You want to favour people in professions that don't pay way? A 1% wealth tax would help. 

These arguments are based on figures for the UK. But I am convinced that the same story would apply just ahout anywhere. No need to target millionaires and billionaires. A simple net wealth tax would make for a much fairer society. I would vote for it, except that there are no political parties who are proposing such a scheme. 

Propositions for Kier Starmer's government

The new Labour government in the UK has good intentions, but will be severely hampered by lack of money. They are committed to not raising taxes, but it is unrealistic to imagine that everything can be fixed without some extra income. 

Tax Justice UK has sent the UK government a list of 10 tax reforms that should raise an extra £60 billion for public services and a fairer economy that you can find here. This is their list

1 – Apply a 2% wealth tax on assets over £10 million, raising up to £24 billion a year

2 – Equalise capital gains and income tax rates, to raise £16.7 billion a year

3 – Apply National Insurance to investment income, raising up to £10.2 billion a year

4 – Close inheritance tax loopholes to raise £1.4 billion a year 

5 – Close the loopholes in the new non-dom scheme to raise up to £1 billion

6 – Introduce a 4% tax on share buybacks, raising approximately £2 billion a year 

7 – End fossil fuel subsidies for oil and gas companies to raise £2.2 billion a year

8 – Close the loophole in the oil and gas windfall tax, costing £2 billion a year

9 – Tax private jets to raise £700 million a year

10 – End tax reliefs that benefit huge multinational corporations 

All of them seem fair enough. The first one, applying a 2% wealth tax on assets over £10 million is close to one of the proposals of the UK Green Party,  although the Greens are apparently only proposing a 1% tax increasing to 2% on fortunes of over £1 billion

Other people have recently been proposing wealth taxes that specifically target billionaires. Earlier this year, ministers from Brazil, Germany, Spain and South Africa signed a motion at the G20 meeting proposing that the world's billionaires should pay a minimum 2% wealth tax. And a study by French economist Gabriel Zucman, commissioned by the Brazilian government demonstrated that such a tax was technically feasible. Zucman said that billionaires were currently only paying 0.3% tax on their wealth. And this was despite the fact that the average wealth of the top 0.0001% of individuals had grown by 7.1% a year on average between 1987 and 2024, increasing their share of global wealth from 3% to 14%.

It's true that, according to the Forbes 2024 billionaires list, the UK can boast 55 billionaires. Here they are, and together they have $225.3 billion dollars in wealth.  That might raise about £3.5 billion if you taxed at 2%.

But I note that 55 billionaires is less than 2% of the 2781 dollar billionaires in the world. And their total wealth is only 1.5% of the $14.2 trillion total.

Given the fact that the UK is the world center for offshore banking, I think we can safely assume that much of that wealth would end up shifting to tax havens. Poor Philip Green, who only just made the list this year with $1.2 billion might already have quite a bit of cash in Monaco thanks to the fact that his wife lives there for tax reasons.  

So, for me, the solution is not to target billionaires in particular, or even just those with only £10 million. That sort of targetting will lead to massive lobbying, despite the fact that a small number of ultra-rich people are begging to pay more tax.  There is even an organisation  called Patriotic Millionaires UK,  a sister group to the Patriotic Millionaires group in the USA. The UK based version includes 50+ millionaires who want to do more. They include Gary Stevenson, James Perry, Phil White, Graham Hobson, Gemma McGough, Kristina Johansson, Julia Davies and Tim Stumpff - Good on you!

No, my proposal to Keir Starmer would be to introduce a 1% on all net wealth. No arbitrary figure of £10 million for the 1% rate, or £1 billion for the 2% rate. Such thresholds automatically trigger defensive reactions from the people with the wealth, leading them to lobby against such measures, and encouraging them to shift their wealth elsewhere.

In contrast, if everyone with net wealth paid 1%, it would hopefully make the richest people feel less justified in cheating the system. 

So who would pay in such a scheme. Well, the UBS Global Wealth report gave a figure of  $163,515 for median wealth in the UK (£128,000), which by definition means that half the population would pay less that £1280 a year.  A more detailed analysis can be based on the figures from the Office for National Statistics. Here's the distribution according by decile.

You can see that the bottom half of the population has only 5.9% of the wealth, and that for the first decile, the tax due would be minuscule (0.02% of the total tax take). 

But everyone would be contributing equally.  No specific targetting of millionaires and billionaires. That's fair.

There are lots of other really interesting bits of information in the ONS data. Here's a graph of wealth by centile. But by downloading the data, you can see that 1% of of the population have negative wealth.

It's unfortunate that the latest dataset is over 5 years old, because I am certain that after Covid and five more years of  Tory austerity, the number of people with nothing will have increased a lot. You want proof? Just look at how the use of food banks has soared since 2008.

One of the biggest factors determining the amount that would be paid with a 1% wealth tax is age,  as you can see from this figure. 

Adults under 25 would only £223 a year on average. Between 25 and 34 this would increase to £768, then £1910 between 35 and 44. The wealth tax for those between 45 and 54 would be £3660, for those from 55 to 64 it would increase to an average of £5534, while those of State Pension Age and above would contribute and average of £4687.

Are these figures unreasonable? I don't think so. Because it is not as if the tax payable is determined by your age. Someone in their 50s who is renting, has no pension pot, and no savings would pay essentially nothing. But it shifts the effective tax burden away from young families with children who are often heavilly in debt because of university loans and mortgage payments.

So my message to Keir Starmer and his government is simple. Yes, you need to tax wealth. But please, don't do it by having arbitrary tax bands for people with headline levels of wealth. A flat 1% wealth tax would, according to the figures from the UBS Global Wealth Report, which puts the UK in 13th position with €350k per adult in net wealth (around £270K), generate £148 billion a year. That's a lot more than even the 10 reforms proposed by the Tax Justice UK group. 

17 Jul 2024

Propositions for the future French Government

There is now a possible name for the future French Prime-Minister proposed by (most of) the New Popular Front coalition. She is the economist Laurence Tubiana. I quote from Wikipedia : "She served as France's Climate Change Ambassador and Special Representative for the 2015 COP21 Climate Change Conference in Paris, for which she became recognised as a key architect of the resulting Paris Agreement. Since 2017, she has been CEO of the European Climate Foundation". Interestingly she spent her early life as a member of the Revolutionary Communist League (1968-1976), but was later more closely associated with socialists including Lionel Jospin and François Hollande, and was even invited to join Emmanuel Macron. So, in terms of background, I would say that she has a lot going for her. 

So, perhaps a bit prematurely, I would like to suggest to Laurence Tubiana some ideas that could be useful - several of which are already contained in the New Popular Front's program that you can find here

The NPF's program includes a huge number of proposals. I am broadly in favour of the vast majority of them. Some of the ideas that I particularly like include the following;

  • Make the first KwH of electricity free of charge. This is the first step to introducing Universal Basic Services - something which seems extremely sensisble. A household that was using energy frugally should be able to manage with no electricity charges at all. And it would end any possibility of people having their electricity cut off completely. I would do the same thing for water - again, every citizen should have a basic amount of water at no charge. Obviously, in both cases, you would have to increase the rates for people who use more than the basic amounts. But the change in rate would be small, and it would further incentivise people to use energy and water sensibly
  • Introducing a kilometre tax on imported products. This is another simple idea that would help promote local production and reduce the ecological cost of shipping goods across the planet. It should not make sense to fly beans in from Kenya. I would rather that people in Africa get to eat their own food!
  • Reintroduce a higher wealth tax (ISF) with a climate component. Details are unclear, but this would presumably mean putting back the taxes on financial assets that were abolished by Emmanuel Macron.
  • Tax the richest people at European level to increase the own resources for the European Union budget. You may already be aware that I am a big fan of making changes to the taxation system at the European level to avoid claims that rich people can avoid taxes by moving their fortunes to more favorable regimes. 
  • Generalise the taxation of superprofits at European level. Again, the key is to do things at the European level. 
  • Introduce the Zucman tax on the profits of multinationals. The recently published Global Tax Evasion Report 2024, coauthored by Gabriel Zucman describes the problem in detail.
  • Increased taxation of financial transactions.  If you have been following my blog over the last 14 years, you will know that for me, taxing all financial transactions (including my financial transactions) would be a very simple way to generate almost unlimited amounts of funding. 
  • Eliminate inefficient, unfair and polluting tax breaks. This seems to be a simple and sensible proposal.  

But I would like to suggest some additional ideas that could be included.

Firstly, I would strongly suggest that the propositions for Wealth Taxes should not have thresholds. Instead, you could have a flat rate 1% annual tax on all net wealth. The Banque de France published an extremely useful report in January 2024. It reports that Net Wealth for households in France stood at €14041 billion at the second quarter of 2023- up 23% in inflation adjusted euros since 2009. 54.2% of that wealth is held by the top 10%, whereas half the population (Deciles 1 to 5) only hold 5%.

There's a particularly interesting figure which shows minimum, maximum and average net wealth for the 10 deciles. 

But I thought it would be interesting to regroup those figures in a table, and calculate the amount of tax that would be paid by households in each decile. I had to guess the minimum (negative) value for net wealth in the first decile by looking at the graph. And then I adjusted the number of households to make the total net wealth figure match the €14,041 billion headline figure. 

You can see that, if there was a 1% annual tax on net wealth,  the poorest 10% of households would pay nothing. The next 10% would only pay an average of €40. On average, the poorest  half the population would only have to pay an average of €462.

But at the top end of the scale, people in the top 10% would have to pay an average of €24,180. This would include people like me who own their own property. But that's only fair. The Banque de France report shows that the top 5% of households hold 41 % of the total wealth (€5708 billion to be precise). They don't provide figures for the top 1% and the top 0.1%, but last year we already knew that the top 500 people in France had a combined wealth of €1170 billion, around 8% of the total. It follows that since they each have an average of €2.3 billion, on average they would have to contribute €23 million a year. Note that these sums are minuscule compared with the increase in wealth that those 500 people have seen in just the last few years (their combined wealth was just €731 billion as recently as 2020).

One point that is not so obvious from these overall decile figures is that net wealth varies enormously with age. I would love to see how these net wealth figures vary between those in the twenties, and those who are in their fifties and sixties or retired. But it seems clear that most young people with families would end up paying very little - simply because even if they have managed to buy property, they will still owe the bank large amounts of money and therefore have negative net wealth. 

And, of course, the wealth tax would be mainly paid by people who own property or businesses. People who rent their accommodation would probably pay little.

All of this seems extremely fair and sensible. The idea that it is better to tax income than wealth makes no sense. Taxes should be paid by the people who have the assets.

This brings me to one of the main areas where I have problems with the NFP's proposals. The NFP program is very keen on "progressive" taxes. They want to "Increase the progressive nature of income tax by introducing 14 tax bands", making the CSG progressive, and getting rid of the 30% flat tax on revenue from financial assets (dividends, sale of shares, rents etc). 

However, I think that there is a much more rational way to do things. You can have a flat tax on income at, say, 30% that would be applied to all types of income - both earned income, and income from investments. Some might say that this is not a sufficiently high level of taxation for high earners. But the point is that people with wealth would be paying a lot more tax on their net wealth, so that the combination of 30% tax on all forms of income, plus a 1% annual tax on net wealth would mean that the wealthy would end up contributing far more. 

At the same time, I would recommend not only getting rid of what the NPF describes as "inefficient, unfair and polluting tax breaks", but indeed all tax breaks. Everytime there is a tax break that is designed to promote desirable behavior such as installing a heat pump, solar panels or purchasing an electric car, it should be clear that there is an alternative approach. Get rid of the tax breaks, and replace them by direct subsidies which would be paid to anyone who installs a heat pump, solar panels or gets an electric car. One of the strongest arguments for such a change is the fact that using tax breaks can only work for people who pay income tax. Since roughly 50% of French citizens pay no income tax anyway, such incentives are clearly not going to work for many French citizens. Why should taxpayers money only be used to help the wealthy? Just give direct, unconditional subsidies to anyone who does the right thing. Easy. And fair. 

The other point I would really want to stress is the need to eliminate means-testing. Many people in France are in the situation where they get government support but where this support is only available if they are not earning any other income. As soon as they start earning any money, they immediately lose at least some of their benefits. This may seem like an intelligent use of public resources - why pay benefits to people who don't really need them? In reality, such a system is a disaster. It means that the effective tax rate for people at the bottom can be as much as 80%. Suppose that you are currently getting income support of €100. Would it be in your interest to get a part time job that pays €100 a month? Not if the result is that you lose €80 of your benefits.

As a consequence, many people will be tempted to avoid taking on paid work at all, especially if they can do other useful activities like child care, looking after elderly relatives, or voluntary work. And those that are interested in paid work will be tempted to take on undeclared work. Part of that will be to avoid paying taxes and contributions, but a lot of it is motivated by a perfectly natural desire to avoid losing the modest support that they get from being unemployed. 

So, in summary, my message to the new French prime-minister is simple. For sure, you should implement a large percentage of the proposals in the NFP's program. But try and be imaginative by adding some even more radical suggestions. 

  • an annual 1%  on net wealth, to be paid by both individuals and households and by businesses
  • elimination of all tax breaks 
  • elimination of all means-tested benefit schemes
  • introduction of direct subsidies to citizens to encourage desirable behavior (including free public transport to encourage people to stop using their cars)
  • introduction of a basic allowance for electricity and water

14 Jul 2024

Global Wealth for the top 8004 companies - $45.1 trillion

Another website that I really appreciate is the one that provides a wealth of information for 8743 top public companies. And the one that I really like most is the listing of NetWealth - Assets minus liabilities. You can find all the data here

But here are the summary figures by country.

The number of companies is slightly reduced because there are a few hundred with negative net wealth. And this year, the numbers for Russian companies have disappeared. But lets just imagine taxing the 8004 that have positive values for net worth. They total over $45.1 trillion, and this figure can be added in with the $450 trillion of household net worth. 

Message to Kier Starmer and the future French Prime Minister. Why not tax the net worth of companies based in your countries at 1% per annum? For the UK, it would raise $18.7 billion - around £14.8 billion. 

For France, it would generate $17.4 billion - around £16 billion. 

Simple. And totally fair. 

Of course, these numbers are only for the 8000 that made it to the listing. All companies have to provide such information in their annual reports, so it really would be simple to determine 1% of the value to be paid in tax. 

The top public companies website includes another fascinating listing. It's what is referred to as "Cash in Hand". You can find that listing here. The total is somewhat less than the Net Wealth data, but it still amounts to an impressive $30.3 trillion. 

 What I find intriguing is the fact that while the Net Assets listing includes a fair proportion of companies that actually produce things with, for example, Alphabet (Google), Samsung and Microsoft coming in respectively at #9, #10 and #11 and Toyota at #14, the cash in hand listings are totally dominated by banks and financial institutions. The first company that actually produces anything is Toyota that comes in at #62.

But, whatever the type of company, and irrespective of whether you choose to have an annual tax on Net Assets or Cash-on-hand, it is clear that there is a lot of money around if only someone had the nerve to think about a radical change to the system. 

It is also important to realise that my 1% annual tax on net wealth could not be described at anti-business. After all, the amount of individual and household wealth  ($450 trillion) is ten times larger than the wealth that is visible in companies accounts ($45 trillion).

Global Household Weath now $450 trillion. A 1% annual tax would raise $4.5 trillion

 Thanks again to UBS for providing its 15th annual Global Wealth Report which you can download here.

The bottom line is simple. They calculated the networth of the world's 3.765 billion adults and found a total net worth of very nearly $450 trillion. The key figure is their pyramid of wealth figure shown here.

I've extracted the numbers in the following table that provides the total wealth value. 
As some of you will know, I have been pushing the simple idea that we could fix many of the world's greatest challenges by imposing a global annual tax on all net worth, whether held by individuals, companies or governments. 
The UBS data is invaluable because we can immediately see that a 1% tax would provide no less than $4.5 trillion in funds that could be used to cover the costs of dealing with a wide range of challenges. We are told that we need to find $5.5 trillion a year to fix climate change. That would nearly be covered by the 1% tax.  You would like to provide a $100 a month for every adult on the planet as a global basic income? It would be paid for almost exactly by the 1% tax. You have just ended poverty at a stroke. Actually, that $100 a month to people in the developing world might end up being used to help them fight climate change, so the two actions would go together. 

Would the people who own the assets object to having to fork out 1% of their wealth every year object? Maybe. But given that the value of their assets is increasing by around 4.5% a year, this means that they would still get to keep the other 3.5% increase in value. 
Remember that net wealth varies enormously with age. Most adults between 20 and 30 have very little net wealth, and so very naturally, such a tax would be paid by relatively elderly people - the ones who have often already paid off their mortgages. That seems very much fairer than making everyone pay VAT and Income tax, irrespective of whether they are wealthy or not.

The UBS report contains many other interesting details. For example, here is a figure showing which countries are in the top 25 for average wealth.

This provides a clear message for the newly elected governments in both the UK and France where I recently voted. There is a huge amount of net wealth in both countries. Multiply the average net wealth for all the adults in the UK (53.6 million), and you get something like $18.9 trillion - around £14.8 trillion.
If you do the same thing with the 54.6 million adults in France, and you get $17.96 trillion - around €16.53 trillion. 
So, message to Kier Starmer:  Impose a 1% tax on the net wealth of all UK adults and you would raise a very useful £148 billion a year - which relative to the £1095 billion in total receipts that the government raised in 2023 would be very useful. 

And message to whoever will be leading the next French government: Impose a 1% annual tax on net wealth for all French adults, and you could raise €165 billion in revenue, which is a substantial proportion of the €1222 billion currently raised. 
I must say that I think that this sort of taxation would be a good way to get rid of much of the existing tax mechanisms - based on taxing income or spending (via VAT).  France has an Impot sur la Fortune Immobilier (IFI)  - which uses a sliding scale that ranges from 0% to 1.5% using this table that you can find here.
France used to have a Wealth tax that used to apply not only to Property, but also to Financial assets. But one of the first things Emmanuel Macron did when he came to power in 2017 was to scrap it. His very wealthy friends were no doubt absolutely delighted. 
Given the very clear thumbs down sent to Emmanuel Macron in the recent elections, it seems to me that a very obvious thing to do would be to reimpose the Net Wealth Tax on all assets - both financial and property. But please, can we avoid having the variable rates? Just have a fixed rate of 1% for all net assets. Much simpler. And it would make life so much easier for everyone because it would be much harder to avoid the tax by shifting assets from one place to another. 
Of course, people will complain that wealthy French people would move their financial assets somewhere else to avoid paying taxes. But the solution to that one is hopefully simple. The 1% net wealth tax should be paid wherever you hide your wealth.
My suggestion would be that countries like France and the UK should introduce the 1% net wealth tax locally to demonstrate that it can be done. And then, when the United Nations decides that it would make sense to use the same idea everywhere, the French and UK governments could simply double the amount to pay both the global tax requirement, and also fund local actions.

31 May 2024

European Government Interest Costs in 2023 - up 13%

 I've been a bit slow, because the Eurostat figures for Government Debt and Interest payments for 2023 were published over a month ago (22/05/2024). You can find the original data here but, as usual, I have extracted the most interesting figures in a Google Sheet that you can find here

The key figures are given in this figure.

Total debt for the 27 European Union countries reached €13.86 trillion - up 4.4% on the previous year. But it is important to realise that roughly half of this increase in debt can be directly attributed to the €290 billion in interest charges that we have collectively handed over to the markets, an amount that was up 13% in a single year. 

For some countries, the increases in interest charges have been eye watering. Interest charges in Estonia increased by 360%, and for Finland the charges more than doubled. 

Interestingly, for some countries, the interest costs actually dropped. This was true for France, which paid 5% less in interest charges despite having a debt level that increased by 5% to over $3.1 trillion. Mind you, the €48.3 billion that French tax payers had to hand over is still a substantial amount.  What is going on here? It appears that the banks who create the money that they use to purchase French governments bonds are quite happy to keep on extending credit. Maybe they think that later on, they will be able to get a good deal when French taxpayers finally have to start paying off the bill. 

The final column in the table gives the total cost of interest payments in the 24 years since 2000. I think that the total figures give food for thought. For the European Union, the total reached €6.57 trillion. But for individual countries, the numbers are also very impressive.

4 Feb 2024

A Global Wealth tax could happen soon!

 I've been rather quiet, but there are good reasons to start getting excited about the possibility of something really big happening in the next couple of years. 

The big news is the fact that, on the 22nd of November, 2023, a landslide majority of countries at the UN voted to begin the process of establishing a framework convention on tax and completely change how global taxes are decided. I can strongly recommend the coverage of the events by the Tax Justice Networks Podcast entitled "The day global power shifted". The proposition, made by an alliance of African countries, faced intense resistance from the OECD countries and lobbyists but nevertheless got approved. That means that the United Nations will be able to make proposals for global tax reform in a forum where measures that are supported by a majority of countries can be implemented. 

So, what sorts of reforms to the tax system could be possible in such a system. Well, many people, including the Tax Justice Network and Oxfam, have been arguing that multinational companies should be obliged to report their profits on a country-by-country basis and pay taxes to national governments that depend on the money they earn in each country. This would help prevent the current system where companies can move their profits to low tax regimes and end up paying little if any, tax. This could also be helped by ensuring a minimum level of corporate taxation for all countries. 

However, I would like to explore the possibility that a UN-based tax authority could have the potential to introduce global taxes that could be used to generate the funds needed to tackle the big global challenges - and specifically the 17 sustainable development goals that all UN member states signed up to in 2015. The latest 2023 Sustainable Development Goals Report makes it clear that progress has been disappointing to put it mildly. The aim was to reach the goals by 2030. But while we are already halfway to 2030, roughly half of the 140 defined targets show moderate or serious deviations from the desired trajectory, and 30% have shown no progress or even regression compared with the situation in 2015.

One of the main reasons for the lack of progress has been the lack of funding. In a recent podcast from the Institute for New Economic Thinking, Adair Turner, the chair of the Energy Transitions Commission, noted that the shift to a net-zero carbon economy would need around $3.5 trillion a year of capital investment. African countries and countries like India have plenty of potential for generating electricity from solar panels, but lack the financial resources to install such systems. Where could they obtain the necessary funding? He talked principally about the need for investors in rich countries to play a greater role, or for organisations like the International Monetary Fund to make further loans. However, increasing debt for such countries does not seem like the best solution. 

Instead, I have been suggesting that if the UN was able to impose a global wealth tax of around 0.3% per annum on all assets, it would generate the $3.5 trillion of capital investment without the need for additional debt. I was pushing this idea on my blog during the COP 28 meeting back in November.  Since then, I have found some additional sources of information that are relevant to the question of how much money could be generated by a global asset tax. 

One particularly interesting source is a site that provides very complete listings for a set of 7985 publicly listed companies. They provide a range of information, including 

 and so forth. 

But for my question, the really interesting ones are 

and finally 

These lists, which can all be downloaded as Excel files, make for fascinating reading. Since the data includes the country of origin of all 7985 companies, it was easy for me to get the total net assets by country. Here's the list

You can see that the total number of companies is less than the 7895 figure. The reason is simple. I only included companies with positive values for net assets. There are around 400 other listed companies with negative net wealth. Top on that list is Boeing, with a net asset figure of minus $16.7 billion. Such companies would clearly not be required to pay any globally implemented tax on net assets. 

But if you look at the companies with positive net assets, you can see that companies registered in the USA have total net assets worth nearly $13 trillion, with companies like Warren Buffet's Berkshire Hathaway topping the list.  The next biggest players are China, which has 4 big banks close to the top of the list, followed by Japan, France, Germany and the UK. 

But you can see that the dataset also includes places like the Isle of Man, the Cayman Islands, Guernsey, Jersey, Panama, the Bahamas and the British Virgin Islands. So, contrary to my expectations, it appears that it is perfectly possible to determine the net assets of companies in all sorts of locations across the planet. 

It follows that if the UN Convention on Global Taxation decided to implement a 0.3% annual tax on the declared net worth of just these companies, it would generate around $131 billion of useful revenue. 

From my point of view, it seems that the question of who is the ultimate owner of a company registered in the numerous UK-linked tax havens is actually irrelevant. If a company registered in the Isle of Man paid its dues, then we don't really care how many shell companies were used to protect the owners. 

If desired, it might also make sense to impose a UN-administered global tax on the $55 trillion in earnings provided by the same source. But, frankly, I think that a new tax on net wealth is simpler. I have no doubt that any attempt to tax earnings would lead to companies hiring sophisticated accountants to find ways of reducing the taxable earnings figures. Hiding figures for net assets would be considerably less easy. 

Once the basic wealth tax mechanism is implemented, it would become relatively simple to extend the taxation mechanisms to other companies not included on this list, including privately owned companies. Forbes provides a list of the largest US-based private companies. Unfortunately, that list only provides information about revenue and the number of employees.  Those companies are also required to file their annual accounts, so it presumably would not be impossible to get the equivalent figures. 

And, of course, my proposal is that exactly the same rate of tax should not just be applied to companies but to individuals  - including myself! As I have already noted, the 2023 Credit Suisse Wealth Report calculated that the net wealth of the planet's 8 billion people totalled $454.4 trillion. 

By taxing all net worth, it would be simple to provide the $3.5 trillion a year needed to shift to a zero-carbon economy and start tackling those 17 sustainable development goals. 

4 Dec 2023

UBI as a way to fight the effects of climate change

 In my post last week, I argued that if the COP 28 participants could agree on a number for the amount of funding required to tackle change, and agree to implement two modest new taxes that would have to be paid by everyone, our hopes of making progress would be vastly improved. And we could avoid the endless arguing about who should be paying. 

The answer should be obvious. We should all be paying - in direct proportion to our ability to pay. That's a simple rule that I think we should all aspire to.

It is pointless trying to get elected governments to introduce big tax increases on their populations to pay for this. For obvious reasons, they will get voted out by the next Trump who will say "America First", "Cut Taxes" "Sod the planet".....

That's why my proposals for two new taxes - a 0.02% tax on all financial transactions, and/or a 0.3% annual tax on net wealth seem so sensible - at least to me! The critical thing is that they need to be paid by all parties - individuals, companies, trusts and governments, wherever they occur on the planet. No exceptions. 

 The funds would be sent directly to the United Nations Environment Program (UNEP) or some other global authority that can be trusted to do the right thing. 

Last week, I took the number provided by Morgan Stanley in 2019. That report said that we would need to invest $50 trillion between then and 2050. I didn't question those numbers, but here is a brief summary of the breakdown. The money spent would be needed for five key areas five key areas of zero-carbon technology.

  • Renewables will require $14 trillion of investment, and could deliver around 80% of global power by 2050—up from 37% today. As solar energy becomes more affordable, it will become the fastest-growing renewable technology.
  • Electric vehicles will become more important than ever in the bid to reduce greenhouse gas emissions from automobiles; $11 trillion will be needed to build more factories and develop the batteries and infrastructure needed for a widespread switch to electric vehicles—the total number of which could grow to nearly 950 million by 2050.
  • Carbon capture and storage, which Morgan Stanley says is the only viable option for reducing emissions from coal-fired plants, is another key area and would need almost $2.5 trillion of investment.
  • Hydrogen can help provide clean fuel for power, cars and other industries—it will require almost $20 trillion of cumulative investments to help make the gas, increase capacity to power plants and manage its storage.
  • Biofuels, like ethanol, will be key for future global transportation and eventually spread to aircraft and other forms of other travel—requiring $2.7 trillion by 2050.

But it is important to realise that those numbers do not include the cost of dealing with the damage that is already caused by Climate Change. What is the cost of failed crop harvests? What is the cost of the infrastructure needed to protect coastal areas from flooding?  How can we help those who are most badly impacted by the climate change that we have already produced? 

 Do you think that you could just increase the funding for UNEP and hope that they would be able to work out where the money should go? 

It's at this point that I would like to suggest that trying to solve problems using top down programs is unlikely to be the best solution. 

As I have suggested previously, and as has been suggested by other groups including EqualRight.org, a particularly efficient way to help out those impacted by climate change is to provide them funds in the form of a Unconditional Basic Income. Rather than trying to pump money into third world countries top down, in the hope that their leaders will do the right thing, I think it would be much more efficient to pump the money into peoples pockets and let them decide what the priorities should be. 

This was something I explained in a YouTube video I posted last year on "AI, Technological Unemployment and Universal Basic Income". Although that talk was aimed at showing how UBI could be useful for dealing with the unemployment generated by AI, many of the arguments I developed are directly relevant for using UBI to help tackle climate change. 

For example, at one point in the video I discussed one of the fundamental problems of trying to distribute aid (money, bags of rice, tents...) to the population. This figure below compares what we would like - we give $20 to someone at the top of the pyramid, and hope that the aid will be distributed equally - with what actually  happens in the real world. Because of corruption, people will be tempted to keep some of the aid for themselves, with the result that the process can be very inefficient. 

Compare that distribution system with a UBI based system. The UNEP could set up digital bank accounts for all citizens and simply credit those accounts every month (for example). In such a system, the people themselves get to decide where the funds go. If people need energy, they could choose to buy electricity. If they are thirsty, they could buy water. And if people are hungry, they could choose to purchase food.

There would be no need for someone in an office in Geneva to decide what people should and should not be getting. The list of goods and services that could be funded in this way would be without limit. If they need medication, let them purchase medications. If they want renewable energy, let them club together to buy some solar panels. If they need to build walls to prevent rising sea levels from wiping out their homes, so be it. 

It's interesting that this is really just allowing market forces to do their work. The problem is that the vast majority of people on our planet don't have any money to influence the markets. A global UBI would give those billions of people a voice. 

I seriously believe that, with a global UBI in place, it may be much less complicated to tackle climate change that with the current attempts to find "top down" solutions. The Morgan Stanley report was arguing that we need to invest $14 trillion in renewable energy. If you say it like that, it sounds like a lot. And hoping that investors are going to invest $14 trillion (which effectively means borrowing the money) is probably naive. But suppose that you were paying  all 8 billion people on the planet $30 a month of debt free money using funds generated by the 0.02% FTT and the 0.3% net wealth tax. It would cost about $3 trillion. 

Anyone like to speculate what percentage of the $3 trillion would end up being used to tackle climate change? Clearly, the longer this goes on, the more urgent the need to tackle climate change will become, and the higher the percentage of the $3 trillion being used for that specific objective. Even if people use the money to buy food, water, and energy, it's still being used to offset the effects of climate disruption. 

I firmly believe that the UBI mechanism is probably the best possible way to get people to change their life styles and give us a chance of combating climate change. 

27 Nov 2023

The COP meeting has to find at least $3 trillion a year of funding to fight climate change. Here's how.

Two years ago, I made three specific proposals for things that could be implemented at the COP 26 meeting in Glasgow

I can't say that I am surprised that nothing happened. 

But COP 28 starts in a few days, and I am terrified that the whole meeting will be taken up with people arguing about who should be paying for the actions that are so clearly needed. The situation was terrible in 2021. Surely, everyone will agree that things are much worse today. 
So I would like to come back to my Proposition #2, and provide some more details about my precise proposals. 
First, we need to decide how much we will need to spend. In 2019, a report from Morgan Stanley had said that tackling climate change would need $50 trillion of investment before 2050. On the basis of the UN Environment Programme's Emissions Gap Report in 2019 it was concluded that the cost of fixing climate change was between $1.6 trillion and $3.8 trillion. The recently released Emissions Gap Report for 2023 says that $4 trillion a year is need to stay on track with the net-zero scenario.
It's clear that the cost of inaction will be huge.  In 2022, Deloitte’s Global Turning Point Report  claimed that unchecked climate change could cost the global economy US$178 trillion over the next 50 years, unless global leaders unite in a systemic net-zero transition.
Last month, the World Economic Forum claimed that climate change is costing the world $16 million an hour, and that the global cost of climate change damage is estimated to be between $1.7 trillion and $3.1 trillion per year by 2050.
Logically, this means that $3.5 trillion a year of investment would pay for itself.
And yet, nothing will happen if the COP delegates waste their time arguing about who should be paying. 
That brings me to the second point. Where can we find  find $3 trillion a year? 
Rather than trying to convince governments to find money from their current tight budgets, forcing them to raise taxes, which they are understandably reluctant to do if they don't want to lose voters support, I believe that we should be looking at two radical new sources of funding that are (a) totally fair, (b) simple to implement, and (c) totally independent of national budgets.
 The first would be a tiny Financial Transaction Tax on absolutely all transactions, wherever they occur in the world, and whatever the denomination of the currency. The second would be a very modest annual tax on the net wealth of all households, trusts, corporations and governments - again, irrespective of where that wealth is located. 

The funds generated by these two new taxes would be provided directly to the United Nations Environment Program (UNEP) or some other global authority, and that authority would be mandated to use the funds in the best possible way to fight climate change. Simple.

Using a Financial Transaction Tax

So what level of Financial Transaction Tax would be needed to provide the UNEP with €3 trillion a year. 
Well, for the last 13 years I've been using the data provided by the Bank for International Settlements to get one measure of the annual volume of transactions. For 2021, the total was $15.9 quadrillon, up 6.51% on the previous year..As you can see in this graph, it has been going up steadily since 2015.

However, even these eye-watering figures must be hopelessly underestimated. Firstly, BIS only reports figures for a set of 26 countries. But more importantly, BIS doesn't bother to include many major players. The most obvious and glaring absentee is the Options Clearing Corporation, "the world's largest equity derivatives clearing organization". The following graph shows the total number of executed trades per year since 2013, taken directly from their webpage. The number was fairly stable around 4-5 billion a year until 2020. Since then it has sky-rocketed. My number for 2023 is an estimate based on trades up to October, but looks set to be well over 11 billion.

What OCC don't say is the financial value of those transactions. It is not inconceivable that we are talking about trades worth a million dollars each. If so, there could be another $11 quadrillion to add to BIS total. 

Even if we only use the figures that are provided by BIS, it should be clear that to generate $3 trillion in funds, it would be enough to impose an FTT of less that 0.02%. 

Importantly, this tax would not just be imposed on the High Frequency Traders responsible for a large proportion of the activity, it would be imposed on absolutely everyone on the planet, including you and me. When my pension is paid into my account (I retired from my job with the CNRS on the 1st of July) - 0.02% of it would go to the UNEP. Every time I make a payment by direct transfer or by credit card, 0.02% would go to UNEP. 

Would I object, given that I know that the money would be used to help ensure that my grandchildren will have a habitable planet? Of course not. Especially when I know that every time I use my credit card, I am forced to pay Credit card processing fees that can typically range from 2.87% to 4.35% of each transaction - paid by the merchant, and passed on to me. The financial transaction taxes imposed by the banking system are even more outrageous when I use my credit card outside the Eurozone. Those international charges are typically an additional 1-3%. Thus, the FTT required to tackle climate change is hundreds of times less than the transaction taxes imposed by the banks. 

Of course, those same banks will say that while it's fine to clobber each of us with what is effectively financial transaction taxes of 4-6%, imposing even a 0.02% tax on the financial sector's trillions of dollars of trading every day would cause the sky to fall in, prevent efficient price discovery, etc etc etc. Don't believe them. It would certainly reduce the incentive to make trades when the margin is less than 0.02%, but trading would certainly continue. 

One of the standard arguments against imposing an FTT in a particular area (such as the Eurozone) has been that the traders would simply move their activity elsewhere. But, clearly, if the UN imposed tax applied to absolutely all trades, wherever they occur, and whatever the denomination used for trading, such arguments completely fail. 

I think that it would also be vital to include the 0.02% FTT on trading in cryptocurrencies. There are now currently 8847 different cryptocurrencies, with a combined market cap of $1.4 trillion. These are involved  tens of billions of dollars worth of trading every day, but there were days in 2021 when the daily volume exceeded $300 billion.  I see no reason why this activity should not also be subject to the climate change tax, especially since cryptocurrencies  have a huge energy cost - because of all the hardware needed for mining.  Bitcoin mining alone is estimated to consume 127 terawatt-hours (TWh) a year — more than many countries, including Norway. See also my proposition #1 from 2021

Using a Net Wealth Tax
My second proposition would be to impose an annual tax on Net Wealth - whether held by households and individuals, trusts, corporations and companies, but also governments. I talked about this option recently with respect to the option of eliminating other types of taxation such as sales taxes, income taxes and taxes on company profits. But here, the aim would be different. It would be an additional new tax that would be specifically and exclusively used to finance the $3 trillion needed to tackle climate change. As stated, the tax would be paid by all holders of net wealth, whatever their status or location
For individuals and households, the vital information can be found in the latest version of the Credit Suisse Global Wealth Report for 2023, which can be downloaded here. They report that total household net wealth at the end of 2022 was $454.4 trillion, corresponding to an average value of $84,718 per adult. 
That wealth is very unevenly distributed, with a small number of individuals holding a massive proportion of the total, as shown in the following pyramid, with 45.8% of total wealth held by the 1.1% of the population who have net wealth of over $1 million. 

Of course, net wealth varies enormously between countries, as you can see in the figure below. The highest average net wealth levels are seen for adults in Switzerland at $685,230, followed by the USA ($551,350), but for many countries in Africa, average net wealth is tiny.  It follows that, if a global tax on net wealth was introduced, the contributions of people in different countries would vary naturally, and would automatically produce a shift of resources from highly advanced economies to developing economies. And that with no need for endless arguments at COP meetings about who should be paying.
In previous posts I used the figures for the Forbes Global 2000 list to show that those 2000 top countries have assets of $231 trillion, $171 trillion of which are held by Banks and other Financial Institutions. I've not yet managed to find figures for the net wealth of the many other publicly traded companies, but in 2022 there were 58,200 of them, and in principle it would be relatively simple to get the required information about their assets and liabilities needed to calculate net wealth. 
There are also large numbers of other companies that also presumably have to file annual accounts. According to Statista  there are 334 million companies in the world. Reporting requirements may vary between countries, but it is presumably the case that with companies with audited accounts, net wealth would be straightforward to calculate. What could the total be? It's difficult to say, but if a global net wealth tax were to be introduced, the numbers would presumably become visible rapidly.  
One other type of structure that should be subject to a global net wealth tax are trusts, often located in tax havens.  According to a 2020 study by the Paris-based Organization for Economic Cooperation and Development, at least $11.3 trillion is held “offshore,”. But earlier work in 2012 had reported that the super rich have as much as $32 trillion in offshore havens. One of the advantages of implementing this sort of global tax on net wealth is that such trusts would be forced to pay or risk being put into liquidation. In the end, it does not matter who the final owners of the assets are, or how many different chains of owners are used to dissimulate the owners, if trusts in the Cayman Islands and elsewhere were forced to pay the same amount to the UNEP fund, it wouldn't matter. I don't care who actually pays, as long as someone does!
The final group that would be required to pay are governments. As is well known, many of our governments are massively in debt, and so their net wealth is often negative. Such countries would clearly not be in a position to pay the tax. The OECD provides a chart for a restricted set of countries showing that 10 countries actually have positive net wealth - Switzerland, Estonia, Denmark, New Zealand, Russia, Sweden, Korea, Luxembourg, Finland and Norway. But Norway stands out because its government has net wealth amounting to 270% of its GDP.

The reason why Norway stands out is almost certainly because it is a major supplier of Fossil Fuels - which no doubt explains why Russia also belongs to the group. 

Unfortunately, I have not been able to find many figures for the net wealth of other governments involved in Fossil Fuel production. But we know that Saudia Arabia produces 12% of the world's oil, the United Arab Emirates 4% and Kuwait 3%. And the Saudi Sovereign Wealth Fund is expected to have over $1 trillion by 2025 and targets $2.7 trillion by 2030.

 It seems likely that by grouping together Individual and Household net wealth ($454.4 trillion) with the wealth of both Public and Private companies, Trusts and Governments, the total amount of wealth that could be subject to an annual net wealth tax could approach $1 quadrillion. This is a figure that I have seen elsewhere, though rarely with a detailed breakdown. See for example, a youtube presentation entitled "What everyone gets wrong about debt" by the Economics Explained.
If true, it follows that a 0.3% annual tax on global net wealth would provide the $3 trillion needed to tackle climate change.

Would I be prepared to hand over 0.3% of the value of my properties and financial assets every year to save the planet?  You bet. 

The fact is that, as demonstrated by the Credit Suisse Wealth Report, household wealth (and almost certainly the wealth of companies) have been increasing by around 6-8 percent every year for the last 20 years - as seen in the following graph - with the notable exception of the financial crash in 2008.
I honestly think that those with wealth might be able to spare 0.3% of their wealth every year, when they get to keep the other 7%.
FTT or Net Wealth? Or both? 
I think that it should be clear that either an FTT of around 0.02% or an annual Net Wealth Tax of 0.3% could provide the $3 trillion we need. 

I propose that the United Nations should be empowered to impose one or both these taxes as soon as possible. It could easily decide to do both and have  a 0.01% FTT coupled with a 0.15% Net Wealth Tax which would also work. But it could also decide to use one more than the other, if implementation is easier for one. On the face of it, the FTT option seems simpler, effectively requiring simply the addition of one line of code to the software handling all electronic financial transactions. For the Net Wealth Tax, it may be simpler to introduce it first for publicly traded companies, before adding individuals. 

But the fact is that both options are by relatively simple. Above all they are fair, because they can be applied to everything - with no exceptions. There will be no reductions or exemptions. And they would need to be applied everywhere. Anyone cheating by attempting to avoid the payments would have the problem of trying to explain why they should be an exception. And, they could easily be banned from the international financial system.
Importantly, if it turns out the $3 trillion a year is not enough, and that we need to double the amount (something that seems to me to be highly plausible), the UN body mandated to impose the two tax systems should have the power to increase the rates to whatever is needed. There can be no wrangling about this. We have to give the final say to people who can be trusted. 
And if, as a result I end up having to pay 0.04% on all my financial transactions, or 0.6% of the value of my property, then so be it. I would be truly insane to think that I could find a better use of my money. 

Finally, I would like to point out that while I have largely ended up with these proposals by thinking through the ideas myself, I recently discovered that there are other people proposing essentially the same sorts of ideas. 

I have been discussing with Laura Bannister who is the Executive Director at https://www.equalright.org/. They have three key objectives that are very close to my own. 
I strongly recommend downloading some of their material, such as this presentation of the No Borders Tax Justice idea. 
Could this years COP 28 meeting be the moment when people move on from saying that we are not doing enough, to actually doing things and deciding how the actions can be financed.