Global tax on the ultra-rich, the choice that divides millionaires

The result is that taxes end up being regressive, and no longer proportional, when they affect the richest 1% of the population. Instead of increasing, they decrease. And the trend peaks among the 0.1% of taxpayers, the infinitely richer ones.

"Personally, I find it absurd that those who, like me, have the opportunity to contribute more, do not even contribute fairly to the collective welfare," explains Giorgiana Notarbartolo di Villarosa, who is part of the Marzotto family and administers the heritage inherited from her ancestors.

Giorgiana Notarbartolo joins the Patriotic Millionaires, a global movement that brings together nearly 400 ultra-rich people from around the world and calls for fairer taxation through higher taxes for the wealthy. Their slogan is: Tax the Rich.

During the last Davos forum, more than 370 billionaires and millionaires from 22 countries signed an open letter calling for a halt to the enormous concentration of wealth that undermines democracies and social cohesion.

"Inequality is the issue that is closest to my heart," adds Giorgiana Notarbartolo, "and it is perhaps because I am at the centre of these inequalities that it is so close to my heart. Organisations such as the Patriotic Millionaires use the voice of millionaires and billionaires to promote a fairer tax system to governments and organisations. Last year the call was for a 2% tax for individuals with a net worth over ten million dollars This year we are pursuing a project to define a line on extreme wealth, because you cannot change what you do not name and measure. And just as there is a line for absolute poverty, we believe there should be a line for extreme wealth'.

Would it be fair to set this line to tax the ultra-rich with a small percentage? And if the answer is yes, who should set this line? And where would that money go? How would it be spent? These questions are difficult to answer. Also because one must first understand what has happened in our countries over the years.

Misha Maslennikov is a mathematician and econometrician. He works as a policy advisor in the non-governmental organisation Oxfam Italy and the data he has at his fingertips tell of a world in which inequality is steadily increasing. 'The last four decades,' says Maslennikov, 'have seen a sharp increase in economic inequality in many advanced economies. Even in Italy, the share of national income held by the richest 0.1% of citizens more than doubled between 1980 and 2020, from 1.5% to 5.3%. Similarly, there has also been an increasing concentration of wealth. If we look at the top of the social pyramid, the wealthiest 0.1% of Italians, some 50,000 individuals, own 9% of the national net wealth. Twenty-five years ago they owned less than 4%'.

Yet, not everyone agrees with this data. Nicola Rossi, an economist at the Bruno Leoni Institute, a study centre founded in 2003 to promote the tradition of liberal thought in Italy, disputes that inequality is growing and therefore fundamentally challenges the motives of the Patriotic Millionaires manifesto.

'I went and looked at the data on income distribution in Italy over the last twenty years,' the economist began. 'The Gini index, which is the thing we usually look at when we want to do analyses of this kind, was 0.33 in 2003, it rose to 0.34 in 2017-2018 and today it is at 0.32 Do we have such an obvious redistribution problem? Has this earthquake happened that I hear about morning, noon and night on all the television channels? And even compared to other European countries, we are exactly the same as Spain, we are a little better than Greece, we are not far from what we see in Germany. A little above the European average, sure, but really marginally above. Where did all this distributional disaster happen that especially the local signatories of that manifesto seem to foreshadow?".

The second episode of the podcast - Milan, a wealth for millionaires

Even millionaires are divided when it comes to taxes. In the Porta Romana area of Milan, there is the showroom of Philipp Plein, a German fashion designer who lives in Switzerland but who has also opened a luxury hotel with several restaurants in Milan in a historic palace in the centre of the Lombard capital, where Leonardo da Vinci is thought to have once stayed.

Plein is not one of the signatories of the Patriotic Millionaires manifesto and has a clear view on how much tax should affect earnings: 'I think taxation between 20 and 30 per cent is a fair figure,' he says. However, the designer recognises that taxes are important. "We live in a social system that is built partly on taxes and taxes actually help the government, if the government is a good government, to do useful things with this money: to support and build the nation, schools, create social security and so on. So I think in some countries you feel more patriotic about paying taxes than in others. It always depends on the government and what they are really doing with your money and how they are managing the money they receive from taxes.

Giorgiana Notarbartolo and Philipp Plein are two sides of the same coin. Although they are on opposite sides, neither of them advances extremist or ideological positions. So it is worth listening to both of them, so as not to reduce the issue of taxation of the ultra-rich to a barroom discussion. Both Giorgiana Notarbartolo and Philipp Plein argue their convictions by trying to follow the line of common sense.

"Today our tax system is progressive, but only up to the 95th percentile. For the 5%, the system is regressive. This means that proportionally we rich people pay less tax, not to mention that capital income is only taxed at 26 per cent,' reasons Giorgiana Notarbartolo. 'We can improve the transparency and effectiveness of public spending, but let us remember that in the vast majority of cases the creation of wealth is also possible thanks to the ecosystem financed by the taxes that are paid by everyone.

Therefore, taxes paid by everyone make it possible for assets to accumulate and ensure that these assets can be passed down from generation to generation, such as the wealth that Giorgiana Notarbartolo manages and that derives from the entrepreneurial and financial activities of the Marzotto family, who settled in the Vicenza area in the 18th century and opened the first textile factory in the 19th century. In short, personal fortunes are never just the result of individual ability but are conditioned by context, explains Giorgiana Notarbartolo. A concept, this, that we often tend to forget but which is actually very important. Especially if one takes into account a study by Oxfam, according to which more than 60% of the ultra-rich did not actually create wealth but inherited it.

Phillip Plein, on the other hand, built his own fortune, starting out as a boy designing luxury dog beds. Then his flair as a designer led him to create his own clothing and accessories lines, to expand worldwide, to buy brands such as Billionaire and to open luxury restaurants and hotels, such as those in Milan.

'I come from Germany,' Plein says, 'and in Germany taxes have always been very high. So it had become a sport for many millionaires not to pay taxes, or at least to try to avoid them as much as possible. Not illegally, but to find different opportunities to avoid paying them. Because in Germany, for a certain income, although I don't know how it is today because I haven't lived there for over 20 years, taxation was over 50 per cent, a very high percentage. I think taxes should be set fairly. If you have to give away more than half of what you earn, that's a lot. So I moved to Switzerland to avoid paying high taxes. I did it in the beginning, when I was still a young entrepreneur. Because I had the feeling that I was working hard for my money and that it was legitimately earned. It felt wrong to give away more than half in taxes'.

The third episode of the podcast - Milan, the choice: to make the rich pay yes or no?

Nicola Rossi, for his part, lays on the table an argument that he considers to be the basis of everything. "Something is taken for granted that is not taken for granted: the idea that taxes are the instrument of redistribution. There are quite interesting examples that the real redistribution, the one that changes people's lives, is done with spending. It is done with education, it is done with health care. Taxes have to be structured in a way that maximises the growth incentives of a system. So there is clearly a problem with the path we have taken. We clearly do not want to take the other one, the one that would use spending to redistribute. We should not think that the path we have chosen is the only one possible'.

The movement for the taxation of the ultra-rich has developed a number of proposals to achieve greater tax fairness. The most important is that of French economist Gabriel Zucman, who aims to create a minimum global tax on the wealth of millionaires and billionaires. In practice, it would not be individual countries that would tax their wealth but there would be a worldwide tax.

Misha Maslennikov is one of the proponents of this solution. "The proposal put forward by Zucman to make billionaires pay at least 2 per cent of their wealth is a good starting point,' Maslennikov argues. 'As for the other proposals in our equality agenda, when we talk about a wealth-type tax, we are talking about a tax that would apply to the richest 0.1 per cent of Italian taxpayers, about 50,000 adult individuals. So let us dispel the myth that this is a proposal that would affect the position of the middle or upper middle classes in our country. To be part of this group, one must have a net worth of at least EUR 5.4 million. You can very well have a house even in the city centre, a second home and even a large bank account and the tax would not be due'.

'What I see is that the richer you are, the less tax you pay,' Plein adds. 'So this is also something we have to address. The truth is that everything has a price: the infrastructure we are using, or sometimes even abusing, costs money. So this has to be financed in some way. I mean hospitals are not free and medical care is not free. And we also saw during Covid how important it is to have a good system that can support us when we need it. Everything has to be financed and taxes are only a part, but an important part'.

If nothing is financed, or everything is financed much less, then the problems begin. Public services become poor, waiting lists in hospitals lengthen, infrastructure ages and becomes useless. And citizens lose faith in the state and democratic systems.

"This is one of the reasons why we should care and worry about economic and social inequalities,' Maslennikov concludes. 'Because when the gaps grow, social cohesion breaks down. And disaffection for politics clearly grows. There is a greater risk of instability, of democratic resistance or even of endorsement of extremist, populist or authoritarian political proposals. We are witnessing the prevalence of identity-based policies that create divisions among the marginalised, appeal to racism, and debase the pact of citizenship and the unity of the nation'.

In short, the question "To tax the rich, yes or no?" is more topical than ever. A question to which the answers are not unequivocal. But the important thing - as you can also hear in the podcast 'The Crack' - is to be aware of it, discuss it calmly and seek a solution. Without bar tones.