It is more than five years ago that German businessmen made a proposal to pay more taxes. They earned more than enough, so they said, and were willing to pay more than the German State was asking them. But as far as I know, the government didn’t listen. Or maybe they told the government not to listen. Who knows?

This sounds nice, but is it nice? Since most leftwing political forces reacted critically, there may be some good reasons to look more closely at these proposals.

Philanthropic donations?

These wealthy people in the US, Germany and France do not ask to be taxed in the same way as working people are taxed. They just want to pay a bit more than they do now, and only this year and maybe next year. Hmm. Is a lasting progressive income tax not the best way to tackle income inequalities?

It looks as if these rich people want to pay something to institutions which lack money and this is precisely what charitable giving is meant for. Looking out for good causes where they can make a difference and earn a good conscience. This is what philanthropy is based on. You give money for the poor, for cancer patients, for churches, for animal welfare or for battered women. Doing this, you help people while ignoring their rights, you justify your wealth, you justify your social utility, and you justify your being in this world. And you do not have to change this growingly inequitable world.

The problem is that philanthropic donations are not in any way comparable to the tax rates working people are paying. Donations are rarely higher than 1 % of taxable incomes. Moreover, we should not forget that most wealthy people (more than half of them in the US) never give any donations. So, while there is some margin for raising state revenues, philanthropy may not be the best way to do it.

This is what Warren Buffet wrote in his letter: ‘My wealth has come from a combination of living in America, some lucky genes, and compound interest. Both my children and I won the ovarian lottery … I worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you  notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious’. Indeed, and this is, apparently, according to these people living in Richistan, how it should stay.

Paying for reforms?

It also looks as if these wealthy and influential people just want to pay for the reforms they have been pushing for since 20 or 30 years. They want strong states to protect their interests, they want states to save the banks and industry, they want weak states to protect workers, they want to do away with social protection, they want to privatize public services, they want a weak form of poverty reduction, and yes, they want low tax rates.

The traditional way to obtain this wish list of reforms, is to influence politicians, pay for their election campaigns, pay for their trips, take them out for diner, etc. But if that does not work, well, you just pay the price for what you want.

If some wealthy people to-day want to help governments to reduce the public deficit, we should first ask where this deficit comes from? Certainly not from too high pensions or social protection, which is largely paid for by workers themselves.

And if governments are hesitating before embarking on a serious dismantlement of social protection, because they know this might cost them the next election, their wealthy friends come to the rescue and are kind enough to pay and to further push for reforms. After all, this is what is going to benefit them for the rest of their lives. By giving a marginal amount of money to governments now, they can be sure the governments will listen and do what is expected from them.

‘If there is a return to morality, let us make sure we get a piece of the action’

Indeed, the high moral ground these wealthy people are taking is not arbitrarily chosen. They want us to see how very serious they are, how they give a good example, how badly politicians are doing their work, how they, in the world of business and finances, are practicing the values they preach for society. Don’t be mistaken, this is not a purely economic or financial decision, but a highly ideological gesture they want us to remember. Trust business people, don’t trust politicians.

After all, for these people, money does not matter. Time, good health and friends are so much more important in life, according to Warren Buffet. These are the people who decide that poverty is ‘multidimensional’, that respect and voice, reducing vulnerability and empowerment are so very important for poor people. Income does not really matter. But did they ever ask the poor?

As Warren Buffet said: yes, there is a class conflict, and we are winning.

 Back to reality

According to Eurostat, tax rates on personal incomes dropped in the large majority of countries during the past decade[i]. The only exceptions are the United Kingdom, Sweden and Portugal. Corporate tax rates were cut forcefully and the EU tax system is becoming less progressive[ii].

The global rich had about 12.000 billion $ of wealth in tax havens in 2007. Tax havens are among the most important structural factors that are determining the distribution of the benefits and costs of globalization among the world’ s peoples. Tax havens are at the very heart of globalization: a growing gap between the very rich and everyone else[iii].

Leftwing schizophrenia

So yes, there are good reasons to be critical of this not so bizarre proposal of the rich. The question is then how leftwing forces should react? Should they say: no, thank you, this is not enough. Or should they say, thank you for this small gift, now let us look at your other assets and see how you can really help your country and your people?

Leftwing forces have always been very schizophrenic about taxes. They do want better and more progressive national tax systems, but often do not believe in global taxes. Proposals for a Tobin Tax or the currently debated Financial Transaction Tax are frequently rejected. They are said to ‘regulate’ capitalism and cannot help to overcome it. Of course, this is closely linked to the way in which one sees, or wants to construct alternatives.

It seems to me that before long, leftwing forces will have to defend political globalization. To-day, global elites are slowly abandoning multilateralism but hope to maintain their economic and financial advantages.  They succeeded in avoiding almost all national tax systems. It is clear that this should stop. And leftwing forces should seriously start to think on viable alternatives for the current inequitable and non sustainable system. It should not be too difficult to find political allies for a couple of simple and brilliant ideas: abandon tax havens, develop national and international tax systems in order to avoid tax evasion, stop capital flight, fight transfer mispricing systems, audit public debt and cancel odious debt . Finally, a global redistributive system should help to finance a universal social protection system, including public services and decent labour law. This is the only way to counter the growing inequalities and support legitimate development efforts.

Richistanis surely are able to help.