Impractical outrage: IEA economist responds to Oxfam report

From: Think Tanks
Published: Mon Jan 16 2023

Professor Len Shackleton, IEA Editorial and Research Fellow comments on Oxfam's annual report on global wealth inequality

Oxfam's annual report on world inequality, always timed to coincide with the World Economic Forum jamboree in Davos, has just appeared. As ever, it shows massive inequality amongst the planet's eight billion people. And, as ever, it demands radical redistribution.

This year's report calls for wealth taxation on an unprecedented scale. The practicalities of this are, however, glossed over. We have no official record of wealth holdings, and Oxfam's quoted figures are guesstimates.

Leaving aside the luxury yachts and private jets, which cannot meaningfully be redistributed to the poor, the bulk of the wealth of the super-rich is in the form of financial assets - including shares in businesses owned by entrepreneurs who have made it big: Mark Zuckerberg, Jeff Bezos and the like.

But the value of financial assets changes daily, even hourly, and provides an uncertain basis for taxation even if we had much fuller information.

Oxfam points to the windfall gains in inflated asset values brought about by Covid-inspired quantitative easing. However this can go the other way too: changes in the prospects of businesses can make asset values plunge. Elon Musk's net worth, for example, has fallen from $320 billion in November 2021 to $138 billion today.

Such fluctuations make estimating the taxable wealth of billionaires very difficult to calculate, which in turn impacts the tax rate which could plausibly be charged.

Oxfam's perspective is global, but we don't have a world government, so all wealth taxes would have to be national. Very few countries have wealth taxes of the kind Oxfam seems to be seeking. One which does is France. Its imposition - at much lower rates than Oxfam seems to be advocating - raises comparatively little, and has driven many rich people abroad. And as in any country the super-rich are a vanishingly tiny minority, wealth taxes will inevitably catch people who are very far from being billionaires. The French wealth tax hits assets in excess of just 1.3 million. The most recent figures suggest that, of 350,000 households liable to the tax, 250,000 paid less than 5,000.

If taxes could be devised which would catch much larger amounts of billionaires' wealth, how would it be redistributed, with no world government in prospect?

Without a plausible plan for practical redistribution, the annual Oxfam report has become simply an opportunity for the left's performative outrage, as pointless in its own way as the World Economic Forum which they bemoan. No political party in Britain should take it seriously and neither should the public.

Notes to editors

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

Annual Report and accounts 2021-22 - Oxfam GB

Company: Think Tanks

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