Billionaires Poverty

Homi Kharas: How Billionaires Could Solve Global Problems with a 1% Tax

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Homi Kharas of the Brookings Institution writes about ways that the world’s billionaires could solve persistent global problems by paying an annual tax of 1% of their wealth.

He writes:

Until recently, even the wealthiest individuals did not have enough money to make a material dent in global problems, let alone “solve” them. Compared to the size of national economies, or the budgets of the governments of national economies, their wealth appeared small.

This is no longer the case. There are 2,755 billionaires in the world today, with an estimated wealth of $13.2 trillion. Even just 1 percent of this wealth (equivalent to a tax rate of 15-20 percent on the accrued income that billionaires have received with returns of 5-7 percent per year) would yield a flow of $130 billion per year. This can be compared with annual official aid (net ODA) of roughly $160 billion from all countries and multilateral institutions combined. Looking for contributions from billionaires has moved from a nice-to-have niche improvement to becoming part of the conversation on financing to solve large-scale global issues.

What could be done with $130 billion each year?

Figure 1 below provides some estimates of the cost of solving selected global problems. For example, updating previous work, I estimate that $95 billion would be enough to eradicate extreme poverty for all the 708 million people in the world living below the international threshold of $1.90 per person per day. Yes, a 1 percent contribution from the world’s billionaires would provide more than enough resources to end extreme poverty today.

Other major global issues have less precise costing estimates but paint a similar picture. The issue of “solving” world hunger has a range of estimates, partly because solving hunger is not simply about having enough food, but about having consistent access to sufficient, safe, and nutritious food, often in conflict-prone, or climate change-affected areas. Preferably, the food should also be grown in a sustainable way and the food system changes required depend on simultaneous system changes in health, energy, and transport. The U.N.’s Food and Agriculture Organization (FAO) nevertheless estimates that annual investments of $39 billion to $50 billion would be required to achieve a world without hunger by 2030. This includes both the 800 million people suffering from acute food insecurity, as well as the 1.5 billion additional people suffering from moderate food insecurity.

If you were a billionaire, wouldn’t you be willing to support a 1% tax on your wealth that would save the lives of millions of people living in desperate conditions?

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