In today’s world, the staggering wealth amassed by the select few has sparked profound debate regarding economic inequality and its ramifications. The immense concentration of wealth amongst billionaires has provoked widespread controversy about the fairness of our system and the effects on society. Inevitably, the radical proposal of banning billionaires entirely has emerged in order to grapple with our world’s socioeconomic disparity. Despite its ambition, such a notion warrants deeper exploration: What truly would happen if we banned billionaires?
Before diving into the intricacies of this topic, we should first define the type of “banning billionaires'' policy this essay will analyse. The most straightforward and literal approach to “banning billionaires'' is simply to impose a limit on the amount of money an individual can possess, in this case one billion dollars, and redistribute excess wealth. This essay argues that the consequences of such a policy would have far-reaching effects on society and that a more balanced approach is warranted. Before presenting their significant negative impact on the world, it is important to recognise the crucial role billionaires play in the advancement of society.
The Problem
Billionaires play a significant role in driving economic growth through the creation of the world’s largest companies and through the production of goods and services that are heavily integrated into our everyday lives. Their sheer size in conjunction with sophisticated organisational structures enable the efficient supply of goods at lower production costs. Without them, our economy would face challenges in sustaining productivity and meeting the demand of society, leading to economic turmoil.
However, there are two sides to every coin; a billionaire ban policy could prove beneficial for the overwhelming population. To begin, “banning” billionaires would allow for a more uplifted, arguably, happier society. The economic concept of diminishing marginal utility (happiness/satisfaction) can be used to assess the relative value of redistributing the wealth of billionaires compared to the status quo. The Law of Diminishing Marginal Utility states that “as an individual consumes more of a particular good or service, the incremental satisfaction or utility gained from each additional unit diminishes.” Applying this concept to wealth, we can observe that as individuals accumulate more and more wealth, ceteris paribus, the marginal utility gained from each additional unit of wealth decreases; this suggests that the vast amount of wealth held by billionaires could be more efficiently allocated toward the benefit of society as a whole. Through redistribution of this wealth, resources can be directed towards areas that generatehigher marginal utility for the general population, such as investments in education, healthcare, infrastructure, or poverty alleviation programs. The economy could thus move closer to a state of Pareto efficiency, where welfare is maximised for the greatest number of individuals.
Furthermore, while billionaires can be innovators and drivers of growth and progress in the world, the data suggests that their habits tend to counteract these gains…Most interestingly, for example, a crucial aspect to explore is the environmental impact that billionaires imprint on the world. Climate change is one of the most pressing issues faced by the world right now; it is an imminent threat to the future of our planet and the survival of the human race. According to the UN, “The science shows clearly that in order to avert the worst impacts of climate change and preserve a liveable planet, global temperature increase needs to be limited to 1.5°C above pre-industrial levels…as called for in the Paris Agreement – emissions need to be reduced by 45% by 2030 and reach net zero by 2050.” A study conducted by the BBC predicted the 2030 carbon emission levels per person, based on income group, and compared it to the levels required to hit the 2030 goal. The information is illustrated in Figure 1 below.
As observed, the BBC predicts that the richest 1% are on track to emit 30 times the
carbon levels required to keep temperature below 1.5 C. However, the richest 1% of the world includes more than just billionaires; further information is required to judge the magnitude of billionaires’ impact on the environment.
A ground-breaking report published by Oxfam in 2022 revealed the carbon emission levels of 125 of the world’s wealthiest billionaires. Without a doubt, the luxurious lifestyle of billionaires emits thousands of times more carbon than the average individual; this comes from the yachts, dozens of homes, private jets etc… However, the report revealed that it was the investments of these billionaires that emitted the largest amount of CO2. The report found that “these billionaires’ investments give an annual average of 3m tonnes of CO2e per person, which is a million times higher than 2.76 tonnes of CO2e which is the average for those living in the bottom 90 percent.” Their investments in polluting industries are actively detracting from the work the rest of the world is doing to reduce carbon emissions.
Billionaires hold the capacity to positively impact the environment and to create a sustainable future. They have the ability to invest in sustainable energy, encourage environmental stewardship, and adopt sustainable practices within the businesses they own. However, whilst some billionaires are strong proponents of investing in sustainability and creating a better world for the future, the overwhelming majority are those described in the Oxfam report – individuals whose investments and lifestyle only exacerbate the problem. While there is no way to ‘force’ change, policies can be implemented to ‘limit’ their wealth and divert those resources towards a better purpose such as the environment and combating climate change.
Billionaires’ political and economic influence also has the potential to benefit peoples’ lives; however, this power often results in a converse effect. Billionaires often use their resources to influence legislation and fund political campaigns to benefit themselves; invariably, what benefits billionaires, harms the overwhelming population. An example of this occurred in 2017, when the Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump. The Centre for Public Integrity found that between the November 2nd to December 31st of 2017, a span of two months from when the bill was proposed in the house to 9 days after it was signed, Republicans and conservative groups received $31 million USD. For the majority of those donors, this surge in donation toward the end of the year “reflected a marked change in their giving behaviour”, suggesting that advancing the bill may have been a motive for the donations. This is almost confirmed through a comment that was made by Republican Senator Chris Collins during the voting period, “my donors told me to pass the bill or ‘don’t ever call me again’”. The bill was eventually passed, and it disproportionately benefited billionaires and the wealthy; the bill featured a 14% corporate tax rate cut and made fundamental changes to tax processes for certain aspects of businesses, creating a number of loopholes that thecountry’s richest abused to evade taxes. The degree to which this bill benefitted billionaires was only revealed in the following years.
“The Triumph of Injustice”, a book published in 2019 by economists Emmanuel Saez and Gabriel Zucman, revealed that in 2018, the year after the tax cut bill was signed into law, the 400 wealthiest families in the US paid an average tax rate of 23% which, for the first time in history, was lower than the tax rate paid by the bottom half of the population, 24.2%. The correlation between the actions of the wealthy surrounding the bill and the immense benefit they received suggest that they may have used their influence and political power to impact these political decisions.
Moving Forward
On balance, we have established that despite their crucial role in driving innovation and entrepreneurship, billionaires’ environmental impact, abuse of political influence, and exacerbation of income inequality necessitates some form of wealth restriction. The straightforward approach of redistributing wealth such that no individuals possess over a billion dollars is simply not feasible. Instead, a pragmatic solution must be achieved, one based on practicality and effectiveness. We can turn to countries with low income inequality and low carbon emissions to draw inspiration.
The Gini Coefficient is a statistical measure of income inequality. It can be derived through a Lorenz Curve, which displays the distribution of income within a population.If we take the developed countries with the lowest Gini coefficients and cross that data with the developed countries that are on target to reach carbon emission goals for 2030 and 2050, one country stands out, boasting both low inequality and strong climate progress: Denmark.
Denmark has a Gini Coefficient of 0.27, with 0 being perfect equality and 1 being perfect inequality. This is staggeringly low compared to the US value of 0.42. Denmark is also ranked 4th in the world on the climate change performance index. Additionally, it consistently ranks as the happiest country in the world, and is among the best in the world for healthcare and education. The overwhelming success of Denmark can be attributed to one key factor, its taxes. Denmark has some of the highest income taxes in the world with the highest bracket at a rate of 56%. In addition, Denmark has one of the highest Value-Added Tax (VAT) rates of 25% and the world’s highest capital gains tax rate of 42%.
Denmark’s tax system can be used as an alternative model to “ban billionaires'', with some adjustments to maintain economic growth and innovation in the long-term. In addition to the high-income tax, Value-Added Tax, and capital gains tax under the Denmark model, an appropriate solution would support innovation and the continual advancement of society. One method of achieving this is through targeted tax benefits. Tax deductions could be awarded to all businesses whose products benefit society as a whole and with extra incentive for start-ups, encouraging entrepreneurship and innovation. Additionally, for any of these tax policies to succeed, it is crucial to close the numerous loopholes that billionaires use to avoid taxes such as the stepped-up basis loophole, carried interest loophole, corporate inversions etc… The closing of these loopholes in conjunction with higher income and capital gains taxes for the wealthy, and tax incentives for businesses that benefit society will greatly impede wealth creation at the highest levels of income whilst also encouraging entrepreneurship. This will divert more money towards the government to improve social welfare, reduce inequality, and push for climate progress. Such changes will undoubtedly require a cultural shift, one that society is unlikely to immediately embrace. An appropriate execution of this proposal will require small adjustments in policy over a long period of time; carrying out a proposal in such a manner is likely to receive greater support and be more effective.
On the whole, the notion of “banning billionaires'' warrants deep thought and analysis. While the proposal itself may sound radical, it stems from several critical issues including inequality and climate change, both of which are of immense importance to any government and society at large. It is crucial to look beyond the straightforward solution of placing an absolute limit on wealth; as discussed, billionaires do indeed serve a vital role in society and our economy and diminishing them outright is both impractical and unwarranted. The mentioned proposal of increasing taxes for the wealthy and implementing incentives for businesses who have a positive impact on the world, if executed correctly, has the potential to have widespread benefits and address issues that are vital to the continual advancement of society.
References
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