Laura Bliss is CityLab’s West Coast bureau chief. She also writes MapLab, a biweekly newsletter about maps (subscribe here). Her work has appeared in The New York Times, The Atlantic, Sierra, GOOD, Los Angeles, and elsewhere, including in the book The Future of Transportation.
Tax havens are largely to blame, according to a new study by Oxfam.
In 2010, the collective wealth of the top 80 individuals on the Forbes list of billionaires totaled $1.3 trillion. In 2014, it jumped to $1.9 trillion.
According to a new annual report by the anti-poverty organization Oxfam, that half-trillion-dollar bump has landed those billionaires with a troubling designation: Their combined wealth is equal to the combined wealth of the poorest half of the world.
You can take that statistic with a grain of salt. As Fusion’s Felix Salmon has pointed out, Oxfam’s methodology of combining the net worth of the world’s poorest people actually results in a negative number, as a result of tremendous individual debts. Comparing the ultra-rich to the bottom half of humanity might be comparing apples to oranges.
But the message of the Oxfam study is clear and accurate: The charts of income inequality are growing ever more jagged. The fact that it takes just 80 people to get to $2 trillion dollars should alone sound alarms for anyone concerned with economic health. As the study argues, legal tax avoidance should be a particular target for financial policymakers, as it’s a huge driver of lopsided wealth distribution and its very tangible social effects.
8 percent of individual financial wealth sits offshore
“Tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share,” Raymond C. Offenheiser, president of Oxfam America, told The New York Times, “depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality.”
According to the study, which was released as the world’s corporate elite convene at the World Economic Forum in Davos, Switzerland, 8 percent of individual financial wealth sits offshore. That totals $7.6 trillion going virtually untaxed. If the owners were paying income taxes on this sum, that would free up $190 billion for global government use every year.
The impacts created by the absence of that revenue are most glaring in developing regions. For example, Oxfam reports that Africa loses an estimated $14 billion in tax revenues every year, because as much as 30 percent of financial wealth is held offshore. “This same amount of money could provide healthcare for mothers and children that would save the lives of four million children a year and employ enough teachers to get every African child into school,” the report states.
Just 50 banks manage the majority of offshore wealth
Oxfam further estimates that combined tax revenue lost in Africa, Asia, and Latin America due to tax havens adds up to $70 billion each year. Who is protecting this clot of money? Just 50 banks manage the majority of the world’s offshore wealth. Banks and financial corporations lobby hard to preserve tax havens from too much regulation—while also employing a disproportionate share of the world’s billionaires.
Deregulation, as well as privatization, financial secrecy, and the globalization of the financial sector, “have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth,” Oxfam concludes.
Meanwhile, workers in nearly all countries are seeing their wages stagnate or fall, even as productivity is increasing. In most parts of the world the portion of wealth going to labor (wages, salaries, and benefits) is shrinking compared to the portion that’s going to capital (dividends, interest, and retained corporate profits).
Crumbling tax bases can result in disaster
A crumbling tax base is no mere inconvenience—it can have disastrous consequences, as the water crisis that began with insolvency in Flint, Michigan, tragically demonstrates.
What can global policymakers do? Buckling down on tax haven regulations, paying living wages to workers, tightening executive pay packages, promoting equal opportunity for all genders in the global workforce, pushing for a progressive (rather than regressive) tax system—this is the roadmap Oxfam draws towards a more equitable global society, where access to basic public services are better ensured.