Only paying a wealth tax will provide a get-out clause for the ultra-high net worth to not enact the tangible positive changes they have the ability to do, says James Chen.
“Great fortunes are great blessings to a community” the American industrialist and philanthropist Andrew Carnegie is reported to have said. Since releasing his paper on philanthropy in 1899 he has coined a new way for how the super-rich should be sharing their wealth.
Yet his testimony which dictates that great fortunes can infiltrate a community and have a positive impact throughout, has not always seemed to ring out true. Inequality in America is a serious problem and appears to be getting worse. Since 1989, the wealthiest 1% of Americans have added $21 trillion to their combined net worth’s, while the poorest 50% have seen their combined net worth’s drop $900 billion.
The lead up to the 2020 presidential race has seen this inequality become a key topic of debate. Rising from the various discussions has been a potential solution in the form of federal wealth tax.
Proposed by Senator Elizabeth Warren, the tax calls for a 2% annual tax on households with a net worth of between $50 million and $1 billion and a 3% annual tax on households with a net worth of over $1 billion.
Those leading on promoting the wealth tax have suggested it could generate $2.75 trillion in revenue within a decade. They claim that this could help limit growing economic inequality by funding programs that would benefit the poorest Americans. Whilst this sounds like a brilliant solution, they don’t cite how it will reduce inequality – or how quickly. This largesse might only enable politicians to “kick the can further down the road” without implementing the necessary reforms.
Though a move towards making the ultra-wealthy more accountable for the inequalities in the world should be encouraged and celebrated we need to consider what is the best way for the wealthy to share their wealth. If we fail to do so, then the wealth tax in this form will be a missed opportunity.
It’s staggering to think that the ultra-high worth community have the opportunity to solve some of the largest issues in our world today and yet this could be another missed chance to address this matter effectively.
For example, If the wealth tax was the last link to achieving a balanced budget, that would be fair. However, without governments having viable plans to curb runaway entitlements and citizens unwilling to accept these curbs no amount of money raised from the wealth tax could solve this issue.
There is an important factor which has been overlooked. The key difference between the power philanthropists have compared to that of businesses and governments is in their ability to take risks. Private philanthropy at its best seeks to privatize failure and socialize success.
Ultra high net worths committed to real philanthropy have both the freedom and resources to lead the way in some of the biggest social breakthroughs. Catalytic philanthropy is uniquely positioned to privatize the inevitable failures of supporting speculative and disruptive concepts while collaborating with civil society organizations, governments and corporates to scalable the breakthrough solutions to the world’s biggest problems.
If some of those in the ultra-high net worth community follow in the footsteps of pioneers like Bill Gates and are able to focus this accountability freedom and apply their expertise honed in nurturing successful for profit enterprises to tackling specific issues in the social sector, they can create an invaluable change in derisking the issue and a blueprint for collaboration towards solving the issue.
I personally have found this in my experience in tackling The issue of uncorrected poor vision. Through the last 14 years I have invested in several initiatives which have led to the recognition of poor vision as an issue from global health organisations. There was a need to highlight the importance of corrected vision so I funded a research study which looked to productivity increase from glasses. There was no viable model for a low resource environment so we created a programme in Rwanda which provided affordable eye care for all. It’s an example of how this model works.
My journey has never been plain sailing but through the Clearly campaign I founded we are changing the narrative of vision as a narrow health silo issue to the importance of vision as the golden thread in addressing the SDG commitments to productivity, educational outcomes and gender equality.
Only paying a wealth tax will provide a get-out clause for the ultra-high net worth to not enact the tangible positive changes they have the ability to do. Their unique position to provide desperately needed risk capital and investing expertise means this is an opportunity to create real world change which cannot be missed.