Tax Justice – a necessary component of climate justice
I usually write these blogs primarily for readers in the United States, although they are often of interest to others as well. This post is a draft of a piece I’m working on for an international audience. It is all relevant to the U.S., but it is also addressed to people in many countries around the world. I welcome your comments and suggestions, and will take them into account in future revisions. Thank you.
Trillions of dollars are now needed every year to meet humanity’s global needs for climate action and for a basic standard of living for all. Fortunately, there is enough money to meet all these needs. The problem is that a vast amount of the world’s wealth is currently held by a tiny number of ultra-wealthy individuals and corporations, and they are not spending it to meet humanity’s needs.
Tax justice is the answer. Tax justice will make the world’s wealth available to meet the world’s problems. Without tax justice (and debt cancellation) climate justice will be unattainable and humanity will not be able to successfully address the climate crisis. Action is needed in many nations and by the global community as a whole.
Tax justice includes:
- Taxing the income and/or wealth of the very wealthy so they pay their fair share of humanity’s needs for climate mitigation, adaptation, and loss and damage; a just transition; and for development — including needs for food, housing, health, education, social services, and income both domestically and globally.
- Making polluters pay. Taxing fossil fuel companies and the financial industry entities that have financed them. These taxes will help pay for the tremendous damage that fossil fuels have caused through climate change and air pollution and will also help eliminate the production of fossil fuels by making them less and less profitable.
- Eliminating tax havens and tax avoidance mechanisms that the wealthy use to avoid paying taxes. This will require global cooperation so the very wealthy of the world pay their fair share regardless of where they live or put their money.
- Redistributing income from the wealthiest to the poor and working class.
- Dramatically reducing expenditures on militaries and warfare. (These are primarily financed by taxes.)
- Eliminating all subsidies for fossil fuels, while providing a just transition so the burden of this is not borne by people with low incomes.
Grossly unequal wealth distribution
Wealth is created by everyone in the world who works (whether that work is paid or unpaid). Our current economic system moves the bulk of global wealth to the already wealthy nations and to a very small minority of the population–the very rich. The world’s richest 1% have more wealth than the bottom 95% of the world’s population. In the U.S. and Europe the top 10% has more than 60% of the wealth; while the bottom half of the population has less than 2.6%. The wealthy are also growing wealthier. In the U.S., for instance, since 1975, $79 trillion has been taken from the bottom 90% of the population and moved to the top 1%.
This extreme wealth has given the ultra-rich extreme political power, which around the world they generally are using to foster more authoritarian regimes, expand fossil fuel use, and slow the transition to renewable energy.
Signs of change – Wealth tax
Driven by the urgent need for large amounts of grant-based international finance for both climate and development, public advocacy for tax justice is increasing. In July of 2024 the finance ministers of the G20 nations agreed that “With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.” Spain already taxes the wealth (not just the income) of the richest 0.5% of its households at the rate of 1.7% – 3.5%. It is estimated that if a similar tax were adopted by all countries, it would raise $2.1 trillion per year. Brazil recently proposed to the G20 that they all impose a 2% wealth tax on the 3,000 wealthiest individuals in the world.
Make polluters pay
There has also been considerable public advocacy for taxing fossil fuel company profits. UN Secretary General Antonio Guterres has urged rich countries to tax the profits of fossil fuel companies and use that money to help countries harmed by the climate crisis and people struggling with rising food and energy prices. “Polluters must pay”, he said. Others have advocated for taxing the extraction of fossil fuels in the wealthy nations, with 80% going to Global South nations for climate damages and 20% retained by the wealthier nations for their own climate action.
Other proposals
A small tax on financial transactions such as the buying or selling of stocks, bonds, and currency would raise billions per year, and would be paid primarily by the wealthy. Taxes that are currently spent on fossil fuel subsidies (estimated by the IMF at $7 trillion globally) and on military expenditures ($2.4 trillion globally) could be reallocated to finance climate action and raise standards of living.
What can we do?
- Highlight the grossly inequitable distribution of wealth and the destructive political power of the ultra-rich so it is more prominent in the public consciousness.
- Advocate for, and build public support for, all elements of tax justice.
- Strengthen bonds of connection, caring, mutual support, and community among all peoples–building a global consciousness that we are “all in this together.”
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The photo above is by Mika Baumeister on Unsplash
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