Taxes on wealth and inheritance will be sufficient to fund basic health care for all and education up to secondary for all Indians, writes Gopi Karunakaran.
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THE history of the people of the world is a history of inequality and domination by the rich. However, there has been a fight back by the subaltern classes against it over the centuries.
Since the end of the 18th century through the 19th, there has been a tendency towards equality but it was limited in scope. The slave revolt in Saint-Domingue, now Haiti, in 1791, spelt the beginning of the end of the trans-Atlantic slavery system.
It was the peasant revolts of 1788–89 and the French Revolution that led to the abolition of the privileges of the monarchy, the nobles and the Catholic church.
I must confess that our world, however unjust, is more egalitarian than that of 1918 or 1950.
“It was the peasant revolts of 1788–89 and the French Revolution that led to the abolition of the privileges of the monarchy, the nobles and the Catholic church.
The inequality and the domination of the rich are linked to the development of Western industrial capitalism. This is closely connected with the systems of the international division of labour, the uncontrolled exploitation of natural and human resources, the military and colonial domination of the European countries in Asia and Africa, and the technological and financial innovation that resulted from that. It is difficult to understand inequality without understanding the colonial heritage.
Equality is first of all a social, historical and political construct. Equality is closely associated with property and income. Jean Jacques Rousseau explained that private property and the immoderate accumulation of wealth are the origins of inequality and discord among people.
This inequality leads to political and social discord. According to Karl Marx, property is a social relationship historically constructed and instituted under the aegis of the State and the propertied class.
Taking into consideration the social and environmental contradictions of the current economic systems, such revolts, conflicts and crises will happen in the future but it is difficult to predict with precision when and where.
To avoid such a situation, it is necessary to have institutional arrangements. One such is progressive taxation and redistribution of wealth. Redistribution of wealth can be brought about by inheritance taxation and a tax on wealth.
Fear of communism in the second decade of the 20th century and a return of fascism in the 1950s led to a change in European thinking on social security and progressive taxation. Without the existence of the Soviet Union, it is not at all certain that the property-owning classes in Europe would have accepted social security, progressive income tax, decolonisation and civil rights.
In France, Germany, Sweden and the United Kingdom (UK), tax receipts from progressive taxation amounted to between 40–50 percent of the national income in the 1980s and 1990s. Between 1914 and 1980, the tax income tripled in the United States (US). The receipts were used to reduce income inequality, thus encouraging growth.
In Europe, as the welfare State expanded with social security and progressive income tax, the levels of life expectancy and literacy rates went up substantially. The progressive taxation allowed the governments to invest in education, health care, replacement income such as retirement pensions, unemployment insurance, stabilising the economy in the event of a recession, etc.
It must be noted that progressive taxation challenged the dogma of laissez-faire and the power of the rich. It must also be pointed out that progressive taxation did not discourage innovation, productivity, or investment in those countries. The data collected between the 1950s and 1990s prove confiscatory taxes have been a success.
Sadly, since 1980, with the advent of Ronald Reagan in the US and Margaret Thatcher in the UK, neo-liberals advocating the monetarist policies of Milton Friedman and Friedrich Hayek and supported by the Whitewater economists of the Chicago School of Economics have led to a reversal of the policies of progressive taxation.
It was because of the influence of the media, the big banks and investment houses, the think tanks funded by the rich, and political funding that has led to this setback.
“Today, in the US and the UK, taxation of the rich is low or almost nil. Warren Buffet, the third or fourth richest man in the world, pays lesser taxes than his secretary.
Today, in the US and the UK, taxation of the rich is low or almost nil. Warren Buffet, the third or fourth richest man in the world, pays lesser taxes than his secretary. Cutbacks in social spending have led to a creaking infrastructure, the famous National Health Services of the UK is underfunded with waiting periods as long as six months for a non-critical procedure.
State schools are no longer open and if open are in a state of disrepair. College students are riddled with loans unable to pay until their late thirties. Homelessness has increased as social housing is no more available.
Just before the 2024 Lok Sabha elections, a leader of the overseas chapter of an Indian political party called for the implementation of inheritance taxation in India.
He was pilloried in the press, on social media, and by the ruling party as having committed sacrilege. His political party also sacked him for having committed this gaffe (he has been reinstated since). A leading columnist in a national pink paper called him, in short, an idiot for having made such a suggestion.
Ironically at the same time, French economist, Thomas Piketty, the leading authority on inequality, along with Nitin Kumar Bharati, Lucas Chancel and Anmol Somanchi, published a paper in March 2024 titled Income and Wealth Inequality in India, 1922–2023: The Rise of the Billionaire Raj.
The paper was met with criticism by many, including a former governor of the Reserve Bank of India. For sure, he had to criticise it, for his sinecure at the US college is dependent on his condemnation of such an idea!
The paper is very revealing. The point is no one wants to talk about inequality in income and wealth in India. The paper concludes:
"As per our benchmark estimates, the Billionaire Raj headed by India's modern bourgeoisie is now more unequal than the British Raj headed by the colonialist forces. One reason to be concerned with such high levels of inequality is that extreme concentration of incomes and wealth is likely to facilitate disproportionate influence on society and government.
This is even more so in contexts with weak democratic institutions. After largely being a role model among post-colonial nations in this regard, the integrity of various key institutions in India appears to have been compromised in recent years. This makes the possibility of India's slide towards plutocracy even more real. If only for this reason, income and wealth inequality in India must be closely tracked and challenged."
“Just before the 2024 Lok Sabha elections, a leader of the overseas chapter of an Indian political party called for the implementation of inheritance taxation in India.
The authors suggest the implementation of progressive taxation of income along with progressive inheritance and wealth tax to fund education, health care, basic income and endowment to youngsters who reach the age of 25 to get a head start in life as compared to the well-off.
Their suggested taxation is in the table below:
According to the chart above, the taxation recommended, at different degrees, will be sufficient to fund basic health care for all and education up to secondary for all Indians.
Author's note: I have liberally drawn from the books written by Thomas Piketty, Emmanuel Saez and Gabriel Zucman. I've not been able to give credit to them individually here but the use of their works in the above article is acknowledged.