Initiatives to tax rich people are gaining support throughout Latin America, the world’s most unequal region, as it struggles to recover from its worst recession in two centuries.
In recent months, legislators in Chile and Mexico have proposed levies based on an individual’s net worth, as has one of the front-runners to be Peru’s next president. Colombia’s finance ministry will send a proposal for a new wealth tax to congress over the coming days, while Argentina and Bolivia have already passed similar measures.
Government debt rose to 79% of the region’s gross domestic product last year, its highest level in decades, after the pandemic sent the economy into a deep recession last year, hurting tax revenue. In these circumstances, the idea of making the rich cover Covid-19 costs is gaining momentum in some political circles.
The region isn’t alone: The International Monetary Fund calls a levy on rich people and corporations “one of the options that is on the table.” New York State, home of the world’s financial center, plans to temporarily raise taxes on millionaires too.
Wealth taxes have grown in popularity since French economist Thomas Piketty described widening inequality in his 2014 bestseller “Capital in the Twenty-First Century”, and advocated a progressive annual levy on capital to narrow the gap.
Under Argentina’s new tax, any individual with assets over $2.2 million must pay a one-time “extraordinary contribution” by April 16. The levy ranges from 2.25% to 5.25% depending on the size of the fortune and whether the assets are held locally or overseas.
Yet initial results show taxing the rich is easier said than done: Through March, the government has only collected 6.1 billion pesos ($66 million) from affluent Argentines, well below the 300 billion lawmakers projected when the levy passed through congress late last year.
Argentina’s tax authority postponed its deadline for the rich to send checks, and had to tweak the rules, offering payments plans. One Argentine tech executive received a favorable ruling from a judge and won’t be paying. Business chambers warn it’ll deter investment and hiring.