How billionaires get away with paying less tax than you

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1:02This is a Global Player original podcast. The minimum tax for the super rich has to be expressed as a fraction of their wealth. The tax problem makes the problem worse because while the rest of us are paying large amounts of taxes or large proportion of our taxes in the income, these people are not paying much or if anything. This is not to say that we can fix all the problems of the world just with taxing billionaires. If all of France's billionaires were to flee to the Cayman Islands tomorrow, the loss of tax revenue to the country would be insignificant. Finding question of the 21st century, meaning this battle between oligarchic forces on the one hand and democratic forces on the other hand.

1:43We need to tax the billionaires. You hear it all the time. Around the world, the populist left. Others, too, argue there are two economic worlds, them and us. Not just the rich, but the super, super rich. The haves and the haveyots. There can be no doubt in some ways that we are living in a new gilded age where the billionaires live on an almost different political and economic plane. A private jet, no doubt. Here's a stat. The 2024 UBS Billionaire Ambitions Report found that global billionaire wealth rose from about 6.3 trillion in 2015 to 14 trillion in 2024, an increase of roughly 121 % in less than a decade.

2:29And it is wealth which begets wealth to such an extent that no one else can ever hope to catch up. Now, the left often talks the talk on wealth taxes. We've heard it from West Streeting and Andy Burnham just this week. Governments, though, have a patchy record of carrying them out. Where they've been tried, they've largely failed. So enter Gabriel Zuckman. He's a French economist and is currently the toast of the left across the world for doing the thinking for how a new tax on billionaires might actually work. Indeed, it's been named after him, the Zuckman tax. His new book, We Need to Tax Billionaires, has just been published in English and has made him the man in demand with progressive leaders across the globe.

3:14So we invited him in to the newsagent studio to discuss his ideas, how he believes they could transform the fortunes, quite literally, of embattled governments across the world, and how he thinks we must act now to prevent a new plutocracy from which even democracy might not be able to save us. Welcome to The News Agents.

3:39The News Agents. Gabriel, thanks so much for coming in. Thanks for having me. I just wanted to ask before we started, how does it feel to have a tax named after you? Yeah, well, it was not a childhood dream, but I think... Actually, if it were. one advantage of this is that it forces everybody to understand that it's a new proposal it's not about recreating the wealth taxes of the past which have existed in many European countries and which didn't work very well that's some of the story that I explained in the book that we need to do a better job at taxing the ultra-wealthy and so that's one thing But the negative aspect, and I didn't seek this, you know, it's not my invention, you know, this name.

4:28But the more negative aspect is that, you know, it's a collective research effort. It's a collective project, you know, and so it shouldn't be attached to just one name. What's really important is all the work that has been done by dozens of researchers in many countries over the last few years to establish the facts, to dissipate the opacity that exists today about the taxes that the billionaires pay. And that's the story I tell in the book. Indeed. I think it's worth sort of breaking this down a little bit. First of all, in the genesis of it, which you allude to, which is the research on actually where billionaires' wealth is and then what you propose to do about it, i.e.

5:08the tax, the eponymous tax, the Zuckman tax. So in the sense of where, in terms of where this comes from, I mean, it seems to me a good place to start is what you say in your book, which is if all of France's billionaires were to flee to the Cayman Islands tomorrow, the loss of tax revenue to the country would be insignificant, around 0.003%. And that is the same throughout Europe and indeed globally. The super rich have not yet entered the realm of national solidarity. So tell us about how you came to that calculation. So what we did, so part of the starting point is that there's no official public statistics.

5:47about the wealth of billionaires, their income, or the taxes that they pay. And so what we did over the last few years is to partner with tax administrations in different countries to dissipate this opacity and to link businesses to their owners and to compute the true income of the super rich and the total amount of tax that they paid directly, personally, and indirectly through the businesses that they own. And what we realized, and we have studies now for about 10 countries, is that everywhere the income tax, the personal income tax, which in principle is supposed to be the pillar of tax progressivity, of tax justice.

6:27It's supposed to be the way that we make the rich pay their fair share. The income tax vanishes for the extremely wealthy. And that's because… They don't pay income tax. They don't pay income tax. Almost no income tax. Very little. And that's because of several problems. But the most important one is the systematic use of personal holding companies. It's a not very well-known form of tax avoidance, but it's widespread. In fact, even systematic among the very rich. Just explain what they do. And so the way it works is that, you know, for the very rich, for the billionaires, most of their income, almost all of their income is the profits of the businesses that they own.

7:18Most of their wealth, almost all of their wealth corresponds to shares in companies. And so what they do is that they put their wealth they put those shares into holding companies which are a bit like shell corporations. They don't have any substance so it's all paper games But once you've put your wealth in a holding company, it's going to be the holding company that's going to earn income. It's going to earn dividends. And that's going to be tax-free, you know, because the dividends are earned on paper, not by a person, an individual. They are not subject to the individual income tax. And at the holding level, there's also no or very little tax that's collected.

8:06And so that's how you can earn billions in income free from income taxation. And more broadly, the problem is that when you're extremely wealthy, it's very easy to structure your wealth. It could be through holding companies, but sometimes it can involve trusts or other arrangements. So as to ensure that your wealth is not going to generate any significant amount of taxable income. Let me give perhaps just one illustration, which is quite striking. So a few years ago, you had revelations by the U.S. media, ProPublica, on the taxes paid by U.S. billionaires. And you saw people like Jeff Bezos or Elon Musk reporting very little income, paying very little income tax.

8:55In one year, Jeff Bezos says, oh, look, I'm so poor that I'm going to claim family benefits. And he receives a child tax credit. He receives a check from the IRS and pays no income tax. Bezos did. Bezos, one of the wealthiest person in the world. And don't get me wrong, there's nothing illegal in that. No, it's not fraud. It's not tax evasion. It's the way the system works. If you find ways to reduce your taxable income to zero, you're not going to pay income tax and you're going to be viewed as poor by the tax system. The richest man in the world probably at that time, Jeff Bezos was basically declaring no income, getting taxed nothing on his income, and technically qualified for various related benefits because his income was so low.

9:41Exactly. And so how did he do it? As CEO of Amazon, he didn't pay himself a wage. As the controlling shareholder of Amazon, he instructed the company not to pay out dividends. And he didn't sell shares, and so he didn't realize any capital gains. And so his taxable income was indeed very low, even though his true economic income, which is his share of Amazon's profit, is really high. Amazon makes billions in profits today. And his wealth, of course, is extremely high. He's one of the wealthiest person in the world. So where was he putting his income? So the income just remains in the company. It's saved.

10:24In the short company? No, no. In his case, there's not even a holding company involved. Everything remained in Amazon, saved, reinvested, contributing to the appreciation of the share price of Amazon. But it's just an illustration of how, if you're extremely wealthy, you can find ways to not have to report any significant amount of taxable income. And one of the points you make in your book, which I think is a well-made one and is often missed, is that the political discourse, particularly in Britain, I suspect the same in France and elsewhere, is often a little cruder, which is perhaps the left would say, oh, the rich don't pay their taxes.

11:07Whereas in actual fact, as you show, actually, most of the rich in terms of the top income, I'll say, do pay a high level of tax. They pay a lot of tax, much as the rest of the income distribution do. What we're talking about here or what you're talking about here is not, say, the top 10 % or necessarily even the top 1%. We're talking about the top 0.01%. Yeah, many zeros. Yes, absolutely. And this is not to say that, you know, we can fix all the problems of the world just with taxing billionaires. But two things. One is that there is an anomaly in our tax systems. The anomaly is not that the upper middle class or relatively well-paid professionals don't pay taxes.

11:56They do pay taxes. The anomaly is that the super rich think people who have more than 100 million pounds in wealth, they pay very little. They live outside of society, in a kind of parallel society, free of tax. And for a long time, you could kind of ignore the problem. Many people suspected that this was true, but they said, well, there are so few in number, those super rich, that it doesn't really matter from a government revenue perspective. It doesn't matter for our budgets. Well, I was going to ask you, how many people are we talking about? But we're talking about a few people, and I'm going to give you the numbers.

12:36But the point is that their wealth has exploded. and so now it's really significant even if you don't care about inequality if you you know if you even if you care only about the budget uh the issue of how much tax those super rich pay or don't pay is really important so in the uk you have perhaps around 1000 households who have more 100 million pounds in wealth, that order of magnitude. In 1989, the first year of the Sunday Times magazine Rich List, if you look at the top 200 wealthiest families, which is the top 0.001 % wealthiest families in the UK, their wealth was equivalent to 5 % of the UK's GDP.

13:28Meaning if they If they had spent all of their wealth, they could have bought 5 % of all the goods and services produced in the UK that year. Now, if you take that same group of the population, the 200 wealthiest families in the UK, each of them has more than 700 million pounds in wealth. Today, collectively, they own the equivalent of 25 % of GDP. One quarter of the entire economy. spent all their wealth, they could buy a quarter of everything that's produced in a given year in the UK. It's astounding, isn't it? You know, this rise of billionaire wealth has been one of the most striking and I think important evolutions of the world economy of the last decades and with an acceleration since the financial crisis of 2008-2009 and an acceleration of the acceleration over the last couple of years, if you take a global perspective.

14:24Yeah, well, as you point out in your book, and again, I think this is something that is not talked about enough. I mean, two things have added to that, right? One is we see massive programs of quantitative easing, money printing effectively for central banks around the world after 2008. That inflates asset prices. These people get even richer. And as you say, the tax problem makes the problem worse because while the rest of us are paying large amounts of taxes or large proportion of our taxes in the income, these people are not paying much or if anything in terms of taxation on their income so that allows them to accumulate more wealth and more wealth and more wealth and it's a self-perpetual or self-perpetuating problem yes well put and indeed this is the deep anomaly in our tax systems today which is that we have an income tax but the income tax uh is uh for most of the population is on all of their income, like you and I, we earn a wage, we have to pay income tax.

15:22And then with whatever remains after we've consumed, we can save and we can add to our wealth. But for the super rich, the income tax does not work like that. They don't have an income tax. They have just a consumption tax. So the very rich, they earn income, they consume a tiny fraction of it and they're going to pay taxes on that. But most of the rest, they're going to save it and they can save it tax free. And so because their income can almost entirely be saved tax-free, mechanically their wealth is growing much faster than the wealth of everybody else. The wealth of billionaires has been growing 10 % per year on average over the last decades, as opposed to 4 % for the average person.

16:08And so why is that a problem? So fundamentally, it's a problem because extreme wealth is always an extreme power. it's always the power to influence markets by buying competitors for instance is the power to influence the prevailing ideology by buying media companies newspapers tv channels radio stations is the power to influence policy making to buy elections and so on and so there's always a fundamental tension in democratic societies between extreme wealth on the one hand and the very possibility of a well-functioning democracy on the other hand. And, you know, look, everybody since Aristotle, everybody who has written about democracy has highlighted this tension.

17:02We forgot Thought a little bit about it after World War II, when extreme wealth was at a historically low level. Had not completely disappeared, but it was low. And then there's been this explosion over the last decades, with again an acceleration in recent years. And now this fundamental tension is making a comeback. and is, you know, going to be, in my view, the defining problem, the defining question of the 21st century. Meaning this battle between oligarchic forces on the one hand and democratic forces on the other hand. Well, it feels a lot more, doesn't it, like the world of, say, the 1890s or the 1910s sort of gilded age rather than the post-war years, as you've alluded to, where, as you say, is a result of the Second World War in these massive welfare states which come along and redistributive states.

17:58You know, you have extreme wealth which is, you know, relatively curtailed. But the early, late 19th, 30th, 20th century world is more similar to the world we're in now. Yes, except that in some sense, especially if you look at a country like the US, today's situation is already far worse than during the Gilded Age. Really? So let's look at the US. So you can do one very simple computation which is look at really the super top, The oligarchs, you know, the top 20 wealthiest people in the US today, so top 0.0001 % of the population. So that would be the four wealthiest households in 1910. And look at how much wealth they owned, that group of the population, at the peak of the Gilded Age, like right before World War I.

18:45They owned in wealth the equivalent of 4 % of US GDP. today they own the equivalent of 12 % of US GDP with like the curve is vertical over the last few years. Like, you know, their wealth is literally skyrocketing. And everybody has seen the very concrete consequences that this has when Elon Musk got a cabinet position at the beginning of the second Trump administration. and, you know, with total power to slash government funding that he didn't like, you know, how extreme wealth very quickly can transform and become an extreme political power. Well, I mean, you say in the book something quote that really struck me on this theme, which said, nobody knows the exact concentration of wealth at which the kind of plutocratic collapse we have seen in history becomes inevitable.

19:43The point of no return is anyone's guess. What do you mean by that, the point of no return? Well, the point past which the concentration of wealth becomes such that, you know, our democratic institutions collapse. And they're unable to reverse it. And it becomes very, very hard to reverse it. And look, I am a big believer in the power of democratic forces. So I do think that, you know, sometimes you look at the current situation and you think it's hopeless. The billionaires have so much power that we cannot change anything and it's already over. And I absolutely don't view things like that. But what I want to emphasize is just, you know, the danger of allowing such an extreme concentration of wealth.

20:32Just a couple of days ago in the U.S., again, there was something really crazy. President Trump had sued the IRS, the tax administration, because his tax return had leaked a few years ago. And so he was asking$10 billion from the IRS, the president that controls the IRS. And so they settled on a deal where he's not getting$10 billion, but there is a commitment by the IRS to never audit Trump's tax return and to never audit the tax returns of the Trump family. You know, you see, it's past corruption. It's total, you know, plutocratic capture of the most essential institutions of the country. Well, let me put two counter arguments to you that I know you're familiar with.

21:21One is, and you've already alluded to it, we are talking by your own admission of a very small, very small number of people. Yes, they have a great deal of concentrated wealth, but they are a small number of people. We're going to get on to the details of what you're proposing to do about it, so I don't want to go that far ahead. But just on the principle of it, even if you were to tax them at the sort of levels that we're talking about, would it make that much difference? Might it make that much difference to states' fiscal situation, UK's fiscal situation, France's fiscal situation? Yes, well, yes.

21:50First of all, it depends on the rate, of course, at which you tax them. But even if you tax them now at a relatively modest tax rate, so let's say 2 % tax on their wealth, the arithmetic is very simple. Let's get back to the UK. When the top 200 families own the equivalent of 5 % of GDP in wealth, if you tax that wealth at 2%, you get 0.1 % of GDP in additional tax revenue. So that was in the 1990s. You could say, well, that's not much. Why bother? Now, when they own 25 % of GDP, you tax that at 2%, you get 0.5 % of GDP. 0.5 % of GDP, that's 15 billion pounds per year in additional tax revenue from just 200 families.

22:32I don't think you can neglect that. Perhaps just to give one example. Well, the government deficit is around 70 billion a year, so 15 billion, it's not nothing as part of that. I agree it's really not enough to fix the public finance problem. of the UK. And it's not enough for all the investments that we need to make in education, in healthcare, and so on. But it also is a serious amount of money. Like, you know, Keir Starmer famously wanted to get rid of winter fuel allowances for retirees. And he was hoping to get 1.5 billion pounds from that. And you can get 10 times more by just asking billionaires whose wealth is growing 10 % per year to just pay 2%.

23:13So now, even if you don't care about inequality, Even if you take a pure public finance perspective on these issues, you have to care about billionaire taxation. And what about the idea, which again is put forward, that it is, in fact, I mean, you've identified it with Bezos, which is that, well, if these people aren't getting income, if their wealth is sitting in these companies, which is going to productive purposes, which is going on a new cap of purchase for new capital and employing people and so on, well, then why should they be taxed? then they should simply be taxed in the way that would be normal.

23:44If they're not deriving income from it in the traditional sense, then why and how should they be taxed? Except that middle class people, they save money and their saving is also going to fund investments, but they have to pay taxes before they can save. So why should the saving of the middle class be taxed and the saving of billionaires be untaxed? No, that's not consistent. So there are two consistent ways to do things. either you say, well, we have an income tax for everybody, including the billionaires, and that's not the case today, and so we need to fix the system, or we just have a consumption tax.

24:24Today, the billionaires just have a consumption tax, but in that case, everybody should just have a consumption tax, and so you should abolish the income tax and just have a big VAT, and that's the standard conservative view, and that's consistent. But it's the current situation, which is, you know, for the super rich, you just tax consumption, which is a tiny fraction of their income. And for the rest of the population, you tax all of their income. It's this situation, which is just not acceptable, not logical. I was also very struck by your argument, which I think is a compelling one, which is to, of course, look at income tax in a historical perspective, because we think of income tax as being just such a staple of life.

24:59But, of course, it's quite a modern innovation. You know, most states, late 1930, 20th century, it becomes permanent. your view is that in effect that revolution in how states fund themselves has been or is incomplete because it has not extended to the super rich so first of all it's important to realise how the invention of progressive income taxation was an important revolution at the beginning of the 20th century in many countries so for centuries countries had been taxing essentially consumption so very unfair a higher burden for the poor than for the rich then at some point in the 19th century they introduced some low, flat income tax rates, like in the UK in 1843, 2 % tax for everybody, no matter whether you're very rich or poor.

25:46And then it's this revolution where we are saying collectively, okay, now the tax rate should be higher for higher income earners. In 1909, it's the famous People's Budget of Lloyd George in 1909 that introduces a super tax of 2.5 % for the 10 ,000 wealthiest people in the UK. The House of Lords famously didn't like that very much. Exactly, exactly. The House of Lords vetoed it and it was a big constitutional crisis and then you had Parliament Act in 1911 removing the veto power of the House of Lords. But it was a major revolution because then, okay, initially the progressive income tax, 4.5 % for the very rich, 2 % for the rest of the population, not very ambitious.

26:36But then the income tax became really very progressive with rates of nearly 100 % marginal tax rates for the super rich after World War II. The Beatles famously wrote about it in one of their songs. Yes. And what's important is that the progressive income tax was really what allowed the UK and other countries to build their modern tax system. and with the modern tax system what it enabled is the the development of the social state the welfare state education for all health care public infrastructure which has been the key engine of economic growth during the 20th century it's been the main reason why we are 10 times more productive today than a century ago so you know a big revolution but this revolution remains incomplete in the sense that the ultra-wealthy are still not yet into the system.

27:28So that's the problem. When we come back, we'll be talking to Gabriel about what he'd like to see us do about it.

27:41From a range of trusted voices and award-winning journalists. Good morning, I'm Nick Ferrari. It's time to get to your calls. Find out the latest news and hear every side of the story. So just as I take responsibility for the results, I also take responsibility for delivering the change that we promised for a stronger and fairer Britain that we must build. Now he's still toast. He's just wasting our time now. The words of two in a growing list of Labour MPs whose patience with the Prime Minister has run dry. Is there anything he said or can say to make you want him to stay? Listen on our free Global Player app or the LBC app.

28:16LBC. Leading Britain's conversation. Less support through telehealth, but it feels overwhelming and rushed. Check out orderlymeds.com now. Orderlymeds.com was built to be different. Here, you connect with real doctors who take the time to understand your goals, review your eligibility, and guide you through a plan that's right for you. Orderlymeds provides access to proven GLP-1 medications like semaglutide and terzepatide, including both name brand options and personalized compound versions when appropriate. So you have choices backed by clinical oversight, not guesswork. It's a simpler, more supportive telehealth experience designed around people who want clarity, care, and confidence in their weight loss journey.