May 24th 2024.
A new research paper, co-authored by renowned economist Thomas Piketty, has put forth some interesting proposals for tackling the issue of rising inequality in India. The paper, titled 'Proposals For a Wealth Tax Package to Tackle Extreme Inequalities in India', suggests implementing a 2% tax on net wealth exceeding Rs 10 crore and a 33% inheritance tax. These measures, according to the paper, would not only address the problem of extreme wealth concentration at the top but also create space for important investments in the social sector.
The paper highlights the potential of this tax package to generate significant revenue, with minimal impact on the vast majority of the population. In fact, the proposed taxes would only affect 0.04% of the adult population, leaving the remaining 99.96% unaffected. In terms of revenue, the paper estimates that these taxes could generate a substantial 2.73% of the Gross Domestic Product (GDP).
However, the authors also stress the need for complementary policies to support the marginalized and middle classes. They suggest using the revenue generated from the proposed taxes to increase public spending on education, which has been disproportionately low at 2.9% of the GDP in the past 15 years. This falls well below the government's target of 6% set in the National Education Policy 2020.
The paper acknowledges the need for extensive debate and consensus-building on the design and implementation of these taxes. It emphasizes the importance of a democratic and inclusive discussion on issues of tax justice and wealth redistribution in India.
The authors, Thomas Piketty, Lucas Chancel, and Nitin Kumar Bharti, note that discussions on income and wealth inequality in India have gained momentum in recent weeks. This is partly due to the release of their previous study, 'Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj', which revealed alarming levels of economic disparities in the country.
The paper argues that such extreme levels of inequality cannot be ignored, especially considering its close link to social injustice. It stresses the urgent need to address these issues through effective policies and taxation measures.
The working paper, released on March 20th, also highlights the rapid increase in inequality since the early 2000s. It states that the income and wealth share of the top 1% of the population has risen to 22.6% and 40.1%, respectively, in 2022-23. The authors note that this rise has been particularly pronounced in terms of wealth concentration, with India's top 1% income share among the highest in the world, even surpassing countries like South Africa, Brazil, and the US.
In conclusion, the paper urges for immediate action and a thorough debate on the proposed tax measures and other policies to address the issue of extreme wealth inequality in India. It calls for a collective effort towards creating a fair and just society for all.
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