Hello and welcome to this bonus episode of the Prospect Podcast. My name is Benjamin Clark and I'm joined today by Gabriel Zucman. Gabriel is an economist. He's worked with various politicians including Elizabeth Warren and Bernie Sanders and he is known particularly for his work on inequality, on wealth taxes. And so we're going to be talking to him about taxation today. But to start off with, Gabriel, I wanted to talk to you about a recent news headline that pricked my interest. The richest man in France, Bernard Arnault, who owns brands including Louis Vuitton and Dior, he recently laid into you in the press, calling you, quote, a pseudo-academic, a far-left activist who wanted to destroy the French economy. Now I imagine being publicly lambasted by the richest person in your country is quite shocking. I certainly would feel quite taken aback by it. How did you feel when you read those remarks and how did you respond to Arnault's comments?
Yeah, thanks for having me, Ben. And I think, look, it's a bit shocking to be honest, this type of reaction. It was in response to a proposal that's been discussed a lot in France over the last few weeks for a minimum tax of 2% on wealth for the super rich like Arnault. And you know, their wealth has increased 10% a year on average over the last three decades. And so the notion that somehow, you know, a small tax of 2% would destroy the French economy, of course, doesn't make any sense. And this type of rhetoric just, you know, reflects two things. One is the lack of substantive arguments from people who oppose these taxes, and the other is a kind of broader trend of anti-knowledge and science and intellectuals. You know, the type of stuff you see in the US. It's something that Trump could say, you know, if you disagree with him, then you're some kind of far-left communist. And so it's just, you know, a reflection of the very sad kind of drift of some of the political right and the associated business elites in the US and globally these days.
Yeah, interesting. So, let's talk about the proposal that he was criticizing specifically. It's become known now as the Zucman tax, sort of named after yourself. Can you give us a brief explanation of both what it is, but also how you came up with it, why you came up with it, what sort of problems were you grappling with and trying to solve with this particular proposal?
It's actually a very modest proposal in the sense that the idea is just to create a minimum tax, a floor to taxation, personal taxes for the super rich. And so it's just to say, okay, there has to be, if you have more, and we can debate what it means to be extremely wealthy, in the proposal that I defended, it's owning more than 100 million euros in wealth, total assets, net of your debt, above 100 million. And so the idea is that if you're rich like that, it's about 1,800 households in France, you should pay a minimum amount of personal tax each and every year. If you already pay the equivalent of 2% or more of your wealth in income tax and equivalent, you know, levies like property taxes, then you wouldn't have anything extra to pay. But if you pay less than 2%, then you would have to pay the difference to reach this minimum of 2% of wealth. And so by definition it's targeting super rich people, but also those among the super rich who pay very little today. And one source of inspiration for this proposal has been the minimum tax on multinational companies. In 2021, more than 130 countries agreed on a 15% minimum tax for big multinational firms. It's a very limited tax in many ways. But one advantage is that the notion of a minimum tax is powerful because it tackles, it addresses all possible forms of tax avoidance. You don't have to specify that you're going to go after, like, trusts or things, you know, this or that. It's just saying, okay, you know, if you're a big multinational or a super rich person, no matter what tax avoidance mechanisms you might use, you have to pay a minimum. So it's the most efficient, it's the most effective way to fight tax avoidance.
Yeah, interesting. And so it sort of reminded me of the idea of a Buffett tax, which, you know, was discussed around about 10 years ago, was quite in vogue. This idea that Warren Buffett had spoken to his secretary and worked out that she was paying a higher percentage of tax on her overall income than he was, and that was shocking, and he suggested that there should be this sort of minimum floor, right? But I guess the difference with yours is that you're looking at wealth as opposed to income. So it's a big, big difference with the Buffett rule, having a minimum tax based on wealth as opposed to income.
Why? Because for the super rich, the key reason why they pay so little tax today is that they find ways to report very little income. So, for instance, a few years ago, you had revelations by the US media, ProPublica, on the taxes paid by the super rich in the US. And in a number of years, you saw people like Jeff Bezos or Elon Musk paying very little in income tax because they reported so little taxable income. So, for instance, in one year, Jeff Bezos says, look, I'm so poor that I'm going to claim family benefits, and he receives, you know, family benefits, and there's nothing illegal in there. But what it illustrates is that when you're super rich, it's very easy to structure your wealth such that this wealth will generate very little taxable income. So for Bezos, for instance, his taxable income was really quite low. But of course, his true economic income, his share of Amazon profits, is quite high. His, more broadly, his ability to pay taxes is, of course, extremely high. And so that's why if you want a minimum tax on the rich, you need the minimum to be expressed not as a fraction of income. It doesn't work. It's useless. But as a fraction of wealth. What recent research has shown over the last three, four years is that Bezos, Musk, and so on are not just isolated cases, but they reflect a broader phenomenon that the super rich globally pay very little in individual income tax. The progressive individual income tax is a big creation, you know, a major transformation that happened in the late 19th century, early 20th century in many countries. But what we've discovered very recently is that billionaires, in a sense, have not yet entered the realm of income taxation. You know, they are still outside of the progressive individual income tax. And that's this specific issue that the minimum tax based on wealth would address. It would force them to enter the realm of national solidarity.
You're joining us from France today. You're a French economist. And there's been a lot going on in French politics at the moment. Some of us from overseas have been sort of struggling to keep up with the number of prime ministers that you've had in the last not too long.
Your tax proposal has now become a kind of live part of the political machinations that are happening in France at the moment. So could you give us a bit of a recap on, like, what is going on at the moment with France economically and how that's working into the nation's kind of fractured politics and how might your proposal sort of fit into that equation or potentially change things going forward?
