 Is that time of the year when we start talking about taxes again? Why? Because the budget is coming up and let's admit for you and me the only thing that matters in the budget is income tax. But I'm not going to be talking about income tax. I'm going to be talking about something which has become very controversial in the last few years and that is wealth tax. And economists across the globe except perhaps in India actually have been saying that the super rich need to be taxed a little bit more. Not only on their income but also on their wealth and even institutions like the IMF and the World Bank have said that there should be some sort of a wealth tax on the richest people, on those who own most of the means of production of a nation. Oxfam has come up with a new report which some people have criticized and perhaps rightly criticized some of its conclusions. But its main point remains correct that the top 1% today have a large disproportionate amount of income and wealth. Their estimate is that the top 1% has nearly 40% or more than 40% of the country's wealth. You might not agree with that number, maybe it's 25%, it could even be 50% but the point is it's an obscene amount of wealth in the hands of the top 1% in a country where so many people go to bed hungry every day. Now how can you solve that problem? One way is to impose a wealth tax which would take money away from the super rich more than their income tax would and then distribute it amongst the poor or invest it, put it in government programs which help the poor. There's another logic actually for having a wealth tax and let me explain that, that logic comes deeply from within capitalism itself. And I'm going to take an example. Let's say there is Peter and Paul. Peter and Paul both are in the same industry and they come face to face to sell goods. Now we understand that the person, if Peter has more capital to begin with than Paul, Peter is going to have an advantage. Why? There are various reasons. Peter will be able to invest in new technologies which would be labor saving and that would help him reduce prices and capture the market. He could even because of his deep pockets actually cut prices in the market and say, okay, I'll take a loss and drive Paul out of the business. Finally, Peter with his capital will be able to employ more people, expand faster and therefore meet a growing demand faster than Paul and ultimately be able to take over Paul's company, offer him something that, okay, you're not doing well, you might go bankrupt. Here's some money, take it and get out of the business and therefore Peter becomes the monopoly there. So when you start with more capital, you're always going to have an advantage. So starting with more capital or more wealth creates conditions of inequality even inherently in capitalism. What happens if both of them start with the same capital? Again, this is the problem. Let's say that both of them have the same capital, but one of them for various reasons. Maybe for changes in government policy, maybe because their factory is closer to a river, maybe because they work harder. Maybe they came up with an innovation, whatever happens, they earn a little bit more than the other company. So let's say Peter's company earns a little bit more than Paul's company. In the first year, the gap might be narrow. In the second year, it would increase and that would turn into savings over a period of time in addition to capital. And that capital over 10, 15 years would accumulate and give Peter an advantage. It is the same as starting with extra wealth right at the beginning. So this is the first reason why excessive wealth concentration in the hands of one company leads to them taking over all productive resources. And that causes inequality and that inequality gets reproduced over years and years and comes to a situation where a few people own everything and earn everything. And their earnings turn into savings and their wealth keeps increasing where a majority of people remain poor and their savings keep producing. And their wealth keeps reducing as a proportion of total wealth in the country. Now, there is one more way and these are connected in which a person an entrepreneur might have an advantage right at the beginning and that is just inheriting a business. Imagine that you come up, you want to start a new business and you want to compete with someone who already inherited an existing brand, has a lot of money, has a huge business in place, what are you going to do? Can you really compete? The reality is that unless there are major changes in the economic patterns in society, it is almost impossible for smaller companies to compete against established bigger brands. So if someone is born into capital or inherit capital, again, they have the same advantage as someone who has more wealth or more capital at the beginning of any particular business cycle. So both of these inheritance and concentration of wealth are problems which create inequality even inequality takes place. There are many problems. You might say inequality is bad because everyone should have access to things equal access or equitable, not equal, but within a particular range. Some might say that is just, you know, that is just non economic morality because why should they have someone has better ability, they should have more money. The reality is that what inequality does is that it slows down economies because if there is only one person who has wealth and 100 others who don't, then that one person might be producing things which those 100 can't buy. So then what this one person can do is essentially stop investing. They slow down, they turn their investments into financial assets and they only want to earn from those financial assets without expanding their business anymore, demand in the economy reduces. This is the nature of inequality. This is what inequality does. It slows down growth. It's not only bad morally, ethically or even in terms of saying there's so many people who are poor and they should get access to goods. It's really just bad simply in terms of growth. So what is the solution to that? And that is where I've come back to these two key taxes which I've been spoken about right now. One is wealth tax and the other is inheritance tax. This has come up every time in the last few years. There have been questions that should there be a wealth and inheritance tax and every year it has been postponed and it has not come. The question is whether it will come this year at all. There is a problem with wealth tax which we should acknowledge right now because let's take the wealth of the richest people in India. Gautam Adani, Mukesh Ambani and these richest people, their wealth actually is a valuation of the stocks they hold. Now try to understand this. This is not really wealth that can be converted into liquid assets immediately. So if Gautam Adani's worth let's say $130 billion or something, most of it is because of the stocks he owns in companies or his shares in Gautam Adani owned companies or his family owned companies where he's the majority shareholder and the fact that the valuation of these stocks have gone up. Now there have been arguments that there should be a 5% wealth tax on the richest billionaires. How would they pay this 5% wealth tax? They would have to liquidate those assets which is their wealth. If they went and sold 5% of their stock in the market, they would actually cause a run on their company. Selling of 5% in the open market is not a joke. It changes the value of that company and automatically the riches of that person itself will drop sharply. So it is a difficult process. It is a process in which governments will have to assess what the richest people have. How much of it can be liquidated easily without changing dramatically the valuation of those assets? And what proportion of that can be taken as tax? It's not an easy straightforward thing where you say 5% of your current net worth is going to be taxed. It's not possible to do that that easily. So these are complex questions but that is what governments and finance ministries exist for. That is what tax experts exist for and now collecting information is much, much easier. It is much, much easier to process information using AI, using machine learning. Similarly, inheritance tax. Inheritance tax, if you inherit stocks and shares, can you really pay a tax without liquidating those in the stock market? What about if you inherited a house which cannot be liquidated in the market because the market is not going to buy anything if there's a real estate slump? So again, these are issues which have to be looked at but they're not issues which cannot be assessed at all. They're not things which cannot be calculated. There might be some excesses over a period of time so maybe it is better to start slow till you've come up with a formula which works. That is why bringing wealth and inheritance tax might be difficult but it has to be done because without that two things happen. Inequality continues to increase and get perpetuated and the economy slows down because it affects the aggregate demand in the economy. That's the show today. Keep watching NewsClick. We will be focusing on the budget as we come closer to D-Day. Do like this video, share it as well and tell your friends about it.