No complaint’, Adam Smith said, ‘is more common than that of scarcity of money’. The observation made over 240 years back acquires profound prescience given the context of slowdown in India. It can be safely said that the lament is common across India — from ordinary folks, from businessmen and of course from the government.
As India heads for the annual hope parade, the unveiling of the Union Budget, the big question confronting every solution for every problem is, ‘where is the money?’ The answer, Bob Dylan would have said, is blowing in the wind as a ten-letter word. Intriguingly, like migratory birds, every winter the issue of inequality returns to resonate on reflective minds across the world.
Earlier this week at Davos, the jamboree of jetsetters, engaged in perfunctory petting of coiffured consciences, were informed by Oxfam International that the richest 1 per cent in the world have more than double the wealth of 6.9 billion people, suggested taxing an extra 0.5 per cent of the wealth of the richest 1 per cent could create over 117 million jobs and that the wealth of India’s billionaires was more than the 2018 Budget of India.
Normally, inequality would have got its annual Warhol moment and receded from headlines. This year, the issue is alive and around, thanks to the elections in the US. Elizabeth Warren, a candidate at the US Presidential Polls is campaigning for a tax of 2 per cent on those with over $ 50 million and 3 per cent on those with over $ 100 million. On Friday, Bill Gates, billionaire philanthropist worth $ 106 billion, which would be roughly Rs 7 lakh crore, while agreeing to pay more, even double what he has paid, worried that it shouldn’t go too far.
There is no denying that the top tech giants, aka FAANG — Facebook, Amazon, Apple, Netflix and Alphabet, have benefited from government investment in technology. The combined market cap of FAANG is over $4 trillion and the net worth of its promoters is over $360 billion dollars. The Warren way would to enable raising $ 2.7 trillion in ten years.
While the math and the methodology mooted by politicians may be up for dispute, the case of obligation is not. In his seminal tome, The Wealth of Nations, Smith postulates, “man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only” and states explicitly, “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities.”
Murmurs of the thesis have been heard in government for two years now. Indian billionaires too have racked up wealth leveraging the India Story. The floor for the Warren wealth tax in the US is $50 million, roughly around Rs 350 crore. The Forbes billionaires’ list hosts over 110 Indian dollar billionaires, who are cumulatively worth over $400 billion, that is Rs 28.40 lakh crore, give or take a few millions or crores.
A three per cent tax would net around Rs 85,000 crore – wealth may not be liquid so shares could be accepted, to be listed as Bharat Billionaires ETF. The kitty could be bigger as Indian billionaires add to their wealth and as more join their ranks. Also, the list is scarcely exhaustive, there are many who do not run listed entities, many are known unknowns.
There could be other formulas, other resources to tap into but there is no denying the need to raise resources to level social and economic asymmetries. It is unconscionable that 100 children die an hour, eight of ten persons do not have piped water, the education system is broken down, lakhs die due to pollution and millions await skilling and jobs.
Lack of resources is an issue but not the issue. It is not that the government has not spent monies. In the past decade, the expenditure of governments in India —centre and states—has shot up from Rs 18.52 lakh crore, average of Rs 211 crore per hour to Rs 53.61 lakh crore, an average of Rs 612 crore per hour or Rs 10 crore every minute of the day. Gross borrowings of centre and states doubled from Rs 6.23 lakh crore to Rs 12.58 lakh crore and tax incidence has gone up from Rs 8,200 per person for 119 crore persons to over Rs 25,800 per person across a population of 135 crore people.
The crux of credibility is located in the legitimacy of the state to tax. It is true that the contours of the state as we know have evolved from Thomas Hobbes to Beatrice Webb and the government obliged to do more. Equally, the Indian state has failed to demonstrate its willingness to reform, to perform and deploy resources efficiently.
After all, as Smith said, the contribution should be “in proportion to the revenue which they respectively enjoy under the protection of the state” and not “render them incapable of supporting the state”. Governance cannot be just about outlaid but must guarantee outcomes to enable growth. Translated, taxation cannot be justified by electorally profitable helicopter economics.