UN calls for 'billionaires tax' to help world's poor

By Tim Witcher | AFP

The United Nations on Thursday called for a tax on billionaires to help raise more than $400 billion a year for poor countries.

An annual lump sum payment by the super-rich is one of a host of measures including a tax on carbon dioxide emissions, currency exchanges or financial transactions proposed in a UN report that accuses wealthy nations of breaking promises to step up aid for the less fortunate.

The annual World Economic and Social Survey says it is critical to find new ways to help the world's poor as pledged cash fails to flow.

The report estimates that the number of people around the globe worth at least $1 billion rose to 1,226 in 2012.

There are an estimated 425 billionaires in the United States, 315 in the Asia-Pacific region, 310 in Europe, 90 in other North and South American countries and 86 in Africa and the Middle East.

Together they own an estimated $4.6 trillion so a one percent tax on their wealth would raise more than $46 billion, according to the report.

"Would this hurt them?" it questioned.

"The 'average' billionaire would own $3.7 billion after paying the tax. If that billionaire spent $1,000 per day, it would take him or her over 10,000 years to spend all his or her wealth," the report says.

It says that the wealth of billionaires grew at an average rate of four percent a year in the two decades before the 2008-2009 financial crisis.

"If that rate of growth returned with no wealth tax, the average billionaire's wealth would double in less than 18 years."

The idea could appeal to the likes of Warren Buffett, the US tycoon who has complained that he pays a lower tax rate than his secretary. France's new Socialist government has caused consternation by vowing a 75 percent tax on salaries above one million euros ($1.24 million).

But the UN acknowledged that the idea is unlikely to get widespread support from the target group, saying that for now its tax on the unimaginably wealthy remains "an intriguing possibility."

"It has not been regarded as a means of raising revenues for international cooperation," the report says.

The document gives other ideas for international taxes, including:

-- a tax of $25 per tonne on carbon dioxide emissions would raise about $250 billion. It could be collected by national governments, but allocated to international cooperation.

-- a tax of 0.005 percent on all currency transactions in the dollar, yen, euro and pound sterling could raise $40 billion a year.

-- taking a portion of a proposed European Union tax on financial transactions for international cooperation. The tax is expected to raise more than $70 billion a year.

It also suggests expanding a levy on air tickets that a number of nations already impose to raise money for drugs for poor states through UNITAID, a UN initiative.

The report says more than $1 billion has been handed over to UNITAID since the levy started in 2006.

France has a one euro tax for a domestic flight in economy and six euros for international flights -- with 10 euros for business class on domestic flights and 40 euros on international tickets. The air industry fiercely opposes any extension of the tax, arguing that it already pays heavily in taxes and levies.

However, because of budget cuts, aid and development assistance to poor countries fell $167 billion short of promised levels in 2011, according to Rob Vos, the report's lead author.

The UN expert said the taxes make "economic sense" as they stimulate the green economy and "mitigate financial market instability."

"In short, such new financing mechanisms will help donor countries overcome their record of broken promises," he added.

Without commenting on any of the individual taxes proposed, UN Secretary General Ban Ki-moon said that if the new "innovative financing" is to become viable, "strong international agreement is needed."

Americans’ wealth plummeted 40 percent from 2007 to 2010, Federal Reserve says

By Ylan Q. Mui

The recent recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And so far, the country has only seen a halting recovery.

“It’s hard to overstate how serious the collapse in the economy was,” said Mark Zandi, chief economist for Moody’s Analytics. “We were in free fall.”

The recession caused the greatest upheaval among the middle class. Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth — the value of assets such as homes, automobiles and stocks minus any debt — suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.
The survey showed that fewer families are carrying credit card balances, and those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who have no debt rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, but they were making less money. Median income fell nearly 8 percent to $45,800 in 2010. The median value of stock-market-based retirement accounts declined 7 percent to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans’ stake in their homes fell by 42 percent between 2007 and 2010 to $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just more than half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, associate director of research at the Pew Hispanic Center, calls this phenomenon the “reverse wealth effect.” As consumers watched the value of their homes rise during the boom, they felt more confident spending money, even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth — or what is officially called unrealized capital gains — shrunk 11 percentage points to about a quarter of American’s assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record-high disparities between whites’ wealth and that of blacks and Hispanics.

“It was turning the clock back quite a bit,” Kochhar said.

The Fed’s survey is conducted every three years. Although there have been some signs that the recovery has picked up — housing prices have begun to stabilize and unemployment has fallen — Fed economists said those improvements largely do not change the survey results.

“Recovery from the so-called Great Recession has also been particularly slow,” the report said.