New Delhi: Two months after publishing a groundbreaking report on income and wealth inequality in India, the Paris-based World Inequality Lab has released a follow-up note advocating for a “comprehensive wealth tax package on the ultra-rich.” The March report had stated that “the ‘billionaire raj’ (a term used to define the post-2010s rapid rise of billionaires in the country, at odds with lives of millions) is now more unequal than the British colonial raj”.

Highlighting the extent of income inequality, the new report states:

“According to our latest estimates, it takes just 2.9 lakhs per year to make it to the top 10% of income earners and 20.7 lakhs to make it to the top 1%. By contrast, the median adult earns only around 1 lakh, while the poorest of the poor have virtually no incomes. The bottom half of the distribution (50% of the population) earns only 15% of the total national income (see Table 1). To get a sense of just how skewed the income distribution is, one would have to be very close to the 90th percentile to earn the average income.

“Looking at wealth, we find that an adult needs to own 21 lakhs to belong to the wealthiest 10% and 82 lakhs to break into the top 1%. The median adult holds about 4.3 lakh worth of wealth. A significant share of adults own close to no wealth at all. The bottom 50% of the population holds only 6.4% of the total wealth (see Table 2). On the other hand, we observe extreme concentration at the very top with shockingly high top shares. The top 1% owns 40.1% of the total wealth, the top 0.1% hold 30%, the top 0.01% own 22%, and finally, a whopping 17% is controlled by the top 0.001% alone. In other words, the total wealth of the top 0.001% (fewer than 10,000 persons) is nearly 3 times the total wealth held by the entire bottom 50% (46 crore individuals).”

In this circumstance of extreme inequality, authors of the note – economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi – argue that a progressive wealth tax and an inheritance tax “would be an important step towards a more equitable growth path for India”.

The note outlines a detailed plan for implementing an annual wealth and inheritance tax that would “involve taxing only the very wealthy”.

“We recommend that these taxes kick-in only for those with net wealth exceeding INR 10 crores in 2022-23 – roughly EUR 3.4 million at purchasing power parity (PPP) or EUR 1.2 million at market exchange rates (MER). Based on our latest estimates, only the top 0.04% of adults would fall above this threshold,” the note said.

For the remaining 99.96% of the population, there would be no change, except for increased government revenue to fund welfare and other initiatives aimed at improving lives and reducing inequalities.

According to the authors, such a package would:

  1. Include Annual Wealth and Inheritance Taxes: These taxes would apply to those with net wealth exceeding INR 10 crores, equivalent to the top 0.04% of the adult population (370,000 adults) who currently hold over a quarter of the nation’s total wealth.
  2. Generate Significant Revenue: Raising large tax revenues while leaving 99.96% of the adults unaffected. A 2% annual tax on net wealth above 10 crores and a 33% inheritance tax on estates exceeding 10 crores could generate revenues equivalent to 2.73% of Gross Domestic Product (GDP).
  3. Support Redistributive Policies: Needs to be accompanied by explicit redistributive policies to support the poor, lower castes, and middle classes. For example, it could nearly double current public spending on education, which has stagnated at 2.9% of GDP over the past 15 years, far below the 6% target set by the National Education Policy 2020 (NEP 2020).
  4. Facilitate Democratic Debate: The implementation of such taxes would need to be extensively debated, with a consensus on specific design details emerging from a broader democratic discussion on tax justice and wealth redistribution in India.