In an early glimpse of what wealth redistribution will look among developed nations in coming years, on Wednesday the lower house of Argentina’s Congress approved a bill seeking to raise 300 billion pesos ($3.75 billion) through a tax on the ultra rich to finance programs aimed at helping families hit by the COVID-19 pandemic.
In a vote that passed 133 to 115 with two abstentions, people with more than $2.5 million in net worth – over 10,000 individuals – will make an “Extraordinary Solidarity Payment,” paying a one-off 2% flat tax. The tax would increase progressively as equity increases, under the proposal.
“The level of concentration of wealth, in a few hands, is so strong that this contribution falls on less than 0.02 percent of the population,” said government deputy Fernanda Vallejos during debate. “About half of what is collected will be contributed by only 252 people, those who are at the top of the pyramid.”
Government supporters took to the streets on Tuesday to show their support for the bill, with militant Peronist groups leading caravans of vehicles and marches on foot to Congress.
The so-called “wealth tax” or “millionaire’s tax” bill – which the opposition slammed as “confiscatory” – may face a tougher time in the Senate, which will likely consider it before the end of the month, with the Frente de Todos coalition needing allies to support it.
The one-time (for now) tax will apply to individuals whose declared assets exceed 200 million pesos (US$2.35 million), with a progressive rate of up to 3.5% for assets in Argentina and up to 5.25% on goods outside the country. According to AFP, between 9,000 and 12,000 people fall into that bracket in Argentina, a country with 40.9% of its 44 million inhabitants currently living in poverty. Unemployment stands at just over 10%, with the economy still yet to overcome a recession that began in 2018. Things have only worsened after the coronavirus pandemic, and the IMF estimates GDP will contract by 11% this year.
The bill lays out that the “extraordinary contribution” will be a one-time measure and it indicates where the funds will be sent and what they will be used for.