Newton Emerson: Tax the millionaire home owners, not the billionaires

There has been credulous coverage of this week’s Oxfam report, Survival of the Richest, published to coincide with the Davos conference of the World Economic Forum in Switzerland.

Oxfam Ireland extracted figures for the Republic showing the wealthiest 1 per cent of the population owns a quarter of all household wealth. The two wealthiest individuals are worth a combined €15 billion, half as much again as the €10 billion owned by the least wealthy half of the population.

These claims were repeated as if they were incontestable, rather than clearly requiring investigation.

Oxfam’s picture of extreme and worsening wealth inequality in Ireland sits oddly with the official figures, easily accessible from the Central Bank and the Central Statistics Office. These show the rich in Ireland are distinguished by their non-property wealth, whose value suffered a record fall last year. Even Oxfam admits the number of billionaires dropped from nine to eight.

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Journalists not suspicious of the numbers might at least recall the work of their peers. Oxfam has been publishing these Davos-timed global inequality reports for years and debunking them has also become an annual tradition

For the vast bulk of the population, wealth mainly reflects the market value of the state’s two million domestic properties. Housing makes up two-thirds and rising of Ireland’s €1 trillion household wealth.

So how plausible does it seem that two individuals own more of it than half the population? How can this be reconciled with the fact that 70 per cent of Irish adults are owner-occupiers?

Wealth distribution may be skewed but the dominance of property as an asset has further distorting effects on the statistics. The average homeowner has wealth of €300,000, the average tenant €5,000. Age strongly correlates to home ownership and the equity built up in homes, making wealth distribution a function of demographics as much as economics. Debt is subtracted from wealth, meaning the 4 per cent of homeowners in negative equity are classed as among the poorest people in society. Borrowing for education or self-employment counts against wealth, not towards it.

These are all valid ways of measuring personal wealth in the tables compiled by Oxfam’s sources, mainly Credit Suisse and Forbes. But they are far too simplistic to portray inequality across a developed country.

Journalists not suspicious of the numbers might at least recall the work of their peers. Oxfam has been publishing these Davos-timed global inequality reports for years and debunking them has also become an annual tradition. Particular fun has been had over American and European young professionals, apparently a large fraction of the very poorest people on earth, due to their student loans.

If all this accountancy makes media eyes glaze over, the politics driving Oxfam is not hard to grasp. It is an organisation in profound difficulty, disbarred from UK government programmes for most of the past five years over safeguarding scandals, riven with whistle-blowing disputes and culturally mortified by the patrician model of western aid. So it is frantically reinventing itself as a lobbyist for wealth redistribution by taxing the super-rich. Yet even this cause is ill-served by its misleading numbers.

No mainstream party in Ireland, or the UK for that matter, is prepared to seriously tax the wealth of the millionaires

Oxfam’s reports make pantomime villains of a handful of billionaires, implying it would be politically painless to fix inequality by taxing them – most would even support it themselves. While the super-rich should undoubtedly pay more tax, meaningful redistribution requires targeting not billionaires but millionaires, who are surprisingly numerous in western countries.

Households worth more than €1 million are the global 1 per cent, holding around half the world’s wealth, yet most do not see themselves as legitimate targets for redistributive taxes and would fight back against them.

This is certainly the case in Ireland. Latest Central Bank figures show 233,000 or 12 per cent of households have a net wealth of €1 million or more. Few would count themselves among the global elite and Oxfam is not helping their perspective. It proposes a 2 to 5 per cent banded wealth tax on the 20,500 Irish individuals worth more than €4.7 million – a conveniently small group. The charity’s prediction this would raise €8.2 billion a year assumes that a tax aimed at permanently redistributing wealth would somehow keep producing the same revenue year after year.

No mainstream party in Ireland, or the UK for that matter, is prepared to seriously tax the wealth of the millionaires. Sinn Féin may be the party most inclined to pretend it only has to tax the billionaires. People Before Profit provided the best demonstration of the politics this pretence supports.

Dún Laoghaire TD Richard Boyd Barrett said: “The Oxfam report shows again if the super-wealthy and big corporations in Ireland were taxed properly there would be more than enough money in this country to solve the housing, cost of living and health crisis.”

Barratt has been objecting to new apartments in Monkstown because they would spoil its “Victorian ambience”.

Until he is willing to tax thousands of his constituents for their Victorian houses, complaints of Dickensian inequality will ring hollow.