How to pay for the pandemic

Covid-19 has proved extremely expensive. It’s time to consider fresh sources of government revenue, says Edward Chancellor

Joe Biden
US president Joe Biden is merely tinkering with the tax system
(Image credit: © BRENDAN SMIALOWSKI/AFP via Getty Images)

The war on Covid-19 has proved remarkably expensive. The US federal deficit last year ran to $3.4trn. That’s nearly 95% of Washington’s total tax take. How to foot the bill? So far, President Joe Biden’s administration has only proposed tinkering with the current tax system. The White House has called for the maximum tax rates on income, corporate and capital gains to rise (capital gains tax might also become payable on estates). UK prime minister Boris Johnson is considering a reduction in the tax benefits enjoyed by pensions. Given Britain’s poor savings record, a raid on retirement plans appears ill-advised.

Rich Americans are expert at avoiding income taxes. Investigative journalists at ProPublica have revealed that several of America’s richest citizens – including Jeff Bezos, Elon Musk, George Soros and Carl Icahn – didn’t pay federal income tax in some years. In 2015, some 14,000 US taxpayers paid more income tax than Berkshire Hathaway’s boss Warren Buffett. The Sage of Omaha enjoys a relatively low income-tax bill because he seldom realises capital gains and Berkshire doesn’t pay a dividend. Corporate America is equally adept at minimising its tax liabilities. The five most valuable US companies – Microsoft, Apple, Facebook, Alphabet and Amazon – pay 15% of their profit in taxes, nearly a third less than last year’s statutory US corporate tax rate of 21%. It’s time to consider fresh sources of government revenue. Here are some possible new taxes to do the trick:

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Edward Chancellor

Edward specialises in business and finance and he regularly contributes to the MoneyWeek regarding the global economy during the pre, during and post-pandemic, plus he reports on the global stock market on occasion. 

Edward has written for many reputable publications such as The New York Times, Financial Times, The Wall Street Journal, Yahoo, The Spectator and he is currently a columnist for Reuters Breakingviews. He is also a financial historian and investment strategist with a first-class honours degree from Trinity College, Cambridge. 

Edward received a George Polk Award in 2008 for financial reporting for his article “Ponzi Nation” in Institutional Investor magazine. He is also a book writer, his latest book being The Price of Time, which was longlisted for the FT 2022 Business Book of the Year.