The ever-widening chasm between the elite few and the rest of society poses not only a threat to social cohesion but also undermines the very essence of democratic principles. This disparity, exacerbated by globalization and tax policies favoring the wealthy, hampers our ability to address critical issues like climate change.

In Germany, Austria, and Switzerland, progressive tax systems are supposed to meet these challenges. However, in recent decades, globalization processes and a series of reforms have resulted in these systems failing particularly in taxing the highest incomes according to their ability to pay. A new study shows that the actual tax rates of the super-rich are far below the intended maximum tax rates, while the middle class contributes a higher proportion of its income to tax and revenue. This is mainly due to special regulations and tax privileges for high wealth and corporate incomes. These regulations mean that progressive income tax only applies to a small portion of their income, with corporate tax being largely the only tax they contribute. Switzerland stands out as an exception with its wealth tax, which ensures that the super-rich contribute more in line with their ability to pay. This tax, levied on assets, serves as a check on wealth accumulation and discourages extravagant spending on environmentally damaging luxuries like private jets and yachts. Adopting similar measures could yield substantial revenue gains for Germany and Austria, of respectively 73 billion Euros and 5 billion Euros.

In Switzerland, the wealth tax ensures that the super-rich contribute a larger share of taxes, while in Germany, tax reforms over the past three decades have slashed billionaires' tax rates due to global pressures. Similarly, in Austria, corporate tax reductions have favored the super-rich, with rates dropping to 23% as of January 1, 2024. Some individuals are taking matters into their own hands, like Marlene Engelhorn's "Good Council for Redistribution" initiative. Other examples like a European citizens' initiative advocating for a wealth tax, and the G20 discussing a global minimum tax of 2 percent for billionaires are warn signals of the issue gaining international momentum. As the authors of the study show, a change in tax systems through the introduction of a wealth tax on the super-rich or a minimum tax on billion-dollar incomes, including retained profits and unrealized capital gains, could increase the tax rate of the super-rich in Germany, Austria, and Switzerland and restore the progression of tax systems.