Budget 2025: Income Tax & the Growing Inequality Gap

The #UnionBudget2025 is only a few days away and speculations that the Income Tax will be reduced is high. As the speculations are heating up, just a few days back Oxfam (@OxfamIndia)  released the Wealth Inequality Report 2024 - Takers, not Makers - bringing out some startling findings. The report says - 204 new billionaires were minted in 2024, nearly four every week.

60% of billionaire wealth is not earned, but derived from inheritance, monopoly power or crony connections, as Oxfam argues that “extreme billionaire wealth is largely unmerited.” The richest 1% in the Global North extracted $30 million an hour from the Global South through the financial system in 2023. It also predicts that there will be at least five trillionaires a decade from now.

When it comes to social spending, resource crunch is cited as a reason for lower allocations. India spends only around 4.4% of its #GDP on education, while many argue a minimum of 6% is required. Similarly, it allocates approximately 1.5% of its GDP to healthcare, far below the global average of 3.5%.

Economists have argued that in India a "2% wealth tax on the top 1% of the population, together with a 33% inheritance tax on the wealth they bequeath every year to their progeny, could finance an increase in government expenditure to the tune of 10% of GDP."

While there has always been a lot of clamour about 'tax-paying citizens' one is deliberately ignoring the fact that everybody is paying taxes. In #GST, with the income inequality gap widening, the poor and ordinary citizens are paying the same indirect tax as the rich. Many luxury items are taxed at a similar rate to food items.

Discussions around reduction in income tax in the upcoming budget need to be looked at in this context.