Editorial 1 : An inheritance tax will help reduce inequality
Context
A remark by Chairman of Indian Overseas Congress Sam Pitroda on implementing an inheritance tax as a tool of wealth redistribution has sparked massive debates.
The issue
- Primarily, we underscore the need to take a view of citizenship where the poor and the rich can participate equally in democratic decision-making.
- However, in an unequal society, a handful of dominant individuals can wield a disproportionate amount of power through control of resources.
- This will likely lead to a few wealthy elites dictating the socioeconomic and political decisions aimed to benefit them at the cost of the majority.
Why inequality matters
- First, inequality harms growth in the medium-to-long run, by hampering firm productivity, reducing labour income, and diverting resources away from rights such as education.
- Second, in unequal countries, the place of birth holds inordinate power in directing lifetime outcomes. In India, almost a third of the variation in consumption can be explained by the place of residence: the State, and city or village.
- Third, high inequality is also associated with political polarisation and increased conflict.
- Fourth, inequality is likely to have a negative multiplier effect on the economy — diminished earnings for the poor lead to reduced consumption and savings and increased indebtedness.
- This reduces aggregate demand, limits production and investments, and leads to lower growth rates in the future.
- The Constitution mandates equality of status and of opportunity. As such the government is obliged to take steps to reduce the disparities arising from accidents of birth.
An inheritance tax
- A wealth tax is a recurring tax on all physical and financial assets an individual owns.
- An inheritance tax differs from a wealth tax in two ways: it is intergenerational and levied once in a lifetime.
- These taxes are meant to be applied to individuals having high wealth above a threshold.
- When implemented well, these taxes reduce the concentration of wealth and encourage shifting investments from non-productive to productive activities.
- Property of the elite being bequeathed to descendants implies that the descendants do no work to acquire it. There is no economic reason for it to be a freebie for them.
- Some might argue that inheritance tax will disincentivise innovations. But this disregards that innovation is needed to be competitive today and suggests that innovation is solely to propagate dynastic control of resources which is at odds with democratic ideals.
- On the contrary, revenue generated from inheritance tax can be used to fund a diversified set of innovations.
- An advanced country like Japan has up to 55% inheritance tax.
- A variant of the inheritance tax, called estates duty, was levied in India between 1953-1985 but this was abolished owing to administrative costs.
- However, the economist Rishabh Kumar shows that this was effective in reducing the top 1% personal wealth share from 16% to 6% between 1966 and 1985.
Land value tax
- Another approach is the land value tax (LVT): this taxes the rental value of land, without considering the property built on it.
- This is borne by the landowner and not the tenants. Unlike labour, land is a natural resource and is unresponsive to changes in taxes, making the LVT an efficient source of revenue.
- Given the role of land ownership in perpetuating feudal caste relations in rural India and the pervasive politician-builder nexus in urban India, LVT can be a useful redistributive mechanism.
Conclusion
Economists Jayati Ghosh and Prabhat Patnaik demonstrate that a 2% wealth tax and a 33.3% inheritance tax only on the top 1% in India can raise an additional public expenditure of 10% of the GDP. This can be used to ensure a bouquet of socioeconomic rights for the poor like living wages, right to health, employment, and food. Given technological advancements, these are possible if there is political will.
Editorial 2 : The unseen effects of climate change on mental health
Context
The mercury is soaring across India, with many places reporting unusually high temperature readings. It may not be possible to link each heat event to climate change, but we know climate change is bringing such anomalies to more areas, and with greater intensity.
Affecting society
- Climate change is disproportionately affecting society’s most vulnerable members, including those with physical ailments, the elderly, the poor, and the socially and economically marginalised.
- And we also know climate change has become the basis of a slew of psychological afflictions of its own, including eco-anxiety, eco-paralysis, and solastalgia (a form of emotional or existential distress rendered by environmental changes).
- It also potentially includes being able to worsen existing mental health conditions.
A dubious distinction
- Studies have reported that an extreme heat event affected people with schizophrenia more than those with kidney and heart disease.
- Also, people with mental health conditions seem to be at a greater risk of succumbing to heat-related deaths.
- The stakes were found to be even higher for people diagnosed with schizophrenia, anxiety or bipolar disorder.
- Scientists reported that 8% of the people surveyed in 2021 were previously diagnosed with schizophrenia as opposed to 2.7% of the people surveyed nine years ago.
- People with schizophrenia were found to be at greater risk of heat-related distress than those with kidney and heart diseases, the latter weren’t immune: they were at risk as well, just less so.
Dysfunction of the hypothalamus
- The researchers believe one of the main reasons people with schizophrenia were more vulnerable to heat stress could be as a result of the dysfunction of the hypothalamus, a structure embedded deep in the human brain.
- Its main function is to maintain the homeostasis of the body, i.e. to keep the body in a stable condition that ensures it can carry out its normal function. This means it controls the body’s temperature, heart rate, hunger, thirst, mood, libido, sleep, and the regulation of hormones.
- Certain antipsychotic medications prescribed to people with schizophrenia have also been found to interfere with the hypothalamus’s workings.
- One side-effect of such drugs has been a tendency to raise the body’s temperature, which when coupled with anomalously high ambient temperatures can rapidly prove fatal.
- People with schizophrenia also often have psychotic symptoms such as hallucinations, delusions, disorganised thinking, and memory loss.
- They may also suffer from anosognosia: a condition in which they’re unable to sense that they’re ill.
- All this together with comorbidities like diabetes and hypertension can make life very difficult for people with schizophrenia, including potentially interfere with their ability to seek help.
- As it happens, marginalisation, lower economic status, and a propensity for loneliness are risk factors for people with schizophrenia, and the same factors can heighten an individual’s vulnerability to heat-related illnesses.
Way forward
- As demonstrated by research, because individuals living with schizophrenia are more susceptible to heat-related illness, it is essential that families and caregivers are aware of the increased risk, identify potential risk factors and take action to help their loved one during a heat wave.
- Educating ourselves to recognise symptoms of heat-related illness and take emergency cooling measures will help ensure everyone’s safety during heat waves.