In favor of the Argentine wealth tax model for addressing COVID-19 supply shortages

December 2020 marked a year since the first COVID-19 case in Wuhan, China was reported. January 22, 2021 marked one year since the first COVID-19 case was reported in the United States to the Center for Disease Control and Prevention (CDC). As we enter the first few months of 2021, the global atmosphere has changed drastically due to the novel coronavirus pandemic’s far-reaching impacts.  

While various vaccine candidates have been making their way around the world and fast-paced technological innovation is largely to thank for the quick development of vaccines, this progress should not overshadow the exposed gaps in health policies and the death tolls that have occurred across the world. And of all the glaring public health challenges revealed during this pandemic, shortages of personal protective equipment (PPE), hospital space and equipment, decreased jobs, and faulty unemployment benefits are only among some of the more critical few. 

Thus, I believe that countries around the world need to quickly implement solutions in an effort to prioritize public health and to meet resources needs. I propose that to manage those shortages amid the global pandemic, countries should adopt the Argentine model of a wealth tax. 

The Global Problem

The first step to understanding how to solve a problem is to, before anything else, acknowledge the problem’s scope. 

Since early 2020, governments and global institutions have acknowledged shortages caused by the pandemic throughout the world. Three months after the first case of COVID-19 was reported in Wuhan, the World Health Organization (WHO) detailed in a news release that major countries and corporations had to raise manufacturing by 40% in order to catch up with the demand of PPE, which mainly consisted of face masks, gloves, eye protection, and hospital gowns. 

The WHO wanted countries who could provide the domestic manufacturing of PPE to ramp up production, but most countries did not manufacture their own PPE in the first place. Therefore, this announcement was simultaneous with the breakdown of the global supply chain management of PPE. 

Countries that were the main exporters of PPE included China, the U.S., Germany, Belgium, Vietnam, Malaysia and Thailand, and other Asian countries. However, these key exporters had to take care of their own nation’s coverage and pandemic outbreak response before they could fill the role the WHO wanted them to. 

Yet, there was a rapid increase of supplies needed to handle the pandemic, and the demand became significantly greater than the supply. Exporters ran into domestic shortages and, as a result, a global PPE shortage PPE occurred. With increasing manufacturing to cover domestic and export demands, economic costs also increased. These rising economic costs have been a theme among all the global shortages of necessary response equipment. 

In addition to these global PPE shortages, overall hospital space and medical devices have seen an all time low. This shortage did not occur until countries found themselves further into the pandemic. However, since the peak of COVID-19, this shortage has not slowed down for some countries. 

In Brazil, for example, from as early as April 2020, the government found itself lacking ventilators that were promised to be delivered to them. This shortage was linked to global competitors all facing the same lack of medical equipment simultaneously. However because of the lack of ventilators, Maranhao’s Secretary of Industry, Commerce and Energy, Simplício Araújo, found himself personally reaching out to his contacts in China. He acquired ventilators that instead went through Ethiopia, rather than the usual shipment of ventilators having to go through the U.S. and Germany. The original ventilators promised to Brazil were first stuck in the U.S. and Germany route.  Now, in January 2021, the lack of medical supplies for Brazil shows no sign of improving. The state of Amazonas in Brazil is facing a lack of oxygen supply for all patients, including premature newborns because of the rise of COVID-19 patients in the ICU.  

The situation in Brazil is just one scene demonstrating the lack of medical supplies that is occuring around the world; and with no financial gain for those who build medical equipment nor financial assistance for countries who need to purchase the equipment, the deficiency is set to continue. 

However, the shortages do not just stop with medical supplies. Citizens all over the world have seen some form of job shortage or unemployment rates rise in their country. This trend can be found in the U.S., Brazil, Canada, Bolivia, Iran, Nigeria and others. Without work, many individuals find themselves searching for unemployment benefits. This leads to the need of additional financial compensation from their governments because of the special circumstances. Although in the case of Bolivia, with a low per capita income even before the pandemic helps to explain why there are no unemployment benefits in the country. Now, as the number of unemployed citizens rises, the need for financial assistance becomes greater. Bolivia is facing a number of pandemic shortages, therefore, financial assistance for their government needs to be found in order to fully assist their citizens.

The shortages of PPE, hospital space and equipment,  jobs and unemployment benefits all have different variables that explain why various parts of the world are facing specific deficiencies on the COVID-19 response front. Nonetheless, one variable that stands out above all else is money. 

In order to purchase PPE for one’s country, governments have to spend money to continue domestic manufacturing or to buy PPE from exporters. The same goes for hospital equipment. There is a correlation between lack of hospital space and jobs as well. With no way in finding financial gains for a country’s government, citizens facing unemployment are less able to be financially compensated to stay home. Therefore, they have to go out to work or find work, and thus put themselves at higher risk of contracting the virus. This, in turn, leads to fewer available hospital beds — further contributing to the vicious public health cycle, with little relief in sight.

As the world continues to push through the COVID-19 pandemic, governments should begin to prioritize ways to break out of this cycle, even if it means trying different economic solutions or policy prescriptions.

One notable example is Argentina, where the government applied a unique solution in order to address these critical shortages.

The Argentine Model

Argentina has embraced an effective strategy to address the costs of the pandemic. 

The South American country’s center-left president, Alberto Fernández, and his cabinet passed a tax on the wealthy on December 4, 2020 to cover the pandemic measures and the domestic shortages they were facing. Around the end of January, that tax was officially imposed in the country. 

The official name of this decree is the “Aporte Solidario y Extraordinario” or the Law on Solidarity: Extraordinary Contribution of Great Fortunes. It has also gained the nickname the “millionaires tax” because the one-off tax was imposed on those with more than 200 million pesos or $2.3 million in assets. 

This tax applies to 12,000 people in Argentina and they will pay a 2 to 3.5% tax rate on assets declared within the country, and a 3 to 5.25% tax rate on assets held abroad. The specification for assets held abroad comes from more than 500 Argentines that took their tax residency abroad this past year (with more than half in Uruguay); therefore, the tax includes resident and non-resident individuals. 

With the implementation of the tax, the Argentine government hopes to raise about $3.7 billion to cover costs for the following: medical supplies for the COVID-19 pandemic, relief for small and medium businesses, funds for social aid, providing natural gas to people off the energy grid, and supporting student scholarships. 

Of course, this wealth tax is not the immediate or long-term solution, and will far from result in the impacts from the pandemic disappearing. Nonetheless, it is a start that other countries can adopt as an example when beginning to address their own shortages. 

Solution & Implementation: The Bolivia and Sweden Case Studies

The wealth tax solution described in Argentina should be one of the top considerations for other countries on what should be implemented in order to slow the costly outcomes that have occurred during COVID-19. It is important to recognize that this tax would not solve all of a country’s worries during the pandemic, though it would help significantly. In these desperate times, countries need to find any way to help their people. 

A wealth tax is an implementation that should be done in many countries during COVID-19. However, in order to make progress without having to force countries into the solution, there must be a practical consideration for where in the world this solution could be implemented without long debate right now. The pandemic is not slowing down for many countries across the world and even when it does, the costs and shortages brought on by it will last years after the actual pandemic has ended. 

Argentina’s governmental views and the favorability of the current party toward this move were a major benefit in creating an environment ripe for imposing its wealth tax. As mentioned previously, Argentina has taken a center-left approach with President Alberto Fernández in office and therefore, the cabinet power largely aligns  social democratic, democratic socialist, and progressivist viewpoints. 

But looking at the political leanings of governments and legislative bodies is necessary for determining which countries could utilize the wealth tax solution for the pandemic shortages as quickly as possible. Identifying this shortens the list of which countries the wealth tax could be implemented in as a short-term solution for pandemic shortages. Another factor to consider that would shorten is countries that already have a wealth tax in their regular tax periods. This list includes countries such as Norway, Spain, Switzerland, Belgium, Netherlands, and Italy; 

Where can this wealth tax model immediately be implemented then? Two possible countries are Bolivia and Sweden. These countries should be targeted for several reasons. Both have governments with similar political environments to that of Argentina and therefore controversy over a wealth tax might be less apparent. These two countries are also ones to target because of the effects that the pandemic has had within their borders.

Sweden did not have positive public health outcomes during the pandemic. The country differed from their Nordic neighbors by having a death rate that was eleven times higher. Additionally, compared to the G7 countries, Sweden had one of the worst economic outcomes as of May 2020. Many experts attributed this to the country’s light COVID-19 safety restrictions. The country’s staggering death rate was accompanied by a 7% decline in the country’s GDP. As of December 2020, the world saw how Sweden “beat” COVID-19. However, this premature “victory” was only reached because the Swedish government wanted to reach herd immunity, no matter the costs. This was revealed by Foreign Policy; a report revealed emails demonstrating this approach from the Swedish government. In “beating” the pandemic, the Swedish government and its economy took a major blow. 

The implementation of a wealth tax can begin to cover the hit to the GDP. Additionally, it can be applied to those still struggling with the pandemic as most of the country acquired the disease at some point in trying to reach herd immunity. 

Bolivia, meanwhile, has one of the poorest economies in Latin America. Imposing a wealth tax in Bolivia, similar to its Latin American counterpart: Argentina, could not only address the country’s dismal economic state, but it can also address the current pandemic needs of providing compensation for informal and formal workers within the country. During the pandemic, it has been reported that 70% of Bolivians do not work with employer-based social security or contracts that cover income. Bolivia, as of February 10, has seen a total of 230,731 cases with 10,929 deaths. Not being able to compensate workers only contributes to this increasing rate. 

Sweden and Bolivia are two countries that could find the possibility of a wealth tax being imposed beneficial amid the COVID-19 pandemic. The model of Argentina’s wealth tax is seen to be influential, as now Bolivia’s president imposed their own wealth tax bill with four other Latin American countries thinking about following suit. 

Conclusion

In these unprecedented times, imposing a wealth tax for pandemic shortages is a measure that is vital, and should even be considered for outside COVID-19 measures. Argentina began the trend to impose a wealth tax, and now other Latin American countries like Bolivia, begin to follow and Sweden is one of the last Nordic countries to not already have a wealth tax in place. 

Therefore, as countries see others with this feasible solution in place during the pandemic, there can be multiple efforts for other countries even outside Bolivia and Sweden to see why a wealth tax can benefit their pandemic shortages. While there is a drive to put wealth tax bills or laws in place, it is essential to recognize that these taxes will only benefit a country if a government allows it to. 

If taxes are received but not allocated to its citizens or for pandemic shortages, then the wealth tax is not an effective solution. Yet, if governments take their power and reallocate the income from the wealth taxes of their country and use it for domestic programs, there can be advantageous change in the amount of shortages we see caused by the COVID-19 pandemic.