Prices for groceries, rent, insurance, gas bills are up and the cost of petrol is through the roof, and wages aren’t keeping up with rising prices. While many Australians are finding it harder to make ends meet, there has been an explosion in the wealth of the super-rich. Australia taxes wealth very lightly, it’s time that changed.

“Billionaires have the lowest effective tax rate of all social groups everywhere”, according to French economist Gabriel Zucman.

“There is a legitimate debate to have about the proper degree of tax progressivity … But nobody should accept a situation where the super-rich can pay less than the middle class. It’s a basic violation of the fundamental principle of equality before the law, which stands at the heart of our social contract.”

Taxing wealth fairly is not just important for the economy, it’s important for our democracy. As the federal budget approaches, we’re about to hear a lot about what Australia ‘can’t afford’. We can’t afford for so many people to access the National Disability Insurance Scheme, for example. We ‘can’t afford’ to increase the unemployment benefit above the poverty line. But somehow we can afford $368 billion for nuclear submarines we may never receive, and we can afford to give away half of our liquid natural gas royalty-free.

There is bipartisan support for increasing spending in areas such as defence, healthcare, and housing. At the same time, both politicians and pundits make frequent calls to reduce the budget deficit. One way to achieve this would be to increase revenue from taxation. Yet come budget time, we hear very little about how we could raise more revenue to fund the public services and infrastructure we all rely on. Australia is of the lowest taxing countries in the developed world. The idea of a 25 per cent tax on gas exports has gained momentum and public support, but Australia also needs to be looking at taxing the super-rich more.

While many Australians struggle to make ends meet, recent analysis by Oxfam shows the average Australian billionaire increased their wealth by almost $600,000 a day over just the past year. Collectively, Oxfam found Australian billionaires added more than $10.5 billion to their fortunes in just 12 months. The picture is the same the world over. There has been an explosion in the wealth of billionaires.

While working people pay taxes on the income they earn, billionaires and the super-rich can often structure their wealth so that they disappear from the income tax system entirely, with little or no taxable income. That’s not a fair system.

We all understand that taxes are the price we pay for a civilised society. They contribute to public services like education, healthcare, the NDIS and defence, as well as public infrastructure. Most people are content to pay their taxes when they know everyone else is contributing their share too, and that their taxes pay for public services we all use and need.

Progressive taxation, the idea that the the rich should pay more in taxes relative to their income than other social groups, is a key pillar of modern democracy. Throughout most of history, the super-rich lived very well, while most other people lived lives of quiet misery, poverty, and deprivation. Progressive taxation changed that. Put simply, those who have more, contribute more. Democracy overruled oligarchy.

The post-war era, in particular, has seen a remarkable period of economic growth, including an unprecedented rise in the living standards of low and middle income earners throughout the world, thanks to the power of progressive taxation.

Progressive taxation strengthens social cohesion and trust in government, it generates revenue to funds key public services and infrastructure that have driven economic growth, and it’s essential as a check on the extreme concentration of wealth and power amongst the super-rich, because those who can accumulate extreme wealth can also accumulate extreme power. The power to buy out your competitors, to buy and control the media, to buy access to and influence politicians and elections. Wealth equals power.

So, there is always a tension between the extreme concentration of wealth and the strength of democracies. It’s not hard to see that as the super-rich have accumulated extreme wealth, democracies around the world are in decline. People sense that the system is rigged against them.

Gabriel Zucman wrote a paper for the G20 proposing an unavoidable 2 per cent tax on wealth for the super-rich. France, Brazil, Spain, Belgium and the Netherlands are looking at implementing this kind of minimum unavoidable wealth tax.

Australia Institute research showed that if such a tax were imposed on those with wealth of more than $5 million (excluding the family home and superannuation), it would raise $41 billion per year. If Australia reintroduced an inheritance tax, it could raise an additional $10 billion per year. And if the government scrapped the capital gains tax discount, which mainly benefits wealthy property investors, it could raise around $19 billion a year. Scrapping the CGT discount would also have the benefit of making property more affordable for those people currently locked out of the housing market.

We know that inequality harms economic growth. We know many Australians are struggling to make ends meet and we know the super-rich are only getting wealthier and wealthier.

Being a billionaire should not mean you can opt out of paying your fair share of tax. In fact, being a billionaire should come with unavoidable duties to the society you extracted that wealth from. It’s not a radical idea that billionaires should pay higher tax rates than ordinary working people. It’s a simple, democratic idea.