IMF Study - Taxing the Rich is GOOD for the Economy

[DisgruntledGoat]

Well, a blow to conservative policy pretty much everywhere and yet another nail in the coffin of trickle down economics the International Monetary Fund has released a IMF staff discussion note on "Redistribution, Inequality and Growth". Details can be read here:

http://www.imf.org/external/pubs/ft/...14/sdn1402.pdf

If you want a run down there here is an article from the Toronto Star:

http://www.thestar.com/business/2014...searchers.html

The gist of the study is that wealth inequality limits growth. Now the study doesn't call for total wealth equality (aka communism) but what it does say is that redistribution of wealth via the taxation of the rich to promote better wealth equality will provide BETTER economic growth than our current systems. Why is this? Well, their study finds that redistribution via taxation is generally benign in terms of economic growth (i.e. no impact). There is evidence that EXTREME redistribution has a negative impact but obviously no one is promoting that agenda anyways. So with redistribution being a net zero and closer weather inequality providing better growth than larger inequality it stands to reason that taxation of the top income earners will provide more substantial growth.

Obviously this study isn't suggesting anything new, anecdotal evidence has shown pretty consistently that trickle down economics is a failed system. Now, if the IMF would just call this official policy rather than pussy footing around it so as to not upset the fat cats around the world then we might finally get some progress towards reducing wealth inequality in this world.

[Slydessertfox]

Does anyone really expect this to change the views of fans of trickle down economics? They will either pretend the study doesn't exist, or accuse the international monetary fund of being run by evil socialists and being biased-in fact, I can see that being the headline of Fox News, if they bother to even acknowledge its existence.

[Durnaug]

I've fallen in love with a thread. I do think that they always knew it was a load of crock.

[Slaytaninc]

Lol, the IMF are the fatcats.

[sleepyx732]

redistribution of wealth via taxation, meaning welfare is good for the economy.

I sure ing hope so..

[Basil II the B.S]

There's no reason to tax someone's income just because he makes ton of money. Inheritance however is another thing. Parents connections and wealth is what makes the system unfair, thus inheritance tax and a consequent redistribution should be high enough to grant people a relatively equal opportunity to succeed.

[Derpy Hooves]

However, by the time my parents die, I will already be in the work force and the human capital I have accrued will already be sufficient enough that inheritance money will make very little difference.. Inheritance tax doesn't exactly even out the playing field.

[Denny Crane!]

Economies in the west are structured in a certain way that give advantages to certain areas and types of industry which creates the inefficiencies and taxes and redistribution address this somewhat but ultimately it means treating symptoms and not causes and the redistribution comes packed full of problems as well.

I do not think this is a blow to conservatism, I think this is just a show and tell of what works in our current distorted economy. If conservative groups or social democrat/left wing groups support this then they are all wrong as well. It isn't exactly moving deckchairs around on the titanic but it is pissing into a mild wind.

[hellheaven1987]

equal opportunity to succeed.

I thought that is why we can have guns privately in US.

[Phier]

I've done what most here have not done which is try to read the paper. I only got through the gist of it, as I don't have the time to do so right now, but these are things I look at.

http://www.tradingeconomics.com/unit...tes/gdp-growth

http://www.tradingeconomics.com/sweden/gdp-growth

http://www.tradingeconomics.com/netherlands/gdp-growth

http://www.tradingeconomics.com/unit...dom/gdp-growth

The gist of the paper seemed to be first world countries perform well The US which was a middle of the road country, seems to be doing better in growth though currently.

I'm most likely not going to really get into the paper, I'm going to be playing Distant Worlds instead tonight, but I'll let others better suited for it take a deeper look.

[Slaytaninc]

There's more to inequality than a few percentage points on an income tax rate. Taxing the rich and giving to the poor doesn't really address inequalities in wealth, poor people on government programs tend not to be able to save up their money, and live from day to day on it and whatever employment they've managed to get for themselves.

[Armenum]

Taxing the rich is a given. The question is how much you tax the rich. Taxing the rich an exorbitant amount limits incentive to make that much money and makes people hide their money in secret locations to avoid such taxes. I'm assuming the study refers to the developed Western European/Nordic countries which have very high tax rates for the rich. The problem here is if such tax policy has a causal effect on such high development. You could just have correlation between tax rate and development.

The way I see it is this. The Nordic countries for example have a very high tax rate and with that they are able to fund their welfare state. A better funded welfare system combined with the fact that the Nordic countries have natural resources, relatively low population, and in peaceful area, will yield a high human development. However, I don't think the fact of taxing the rich is the ultimate solution to higher human development. There are so many factors that go into advancing human development of a given country. It depends on the country in the end. Low tax rates can attract business and investments, which can vitalize the economy, and with that better human development. Eventually you run into a clash of philosophies.

In all, I'll take this conclusion with a grain of salt, because I would want, concrete causal evidence that suggest that, controlling for all factors and variables, taxing the rich, leads to a significantly higher human development.

[Slydessertfox]

Except we live in a country were someone making as much money as Romney can get away paying 13% in income taxes, whereas someone making 40,000 might pay 20%.

[Denny Crane!]

Except we live in a country were someone making as much money as Romney can get away paying 13% in income taxes, whereas someone making 40,000 might pay 20%.

Lets not consider the richest abberations as that has little to do with tax and more to do with tax loopholes being exploited. So its not relevant to a tax level debate - as you can agree on whatever that is and the loopholes for those will still exist. And good luck finding an opponent who will oppose closing tax loopholes as a separate issue.

[Slydessertfox]

And good luck finding an opponent who will oppose closing tax loopholes as a separate issue.

You underestimate the people in Congress.

[fkizz]

Well, by what they say France, with their 75% tax on rich, should be booming economy now, instead its rating got downgraded, and wealthy people are trying to put their money away from France. Not to mention Depardieu, which is sort of a media caricature of what is represented. This gives benefits to not aim to be wealthy, to avoid upper tax echelons (taking away ambition to work more) and creates temptation for tax evasion by the rich.

Though this is the typical populist appeal, IMF is basically the rich people's mistresses, and going by Portugal experience, on bail out countries the biggest affected by tax and salary cuts end up being the lower classes, the ones more unable to fight back. This time the middle class aswell. Though this is a clever political move by the IMF of trying to mask itself, and will work as usual.

[|Sith|Galvanized Iron]

Give a Captain Obvious hat to the IMF then. Wonder when they will be a good example and share some of their coffers then.

[Armenum]

Except we live in a country were someone making as much money as Romney can get away paying 13% in income taxes, whereas someone making 40,000 might pay 20%.

You should take into account that many people like Romney, give away a lot to charity. Just look at Bill Gates or Mark Zuckerberg.

[|Sith|Galvanized Iron]

You should take into account that many people like Romney, give away a lot to charity. Just look at Bill Gates or Mark Zuckerberg.

Compared to what they earn it is obviously nothing. Several studies has shown that taxation is a much more efficient way to re-distribute wealth to needed areas than entrusting it to some imagined CSR-humbug.

Taxation, believe it or not, actually has a noticeable positive effect on economical growth in a country. Simply becuase a fair and well run country is much smoother to run a business in than a let-go state.

[Denny Crane!]

Compared to what they earn it is obviously nothing. Several studies has shown that taxation is a much more efficient way to re-distribute wealth to needed areas than entrusting it to some imagined CSR-humbug.

Taxation, believe it or not, actually has a noticeable positive effect on economical growth in a country. Simply becuase a fair and well run country is much smoother to run a business in than a let-go state.

Yeah France is doing so well! And flat tax countries are doing so badly? Damn Latvia is having a hard time.

Turns out simplifying complicated topics is fun!