International Monetary Fund: Taxing The Rich Is Good For America!by Liam O'Connor |
A
new study from the International Monetary Fund (IMF) appears to have
found proof that not only are high levels of income inequality bad for a
nation's economy, but that redistribution of wealth through higher
taxes on the rich benefits long-term economic stability.
The
study is one of the first of its kind. It examined the pre- and
post-tax income of several countries and reached some important
conclusions including that low net income inequality is good economics,
boosts long-term economic growth and leads to longer periods of economic
expansion.
However
the most important (and controversial) finding was that redistribution
of wealth through higher taxes does not actively harm economic growth,
and that because this policy decreases economic inequality, this
actually increases economic growth:
[box
type="shadow"]"We find that higher inequality seems to lower growth.
Redistribution, in contrast, has a tiny and statistically insignificant
(slightly negative) effect. This implies that, rather than a trade-off,
the average result across the sample is a win-win situation, in which
redistribution has an overall pro-growth effect."[/box]
According
to the CBC, the authors of the study are aware of the political
implications their findings could have, but felt a new approach was
needed to study the effects of income inequality:
[box
type="shadow"]"The authors concede that their conclusions tend to
contradict some well-accepted orthodoxy, which holds that taxation is a
job killer. But they say that many previous studies failed to make a
distinction between pre-tax inequality and post-tax inequality, hence
often compared apples to oranges, among other shortcomings."[/box]
Since
the advent of neo-liberalism and Reaganism in the late 1970's and early
1980's, it has become a mantra of the Republican Party to claim that
taxes are job-killers, and that only be lowering taxes (especially for
the wealthiest earners) will free enterprise be allowed to prosper,
leading to economic growth. However this study is the latest to
forcefully argue that the more equal a society is, the more prosperous,
free and sustainable it is. The GOP is now placed in the rather
invidious position of defending an economic policy based not on evidence
or facts, but ideology and dogma.
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