PHM-Exch> Fwd: [FTT] Taxing the rich is good for the economy, IMF says (!)

[Claudio Schuftan]

From: Taavi Tillmann <taavi.tillmann at gmail.com>

From: Teresa Marshall <teresa.marshall at world-psi.org>



http://www.cbc.ca/news/business/taxing-the-rich-is-good-for-the-economy-imf-says-1.2552141



*Taxing the rich is good for the economy, IMF says*

*Research paper debunks theory that taxing rich people slows overall growth*

*The Canadian Press Posted: Feb 26, 2014 11:29 AM ET *

A new paper by researchers at the International Monetary Fund appears to
debunk a tenet of conservative economic ideology -- that taxing the rich to
give to the poor is bad for the economy.

The paper by IMF researchers Jonathan Ostry, Andrew Berg and Charalambos
Tsangarides will be applauded by politicians and economists who regard high
levels of income inequality as not only a moral stain on society but also
economically unsound.

Labelled as the first study to incorporate recently compiled figures
comparing pre- and post-tax data from a large number of countries, the
authors say there is convincing evidence that lower net inequality is good
economics, boosting growth and leading to longer-lasting periods of
expansion.

In the most controversial finding, the study concludes that redistributing
wealth, largely through taxation, does not significantly impact growth
unless the intervention is extreme.

In fact, because redistributing wealth through taxation has the positive
impact of reducing inequality, the overall affect on the economy is to
boost growth, the researchers conclude.

"We find that higher inequality seems to lower growth. Redistribution, in
contrast, has a tiny and statistically insignificant (slightly negative)
effect," the paper states.

"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."

While the paper is heavy on the economics, there is no mistaking the
political implications in the findings.
*Tax doesn't kill jobs*

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 shotcomings.

The data they looked at showed almost no negative impact from
redistribution policies and that economies where incomes are more equally
distributed tend to grow faster and have growth cycles that last longer.

Meanwhile, they say the data is not crystal clear that even large
redistributions have a direct negative impact, although "from history and
first principles ... after some point redistribution will be destructive of
growth."

Still, they also stop short of saying their conclusions definitively settle
the issue, acknowledging that it is a complex area of economic theory with
many variables at play and a scarcity of hard data.

Instead, they urge more rigorous study and say their findings "highlight
the urgency of this agenda."

The Washington-based institution released the study Wednesday morning but,
perhaps due to the controversial nature of the conclusions, calls it a
"staff discussion note" that does "not necessarily" represent the IMF views
or policy. It was authorized for distribution by Olivier Blanchard, the
IMF's chief economist.
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