Sending a few ripples across the financial world, the International Monetary Fund said in a report that raising taxes is a great way for countries to fight deficits.
“We had to read it twice to be sure we really understood it,” said Nicholas Mombrial of Oxfam in Washington. “It’s rare that IMF proposals are so surprising.”
Usually, the IMF advises nations that are having financial difficulty to slash public spending as a way to attack their deficit problems. But in the report subtitled “Taxing Times,” the Fund promoted the idea that taxing the highest income earners was the best way to avoid unwanted spending cuts and bridge the gap in income inequality.
According to estimates in the report, taxing the rich simply at the rates of the 1980s would generate fiscal revenues equal to 0.25% of economic output in developed countries.
It what seemed to be a slight disclaimer, the IMF said that it didn’t care to enter a debate on whether the rich should be taxed more. But the report said that “the chance to review international tax architecture seems to come about once a century; the fundamental issues should not be ducked.”
Last year, a proposal by the French socialist government to tax the wealthy at 75% was overturned by the country’s highest court. But in the wake of the IMF’s report, France’s finance minister was emboldened by the findings, calling them a “positive development.”
“These proposals are heading in the right direction, but a lot remains to be done,” said Oxfam’s Mombrial. He went on to point out that the IMF needs to clamp down on “illegal capital flows,” which cost developing countries billions of dollars.
h/t Raw Story