Realist, not conformist analysis of the latest financial, business and political news

Mummy! The Guardian’s Lying About The IMF Again!

Wrong about everything. Always

It’s not like they’ve not done this before of course but it is still irritating:

IMF boss says raise taxes on the rich to tackle inequality
Kristalina Georgieva calls for rethink of economic policies to better help those left behind

Well, no, she doesn’t.

Raising income tax on the wealthy will help close the growing gap between rich and poor and can be done without harming growth, the head of the International Monetary Fund has said.

Kristalina Georgieva, the IMF’s managing director, said higher marginal tax rates for the better off were needed as part of a policy rethink to tackle inequality.

No, really, she hasn’t. Her blog post is here:

Tackling inequality requires a rethink. First, on fiscal policies and progressive taxation.

Progressive taxation is a key component of effective fiscal policy. At the top of the income distribution, our research shows that marginal tax rates can be raised without sacrificing economic growth.

Note the link. At which we get:

Progressive income taxes. Personal income tax progressivity has declined steeply in the 1980s and 1990s, and has remained broadly stable since then. The average top income tax rate for OECD member countries fell from 62 percent in 1981 to 35 percent in 2015. In addition, tax systems are less progressive than indicated by the statutory rates, because wealthy individuals have more access to tax relief. Importantly, we find that some advanced economies can increase progressivity without hampering growth, as long as progressivity is not excessive.

Aaaaah. There’s an optimal amount of progressivity. It ain’t true that just more is better. And the actual amount of progressivity that is optimal? Well, it’s the IMF’s research which tells us that moving the Gini about 13 points is it. And how much is that?

Well, it’s a little more than the US does, a smidgeon. It’s a lot less than Sweden does. And it’s almost spot bang on the amount that the UK does.

Which is why The Guardian is lying. For the finding is that some advanced economies as long as not excessive. The some not including us and our amount being the starting point of excessive.

In fact, what the IMF is really saying is that we’re Goldilocks and all the other European countries have tax systems which are too progressive. Which isn’t what The Guardian is telling us at all which is why they’re lying.

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4 years ago

Why would it ever be a good idea to target an economy’s most productive / motivated / valuable workers for a penalty tax? (A good idea for the economy, not for one’s political bona fides.) The most you can say is a surtax might not induce them to quit entirely (though a surtax on assembly-line workers is even surer not to induce avoidance). And why is it the business of an international “monetary fund” how equally earnings are distributed? except that it is a soapbox and I’m going to climb it.

Gavin Longmuir
Gavin Longmuir
4 years ago

“IMF boss says raise taxes on the rich to tackle inequality” They always obfuscate the difference between income and wealth. Generally, their plans come down to taxing the wage slaves and letting the owners of large amounts of capital skate free. But raising taxes on the income of the wage slaves prevents them from aspiring to join the owners of large amounts of capital. Which may be the point of the exercise. And if we are going to get excited about inequality, how come some people get to party with Scarlett Johansson and other people don’t? That is the inequality… Read more »

4 years ago

But inequality is tacked effectively anyway, by time. I was at the lower end of incomes when I started work, ended up pretty high up. That’s how it works. What should be looked at is how you make that happen for more people, those who struggle to move upwards. Simply redistributing more is stupid. Actually stupid.

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