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Monday, 3 March 2014

Redistribution through taxation improves economy and reduces inequality - says IMF

When the Occupy movement suggested striving for equity by redistribution from the 1%, they were for the most part dismissed, and rudely evicted from their camps.

So when the International Monetary Fund suggests that increasing taxing the rich and striving for equity, will the political community begin to listen.  Not only is it recommended, but the IMF comes out suggesting that it is healthy for the economy, CBC report .  And while conservative journalist like Huffington Post are quick to find the faults and shortcomings, even they acknowledge that there is some basis in the discussion.  Warren 
Buffet has added his voice to the need to increasing taxation of those who are economically privileged.    

While the study is authorized by the chief economist, it is referred to as a staff discussion note and not a formal position document, no doubt in recognition that many heavy hitters on both sides of the border will not take a liking to the message.  The methods draw on accepted economics approaches and rely heavily on the use of the Gini coefficient. 

There are some interesting discussions by the authors at the IMF home page, and the full document is accessible Redistribution, Inequality and Growth.  Kudos to the IMF for taken aim at an analysis of the traditional ultraconservative thinking that taxation is bad, and that economic growth is driven by those with the most resource investing in the economy.    

Don’t expect current fiscal policy to shift quickly, however such work will fuel opposition parties looking for a niche that appeals to the public, and focusing attention on tax increases for those in financial power positions will be an attractive position for the 90-95% of the population who have household incomes less than $100K

Not that this is news either, the Conference Board of Canada discussed late in its paper on income inequality how tax redistribution was failing in Canada  because of changes to taxation policies. 

As the evidence begins to mount, heads will start to turn.  Those who currently have money and power will not readily give up either.  

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