The IMF has long been a bogeyman of leftists who despise it as one of the key tools of US foreign policy, high finance capitalism and neo-liberal shock therapy. That was until an IMF analyst said:
“…the top personal income tax rates in OECD rich nations had fallen to 35% in 2015 from an average of 62% in 1981… Progressive taxation and transfers are key components of efficient fiscal redistribution… Optimal tax theory suggests significantly higher marginal tax rates on top income earners than current rates.”
The IMF backing higher taxes on the rich!
Cue reverse ideological ferret from left-wingers: Matt Zarb-Cousin spinning furious tweets citing the IMF, a leader in The Guardian, which of course whilst still blaming Thatcher for today’s inequality praises the IMF for its journey: “Make no mistake, this is a significant moment”. The implication is that even the neo-liberals at the IMF now think inequality has gone too far and we need more more progressive taxation and redistribution to undo that wicked Thatcherite policy of lowering taxes.
Guido has never been convinced that more billionaires make a society worse because they increase measured inequality. It seems self-evident that it is the number in absolute poverty that is the problem, not the number of billionaires. That is a different argument for another day.
Two points might dampen down the left’s welcoming of the IMF’s analysis;
- the aggregate level of taxation in the UK is now higher than it was under Thatcher, higher than it was under Gordon Brown and even higher than it was under Denis Healey when he promised to “squeeze the rich until the pips squeak”.
- the IMF calculates that the optimal marginal rate of taxation is 44%. The top marginal rate of taxation on income in the UK is 62%*. After income is taxed, spending is further taxed even more.
The UK is already beyond the point at which the IMF thinks progressive tax rates are optimal.
*Arguably it is actually 70% at the point child benefit is withdrawn from higher earners.