Taxing the Rich Helps the Economy

February 28, 2014 International Tax Cooperation

WASHINGTON D.C. – New research indicates that imposing higher taxes on the wealthy to help the poor may be a good economic policy.

On February 26th the International Monetary Fund released a new report showing tax breaks, concessions, allowances and tax cuts aimed at helping low and middle income earners may in fact be good for the economy, helping boost growth and sustainability, while reducing economic inequality.

According to the authors of the report, the findings of their research indicate that countries which implement policies to increase wealth distribution through taxation saw an increase “pace of medium-term growth and of the duration of growth spells.”

The authors noted that it is commonly believed that reducing economic inequality through taxation will cripple economic growth, but the researchers found that “…there is no evidence of any adverse direct effect” arising from reasonable distribution policies.

Aside from improving economic performance, implementing tax policies to increase wealth distribution also has a positive effect on decreasing the income inequality and improving the living standards of low income individuals, among other positive “ethical, political, or broader social considerations”.

The authors conceded that the expected positive results on economic growth did not occur in situations when the distributions policies were too “extreme” or unreasonable for the state of the economy at the time.

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