By Frank Clemente, Campaign Manager, Americans for Tax Fairness
The International Monetary Fund (IMF) loans money to countries in trouble—but at a steep price. For decades, it has been demanding that the countries that borrow from it impose a sort of economic “shock therapy”: slash programs for the poor, sell off state-run enterprises, end subsidies for food and gas, and abolish tariffs that protect indigenous farmers and businesses. Not surprisingly, multinational corporations and local elites prosper, while the majority suffers.
Now, the IMF is considering a new prescription, and one that’s shocking only for what it’s based on: tax fairness.
The title chosen for the October issue of the IMF’s periodical Fiscal Monitor—“Taxing Times”—reflects a refreshing new focus on the revenue side of the fiscal ledger. The introduction asks, “Can countries tax more, better, more fairly?” (p. vii)
The answer, it turns out, is yes! Here’s their conclusion, in IMF-speak:
“…[M]any countries (including some with the largest consolidation needs, like the United States and Japan) could still mobilize significant amounts while limiting distortions and adverse effects on growth.”
Translation: “Countries like the U.S. that need to lower debt can do so by raising taxes, without hurting the economy.” (p. vii-viii)
The IMF also specifically targets offshore tax dodging:
“Recognition that the international tax framework is broken is long overdue. Though the amount is hard to quantify, significant revenue can also be gained from reforming it.” (p. viii)
Old habits die hard, of course. The IMF leans more toward consumption (sales) taxes, which tend to clobber the poor, rather than income taxes, which demand more of the rich. But in a major (though grudging) concession, the report surveys the top tax rates currently charged in various advanced countries, including the U.S, and concludes:
“It might indeed be possible to raise more from those with the highest incomes.” (p. 35)
Combined with the efforts announced over the summer by other international groups to crack down on international corporate tax dodging, the IMF’s (tentative) embrace of tax fairness shows the world is beginning to understand that we can’t cut our way to prosperity — everyone needs to pay their fair share.