A new research by the International Monetary Fund debunks the theory that taxing the rich to give to the poor is bad for the economy-. The research, in fact finds, that redistributing wealth, largely through taxation, does not radically impact growth unless the intervention is tremendous in nature.
Contrary to previous belief taxing the rich has a positive impact of reducing inequality and therefore, it is bound to boost growth.
The study hits a nerve when it comes to the rich poor divide which is increasing every day and is the main fodder for fueling economic and political instability across the world.
Though the thought of bridging the rich poor gap, even a little is a welcoming one; it will be interesting to see how the rich of the society will take it.
Just last month, tech venture capitalist Tom Perkins complained publicly of "a rising tide of hatred of the successful one percent," and compared the ‘assault’ on the wealthy to a wave of Nazi attacks on Jews ahead of the Holocaust saying, "In the Nazi era it was racial demonization, now it is class demonization".
He later accepted the comparison went too far, but he didn't apologize for his warning about anti-rich ‘radicalism.’
Putting Mr. Perkin’s apprehensions aside, here are some facts:
1. Income for the top 1% grew an estimated 31.4% from 2009 to 2012 whereas the bottom 99% saw a gain of 0.4%.
2. The stock market has gone since January 2009 benefitting the upper economic tier of society more than any other.
Comparatively the tax rates on the rich have not been bad at all.
According to Dr. Dean Baker, Co-Director of the Center for Economic and Policy Research, “The idea of imposing a tax on financial transactions is hardly new or radical. The tax in the United Kingdom dates back to the 17th century, and it hasn't prevented the country from having one of the largest stock markets in the world.”
It wouldn’t really hurt to pay more taxes.
According to anti-poverty charity Oxfam it shows "extreme inequality is damaging not only because it is morally unacceptable, but it's bad economics".
It appreciates that the IMF has finally debunked the old myth that redistribution is bad and that in fact it is essential in fighting inequality.
But regardless of the benefits; some backlash is to be expected; especially in the US.