As ever our laddie has managed to get the wrong end of the stick:
In fact, this understates, if anything the conclusion they reached. They say that even large scale redistribution does not appear to harm growth.
The article, I know, comes with a few caveats attached but the message is clear: the argument that redistributive tax policies (such as a 50p tax rate in the UK) harm growth has been holed well and truly below the water line.
In unequal societies it is now clear that if we want innovation, opportunity, jobs and growth then tackling inequality through progressive taxation is a very clear way to achieve that goal.
Second, we found little to suggest that a modestly redistributive tax system has an adverse effect on growth. True, there are some signs that highly redistributive tax systems – the top 25 per cent of our sample – may crimp economic performance. But the levels of redistribution seen on average in the broad cross-section of countries we looked at seem to have had negligible direct effects on growth.
What the IMF has actually found is that modest redistribution seems not to harm growth while “excessive” does.
Ritchie then leaps from this to insist that his demands for “excessive” redistribution thus are justified. Which ain’t at all what is being said.
There’s another very interesting bit to add to this as well. Which is that other work tells us that how you do the redistribution does indeed matter. Transactions taxes are worst (they have the highest deadweight costs), then capital and corporation taxes, then income taxes, then consumption and finally repeated taxes upon real property. And it’s notable that the countries that do the most redistribution (the Nordics, they have the biggest gaps between market and post tax post benefit gini) do it by having heavier than we do consumption taxes and lighter than we do capital and corporate ones (note that that last is influenced not so much by the rate but by the base).
That is, that raising the money to do more redistribution without killing off growth is best done by exactly the tax policies that Ritchie abhors.
Which is rather fun really.