![\"A](\"https:\/\/i0.wp.com\/www.dougsbriefcase.com\/blog\/wp-content\/uploads\/2013\/11\/Credit-NYPost.jpg\")
<\/a>A recent IMF<\/span> report sug\u00adgests that this man\u2019s enor\u00admous wealth might help resolve the gov\u00adern\u00admen\u00adt\u2019s debt prob\u00adlem. [Cred\u00adit: NY<\/span> Post]<\/p><\/div>The Inter\u00adna\u00adtion\u00adal Mon\u00ade\u00adtary Fund (IMF<\/span>) recent\u00adly report\u00aded<\/a> that Euro\u00adpean gov\u00adern\u00adments could reduce their debt back to pre-Great Reces\u00adsion lev\u00adels by con\u00adfis\u00adcat\u00ading 10 per\u00adcent of the wealth held by their rich\u00adest cit\u00adi\u00adzens. IMF<\/span> isn\u2019t rec\u00adom\u00admend\u00ading that<\/a>, of course.\n They\u2019re just sayin\u2019.<\/p>\n The report, called Tax\u00ading Times<\/em>,<\/span> is part of the IMF<\/span>\u2019s Fis\u00adcal Mon\u00adi\u00adtor series. The group\u2019s mod\u00adest pro\u00adpos\u00adal is tucked way back on page 49, just before all of the method\u00adolog\u00adi\u00adcal and sta\u00adtis\u00adti\u00adcal appen\u00addices that no one reads. It begins:<\/p>\n The sharp dete\u00adri\u00ado\u00adra\u00adtion of pub\u00adlic finances in many coun\u00adtries has revived inter\u00adest in a \u2018cap\u00adi\u00adtal levy\u2019 \u2013 a one-off tax on pri\u00advate wealth \u2013 as an excep\u00adtion\u00adal mea\u00adsure to restore debt sustainability.<\/p><\/blockquote>\n Before exam\u00adin\u00ading more close\u00adly the idea of the \u201cone-off tax on pri\u00advate wealth,\u201d it\u2019s worth look\u00ading at the \u201csharp dete\u00adri\u00ado\u00adra\u00adtion of pub\u00adlic finances\u201d it is meant to rem\u00ade\u00addy. The IMF<\/span> wor\u00adries about such things because they are on the oth\u00ader end of the line when gov\u00adern\u00adments fac\u00ading default dial 911. Part of the famous \u201ctroi\u00adka\u201d (along with the Euro\u00adpean Union and Euro\u00adpean Cen\u00adtral Bank) that engi\u00adneered the Greek bailout, they ner\u00advous\u00adly scan the hori\u00adzon for dis\u00adtress sig\u00adnals from Europe\u2019s periph\u00adery and our side of the Atlantic.<\/p>\n They have rea\u00adson for con\u00adcern. \u201cHigh debt ratios amid per\u00adsis\u00adtent\u00adly low growth in advanced economies,\u201d they write, \u201ccast clouds on the glob\u00adal fis\u00adcal land\u00adscape.\u201d Pub\u00adlic debt across the globe now stands at an \u201chis\u00adtoric peak\u201d \u2014 110 per\u00adcent of the world\u2019s annu\u00adal eco\u00adnom\u00adic out\u00adput and 35 points (47 per\u00adcent) above its 2007 lev\u00adel \u2013 and appears to be sta\u00adbi\u00adliz\u00ading there [p.4]. The report\u2019s rec\u00adom\u00admen\u00adda\u00adtions, if adopt\u00aded, would return that debt lev\u00adel to a more man\u00adage\u00adable 70 per\u00adcent \u2026 by 2030 [p. vii].<\/p>\n And if their rec\u00adom\u00admen\u00adda\u00adtions are ignored?<\/p>\n Main\u00adtain\u00ading pub\u00adlic debt at these his\u00adtoric peaks would leave advanced economies exposed to con\u00adfi\u00addence shocks and rollover risks and ham\u00adper poten\u00adtial growth [p. 4].<\/p><\/blockquote>\n Stag\u00adna\u00adtion, reces\u00adsion, default. Repub\u00adli\u00adcans, how\u00adev\u00ader ill-con\u00adceived and reck\u00adless their tac\u00adtics may be thought to be, do have a point: if default caused by polit\u00adi\u00adcal brinks\u00adman\u00adship is bad, default caused by insol\u00adven\u00adcy is far worse. Per\u00adhaps it\u2019s not so irre\u00adspon\u00adsi\u00adble to cou\u00adple an increase in gov\u00adern\u00admen\u00adt\u2019s short-term bor\u00adrow\u00ading author\u00adi\u00adty with a reduc\u00adtion in its long-term bor\u00adrow\u00ading needs.<\/p>\n The US<\/span> fis\u00adcal imbal\u00adance is worse than that of most oth\u00ader advanced economies. Our debt to GDP<\/span> ratio of 106 per\u00adcent exceeds that of the Euro\u00adzone, Cana\u00adda and the UK<\/span> [Table 2, page 6]. What the IMF<\/span> calls our \u201cfinan\u00adcial need\u201d \u2013 the amount, as a per\u00adcent\u00adage of GDP<\/span>, that a coun\u00adtry needs to bor\u00adrow each year to cov\u00ader bond redemp\u00adtions and annu\u00adal deficits \u2013 lags only that of Japan and Italy [Table 5, p. 15]. Our deficit, which the IMF<\/span> esti\u00admates to be 5.8 per\u00adcent of GDP<\/span>, is worse than that of Italy, Greece and Por\u00adtu\u00adgal [Table 1, p. 3].<\/p>\n When you\u2019re men\u00adtioned in the same breath as Italy, Greece and Por\u00adtu\u00adgal, you\u2019re run\u00adning with a bad motor\u00adcy\u00adcle gang. I under\u00adstand that, unlike them, we can print our own mon\u00adey and that the dol\u00adlar remains the world\u2019s reserve cur\u00adren\u00adcy, but that does not make our cred\u00adit\u00adwor\u00adthi\u00adness bullet-proof.<\/p>\n Still, not every\u00adone is as con\u00adcerned as the IMF<\/span> about our fis\u00adcal incon\u00adti\u00adnence. Paul Krug\u00adman<\/a> believes that we may have entered a new real\u00adi\u00adty in which the US<\/span> econ\u00ado\u00admy exhibits a \u201cper\u00adsis\u00adtent ten\u00adden\u00adcy toward depres\u00adsion.\u201d In this new eco\u00adnom\u00adic real\u00adi\u00adty \u201cvirtue is vice and pru\u00addence is fol\u00adly.\u201d Con\u00adgress and the Pres\u00adi\u00addent should agree to run big deficits and enlarge the fed\u00ader\u00adal debt load. The Fed\u00ader\u00adal Reserve should drop all plans for an \u201cexit strat\u00ade\u00adgy\u201d and instead con\u00adtin\u00adue with quan\u00adti\u00adta\u00adtive eas\u00ading and do its best to depress inter\u00adest rates. We should \u201cfor\u00adget all those scary sto\u00adries about gov\u00adern\u00adment debt.\u201d<\/p>\n The IMF<\/span>, which believes all those scary sto\u00adries about gov\u00adern\u00adment debt, hews to a more ortho\u00addox line. Their pre\u00adscrip\u00adtion has some\u00adthing to offend every\u00adone. Repub\u00adli\u00adcans will be cheered by the report\u2019s talk of enti\u00adtle\u00adment reform, Democ\u00adrats with its embrace of high\u00ader tax\u00ades (includ\u00ading an addi\u00adtion\u00adal 30 cents per gal\u00adlon tax on gaso\u00adline, p. 25) and its crit\u00adi\u00adcism of seques\u00adtra\u00adtion, which it calls \u201ca crude tool \u2026 with poten\u00adtial\u00adly unde\u00adsir\u00adable effects on the com\u00adpo\u00adsi\u00adtion of spend\u00ading and long-term growth\u201d [p. 15].<\/p>\n Tax reform, it states, should increase gov\u00adern\u00adment revenue:<\/p>\n In addi\u00adtion to enti\u00adtle\u00adment reform, a fun\u00adda\u00admen\u00adtal tax reform aimed at sim\u00adpli\u00adfy\u00ading the tax code and broad\u00aden\u00ading the base by reduc\u00ading exemp\u00adtions and deduc\u00adtions, as well as at high\u00ader tax\u00ada\u00adtion of fos\u00adsil fuels, could pro\u00advide new revenue.<\/p><\/blockquote>\n Tax reform has proven no less elu\u00adsive in the present polit\u00adi\u00adcal envi\u00adron\u00adment than enti\u00adtle\u00adment reform and the report is can\u00addid in acknowl\u00adedg\u00ading the dif\u00adfi\u00adcul\u00adties. Still, it argues that the US<\/span> is among sev\u00ader\u00adal advanced economies with a \u201cpos\u00adi\u00adtive rev\u00adenue gap\u201d [p. 27], their way of say\u00ading that our gov\u00adern\u00adment tax\u00ades too timidly.<\/p>\n And, like the Pres\u00adi\u00addent, they sug\u00adgest that the rich can tol\u00ader\u00adate addi\u00adtion\u00adal tax increas\u00ades, though observ\u00ading that this can be \u201ca con\u00adtentious polit\u00adi\u00adcal issue\u201d [p. 35] on which \u201crea\u00adson\u00adable peo\u00adple can dif\u00adfer\u201d [p. 34]. While acknowl\u00adedg\u00ading that wealthy peo\u00adple in advanced economies already pay a dis\u00adpro\u00adpor\u00adtion\u00adate share of tax\u00ades, they argue that gov\u00adern\u00adments would be bet\u00adter off if they paid a greater share still. They reck\u00adon that our \u201crev\u00adenue-max\u00adi\u00admiz\u00ading\u201d top rate is in the range of 55\u201370 per\u00adcent [Fig\u00adure 17, p. 37].<\/p>\n Tax\u00ading income at a high\u00ader rate can be jus\u00adti\u00adfied by income inequal\u00adi\u00adty, the report sug\u00adgests. It goes fur\u00adther in not\u00ading that wealth inequal\u00adi\u00adty is even more pro\u00adnounced in advanced economies than income inequal\u00adi\u00adty and is \u201carguably, a bet\u00adter indi\u00adca\u00adtor of abil\u00adi\u00adty to pay than annu\u00adal income\u201d [p. 38].<\/p>\n That leads to the report\u2019s dis\u00adcus\u00adsion of ways that gov\u00adern\u00adment can do more to tax wealth \u2013 prop\u00ader\u00adty tax\u00ades, trans\u00adac\u00adtion tax\u00ades, death tax\u00ades, and recur\u00adrent tax\u00ades on net wealth [pp. 38\u201340]. The report notes that if the US<\/span> imposed a recur\u00adrent tax on the wealth of the top 10 per\u00adcent of house\u00adholds, it would raise the equiv\u00ada\u00adlent of 3.1 per\u00adcent of GDP<\/span> [Table 12, p. 41]. And while ini\u00adtia\u00adtives to insti\u00adtute such tax\u00ades would face \u201cdif\u00adfi\u00adcul\u00adties that should not be under\u00ades\u00adti\u00admat\u00aded, over the longer term they have the poten\u00adtial to make much fair\u00ader tax sys\u00adtems\u201d [p. 40].<\/p>\n If recur\u00adrent tax\u00ades on wealth are fair, one-time tax\u00ades on wealth must sim\u00adi\u00adlar\u00adly be fair, and could be more work\u00adable in the bar\u00adgain. Which brings us round to the report\u2019s dis\u00adcus\u00adsion of a one-off tax on pri\u00advate wealth:<\/p>\n The appeal is that such a tax, if it is imple\u00adment\u00aded before avoid\u00adance is pos\u00adsi\u00adble and there is a belief that it will nev\u00ader be repeat\u00aded, does not dis\u00adtort behav\u00adior \u2026 The con\u00addi\u00adtions for suc\u00adcess are strong, but also need to be weighed against the risks of the alter\u00adna\u00adtives, which include repu\u00addi\u00adat\u00ading pub\u00adlic debt or inflat\u00ading it away (these, in turn, are a par\u00adtic\u00adu\u00adlar form of wealth tax\u2014on bondholders\u2014that also falls on non\u00adres\u00adi\u00addents) [Box 6, p. 49].<\/p><\/blockquote>\n A one-time levy, the report argues, if swift\u00adly exe\u00adcut\u00aded, won\u2019t give the rich time to move their mon\u00adey beyond the taxman\u2019s grasp. And if wealthy cit\u00adi\u00adzens gen\u00aduine\u00adly believe that gov\u00adern\u00adment would nev\u00ader do it again, such a tax won\u2019t induce tax-avoid\u00adance behavior.<\/p>\n The report also reminds us that there is no pain\u00adless way out of gov\u00adern\u00adment debt crises. A gov\u00adern\u00adment that can no longer meet its oblig\u00ada\u00adtions has to screw some\u00adbody and that some\u00adbody is ordi\u00adnar\u00adi\u00adly the peo\u00adple and insti\u00adtu\u00adtions that have lent it mon\u00adey. Either the gov\u00adern\u00adment deval\u00adues its cur\u00adren\u00adcy, mean\u00ading that it repays bond\u00adhold\u00aders in mon\u00adey that is worth much less than what it bor\u00adrowed or it reneges more direct\u00adly, by refus\u00ading to pay lenders what it owes. The \u201chair\u00adcuts\u201d that bond\u00adhold\u00aders last year took on Greek debt (they were, in effect, repaid 26 cents<\/a> on each dol\u00adlar they lent the Greek gov\u00adern\u00adment) is a recent exam\u00adple. Why not spare bond\u00adhold\u00aders, many of whom are not cit\u00adi\u00adzens and had no voice in elect\u00ading the gov\u00adern\u00adment, and instead avert default by con\u00adfis\u00adcat\u00ading the wealth of your own cit\u00adi\u00adzens? That, the report notes, \u201cmay be seen by some as fair\u201d [Box 6, p. 49].<\/p>\n That con\u00adcep\u00adtion of fair\u00adness, that peo\u00adple who earn more and who are worth more should pay more in order to ease the government\u2019s debt bur\u00adden \u2013 that Robin Hood should rob from the rich to give to the Sher\u00adiff of Not\u00adting\u00adham \u2013 is a curi\u00adous one. IMF<\/span> acknowl\u00adedges that enti\u00adtle\u00adment pro\u00adgrams are among the lead\u00ading caus\u00ades of government\u2019s fis\u00adcal imbal\u00adance. Such pro\u00adgrams trans\u00adfer mon\u00adey from those who have earned it or accrued it through their invest\u00adments to those who have not. The rich already bear a dis\u00adpro\u00adpor\u00adtion\u00adate share of these pro\u00adgrams\u2019 costs. Now that enti\u00adtle\u00adments are jeop\u00adar\u00addiz\u00ading government\u2019s abil\u00adi\u00adty to repay its debts, it is sug\u00adgest\u00aded that peo\u00adple with high incomes (or wealth) pay more so that the gov\u00adern\u00adment can con\u00adtin\u00adue to bor\u00adrow suf\u00adfi\u00adcient sums to sus\u00adtain enti\u00adtle\u00adment spend\u00ading. Could it not also be rea\u00adson\u00adably argued that it is unfair to require them to pay more than the dis\u00adpro\u00adpor\u00adtion\u00adate share they\u2019re already paying?<\/p>\n The idea that it is fair seems to stem from the idea that if some\u00adone \u2013 whether an indi\u00advid\u00adual with low wages or a gov\u00adern\u00adment that has bor\u00adrowed improv\u00adi\u00addent\u00adly \u2013 needs mon\u00adey, then it\u2019s fair for gov\u00adern\u00adment to take it away from some\u00adone who has it.<\/p>\n That con\u00adcept of fair\u00adness has its roots in grow\u00ading inequal\u00adi\u00adty of income and wealth<\/a>. That inequal\u00adi\u00adty, as the IMF<\/span> report [Fig\u00adure 20, p. 39] and oth\u00ader stud\u00adies have shown, is not a unique\u00adly Amer\u00adi\u00adcan phe\u00adnom\u00ade\u00adnon. It is also a char\u00adac\u00adter\u00adis\u00adtic of Euro\u00adpean economies, where gov\u00adern\u00adment tax\u00ades more aggres\u00adsive\u00adly, pro\u00advides \u201cfree\u201d health care, and pur\u00adsues a more robust redis\u00adtri\u00adb\u00adu\u00adtion\u00adist agen\u00adda. Tax\u00ading more and spend\u00ading more has not eased inequal\u00adi\u00adty in Europe. Indeed, a recent study showed that Euro\u00adpean wealth-to-income ratios<\/a> have returned to lev\u00adels not seen since the eigh\u00adteenth and nine\u00adteenth centuries.<\/p>\n Inequal\u00adi\u00adty has late\u00adly been joined with Krug\u00adman\u2019s sense that our econ\u00ado\u00admy has a \u201cper\u00adsis\u00adtent ten\u00adden\u00adcy toward depres\u00adsion.\u201d Though they (like me) lack Krug\u00adman\u2019s eco\u00adnom\u00adic sophis\u00adti\u00adca\u00adtion, many peo\u00adple seem to share his view that high rates of job\u00adless\u00adness and tepid growth are the new nor\u00admal. You are much more like\u00adly to resent the wealthy if you feel that your cir\u00adcum\u00adstances may nev\u00ader improve.<\/p>\n The extra\u00ador\u00addi\u00adnary gov\u00adern\u00adment inter\u00adven\u00adtions that have occurred since 2008 seem to have had done lit\u00adtle to improve the lot of work\u00ading peo\u00adple. There is a strong case to be made that they have exac\u00ader\u00adbat\u00aded inequal\u00adi\u00adty. The growth of gov\u00adern\u00adment has pro\u00adduced pros\u00adper\u00adi\u00adty pri\u00admar\u00adi\u00adly around the Wash\u00ading\u00adton Belt\u00adway<\/a>. Its mon\u00ade\u00adtary inter\u00adven\u00adtions, accord\u00ading to the for\u00admer Fed\u00ader\u00adal Reserve offi\u00adcial who over\u00adsaw the first round of quan\u00adti\u00adta\u00adtive eas\u00ading, con\u00adsti\u00adtute the \u201cgreat\u00adest back\u00addoor Wall Street bailout of all time<\/a>.\u201d It is no acci\u00addent that 8 of the 10 US<\/span> coun\u00adties <\/a>with the high\u00adest per capi\u00adta income are sub\u00adurbs of Wash\u00ading\u00adton or Wall Street.<\/p>\n The nox\u00adious com\u00adbi\u00adna\u00adtion of inequal\u00adi\u00adty and stag\u00adna\u00adtion has fed the resent\u00adment that sees tax increas\u00ades as a way to set\u00adtle the score. Mak\u00ading the rich pay is thought fair even if it nei\u00adther stim\u00adu\u00adlates the econ\u00ado\u00admy nor reduces inequal\u00adi\u00adty. As White House eco\u00adnom\u00adic advis\u00ader Jason Fur\u00adman once con\u00adfid\u00aded, the Pres\u00adi\u00adden\u00adt\u2019s pro\u00adposed min\u00adi\u00admum tax on mil\u00adlion\u00adaires \u201cwas nev\u00ader our plan to bring the deficit down and get the debt under con\u00adtrol<\/a>.\u201d Though it served at best a neg\u00adli\u00adgi\u00adble fis\u00adcal pur\u00adpose, it was good because it was \u201cfair.\u201d<\/p>\n Though I\u2019m not gen\u00ader\u00adal\u00adly com\u00adfort\u00adable with that con\u00adcep\u00adtion of fair\u00adness, I must admit that the IMF<\/span> report has pro\u00advid\u00aded a sat\u00adis\u00adfy\u00ading out\u00adlet for my own resentments.<\/p>\n My back-of-the-enve\u00adlope cal\u00adcu\u00adla\u00adtion is that the US<\/span> would have to tax net pri\u00advate wealth at a rate of 7.25 per\u00adcent to reduce its debt-to-GDP ratio to 70 per\u00adcent. Bill Gates\u2019 prod\u00aducts have earned him a for\u00adtune while caus\u00ading me untold vex\u00ada\u00adtion and frus\u00adtra\u00adtion. He has amassed an esti\u00admat\u00aded net worth of $67 bil\u00adlion<\/a>. I am worth much less, and must take blood pres\u00adsure med\u00adica\u00adtion, a con\u00addi\u00adtion that I attribute at least in part to the dai\u00adly irri\u00adta\u00adtion that his prod\u00aducts inflict. A one-time tax of 7.25 per\u00adcent on that $67 bil\u00adlion would cost him $4,857,500,000. Sounds fair to me.<\/p>\n Just sayin\u2019.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The Inter\u00adna\u00adtion\u00adal Mon\u00ade\u00adtary Fund (IMF<\/span>) recent\u00adly report\u00aded that Euro\u00adpean gov\u00adern\u00adments could reduce their debt back to pre-Great Reces\u00adsion lev\u00adels by con\u00adfis\u00adcat\u00ading 10 per\u00adcent of the wealth held by their rich\u00adest cit\u00adi\u00adzens. IMF<\/span> isn\u2019t rec\u00adom\u00admend\u00ading that, of course. They\u2019re just sayin\u2019.<\/p>\n","protected":false},"author":3,"featured_media":1599,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[479,12,18,17,25,371,14,13,690],"tags":[281,691,40,1182,24,84,688,642,41,425,23,104,689,22],"class_list":["post-1596","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget","category-debt-ceiling","category-economy","category-entitlements","category-european-central-bank","category-federal-reserve-economy","category-global-economy","category-sequestration","category-taxes-2","tag-bailouts","tag-bill-gates","tag-ecb","tag-european-central-bank","tag-european-union","tag-federal-reserve","tag-government-debt","tag-government-default","tag-imf","tag-inequality","tag-international-monetary-fund","tag-paul-krugman","tag-tax-reform","tag-troika"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t