tax

IMF: Raise Taxes on the Rich, Lower Taxes for Everyone Else

- Adam Clare

Interview

Historically, the International Monetary Fund (IMF) argued for lower taxes for everyone, particularly those that need it the least: the wealthy. Due to increases in multiple forms of inequality since the last global recession the IMF has changed its tune. The institution now calls for countries around the world to implement a wealth tax while lessening the financial burden on workers through tax breaks. They argue that by doing so we can fend off a global depression.

For individuals, the IMF encouraged slashing payroll taxes as well as cash transfers to help those hardest hit with job losses or other circumstances.

The IMF’s recommendation for a wealth tax marks a stark turnaround for an institution that long pushed tax cuts as a central element of its policy menu for developing nations. It serves as a lender of last resort to countries in dire financial straits.

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British Columbia’s Carbon Pricing Works Well

- Adam Clare

carbon output

British Columbia shows carbon pricing works while another province looks uselessly backwards.

The regressive and antidemocratic Ontario “conservative” government is set to sue the Canadian government for protecting the environment. The argument by the Conservatives is basically that an economy allowed to inefficiently consume non-renewable resources is good and that sustainable policy (carbon pricing) is bad. Yes, it’s as ludicrous as it sounds.

Hopefully this wasteful battle between governments ends in the environment’s favour. If Ontario just followed British Columbia’s lead this wouldn’t be an issue and arguably the economy would be in better shape. In B.C. the carbon pricing has reduced emissions while making a more energy efficient economy. Sustainable businesses are seeing growth in B.C. that they wouldn’t see elsewhere.

“This carbon tax is a model for the world that well-designed carbon pricing can be good for the environment and the economy. In the 11 years since B.C. brought in its carbon tax, it’s outpaced the rest of Canada both on emission reduction and GDP growth,” said Stewart Elgie, a professor of law and economics at the University of Ottawa.

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In the meantime, numerous researchers have tried to determine the impact of the tax. According to a 2015 paper, B.C.’s emissions had dropped by between five and 15 per cent since the tax was implemented, and it had a “negligible impact” on the overall economy.

Elgie, of the University of Ottawa, was part of a wide-ranging 2013 study that showed a 19 per cent drop in B.C.’s per capita fuel consumption in the first four years of the tax, while the province’s economy slightly outperformed the rest of the country.

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The Panama Papers Worked

- Adam Clare

money

Tax evasion is a problem in every country and it’s up to teams of investigative journalists to expose mass illegal international operations. A few years ago the Panama Papers exposed an efficient tax dodging operation by a large group of wealthy people. The results of the exposure from the Panama Papers has led to millions being collects in countries with more results coming in.

Not only did the Panama Papers catch a bunch of criminals it also proves investigative journalism works.

More than a dozen people are in prison or awaiting sentencing in Ecuador, the United States and Panama for their roles in a bribery scheme at the Ecuadorian state petroleum company that was exposed in the huge document leak.

In South Korea, the leak led to bribery indictments against a former army general and a former executive of a major defence company.

And in Pakistan, former prime minister Nawaz Sharif has been serving a seven-year sentence after the Panama Papers revealed assets his family had hidden overseas. He is appealing his conviction, calling the charges against him politically motivated.

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Fight Inequality by Taxing Corporations

- Adam Clare

happy workers in a factory

Unless you earn more then $200,000 a year corporate tax cuts likely make your life worse. Even though it’s a myth, it’s long been argued that by cutting taxes for wealthy companies jobs will magically pop into existence. Indeed, this myth is so pervasive in modern capitalism that we’re increasing inequality as a byproduct of supporting tax cuts. The good news is that the discourse is changing. Every year there’s more evidence that helping the 1% is detrimental to the rest of society and people are growing more aware of this. This month the Harvard Business School released their research on corporate tax cuts.

In the paper Corporate Tax Cuts Increase Income Inequality (pdf), Rouen and his collaborators, Duke University professors Suresh Nallareddy and Juan Carlos Suárez Serrato, analyze data created by tax filings to compare effects on workers at varying compensation levels in different US states with and without tax cuts.

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“Compensation and income inequality are very relevant to managers,” Rouen says. “This is something that they’re now having to deal with in terms of SEC disclosures and having to disclose CEO pay ratio. Active managers are often the face of income inequality, in that these are the people who set the pay for everyone else and also are the highest paid employees in their organizations.”

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Thanks to Delaney!

California Launches Improved Reverse Income Tax Scheme

- Adam Clare
work and smile

California’s welfare system (EITC) includes subsidies sent annually for people living without income and that’s about to change. Under new rules the money given to people who earn less than minimum wage will be sent monthly. This is really good since it provides a stable, reliable, and regular sum every month; in theory this will reduce stress for the recipients.

The plan is more like reverse income tax than it is universal basic income. Regardless, it’s good to see one the world’s largest economies delivering financial care in a more efficient manner.

“The typical pattern with the EITC is that you get deeper and deeper into debt over the course of a year,” Ruben says, “and then you use the big payment at tax time to try to pay everything off and break even.” Giving people the option to receive the credit on a monthly basis will help people plan their budgets on a more immediate basis. Benefits like food stamps are delivered monthly, so families receiving both will have a more accurate sense of their financial landscape. And in months when a household finds itself on more stable financial footing, they might be able to put some of the tax credit money aside in savings. “What we’re seeing is the idea of the importance of a steady drumbeat of financial security throughout the year,” Ruben says.

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Newsom’s budget proposal aims to tackle these challenges. It will raise the household income threshold to over $30,000 (or what someone would take home working full-time at the projected $15 per hour minimum wage) to include more families. And the expanded funding will grant parents with children under six an additional $500 per year. That may not seem like a lot, Ruben says, but in focus groups run by the ESP over the past year, one woman said anyone who looks at that money and responds in that way “has never had to choose between paying rent and buying food.”



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