Lower taxes don’t help growth | Concluded …

Reforms that reduce taxes for the rich lead to greater income inequality and do not no significant effect on economic growth or unemployment. This is clear from a paper published by the International Institute of Inequalities, London School of Economics, which uses data from 18 OECD countries over the past 50 years. The document is released a week after the same think tank introduced a wealth tax that could bring in $ 260 billion in five years.

The paper, titled “The Economic Consequences of Major Tax Cuts for the Rich”, was produced by researchers David Hope, of the London School of Economics, and Julian Limberg, of King’s College London. Research shows that the last five decades (1965-2015) have been period of lower taxes on the rich in advanced economies, in particular at the end of the 80s. In the bibliography and the series cited, the research of the French economist Thomas Piketty is repeated.

“Our research shows that the economic case for keeping taxes on the rich is weak,” Hope said. On a related note, the Limberg added: “Our findings could be good news for governments looking to fix public finances after the COVID-19 crisis, as they imply they shouldn’t be too sore. ‘worry about the economic consequences of taxes. high for the rich. “

The paper first examines the impact of income tax cuts: three years after the reforms, the income share of the richest 1% increases by almost 0.6 percentage point. Five years later, it has reached 0.8 percentage point. “The results show that large tax cuts lead to a significant increase in inequality, and this effect grows stronger over time,” the document describes.

“Our results are in line with those of Piketty (2014), who suggests that lowering taxes for the rich encourages the richest to negotiate harder to increase their own remuneration, to the direct detriment of the lowest. in the distribution of income ”, adds the text.

Next, the research examines the impact on economic growth and unemployment. “The results suggest that tax reforms do not lead to higher economic growth, and the effect on GDP per capita is close to zero and statistically insignificant, ”he describes. A similar situation occurs with unemployment. “In the years immediately following the reform, the point estimate becomes negative, and in the medium term, close to zero”, indicates the text.

During the article, the researchers refer to the global debate What about the application of an extraordinary wealth tax, as Argentina has done or as Spain and Bolivia plan to do: “Our results have important implications for the debates current, because they provide causal evidence that lowering taxes on income share higher, but has little effect on economic performance. ”

In fact, in early September, the Wealth Tax Commission, led by prestigious economists from the London School Of Economics / University Of Warwick, presented the UK with a proposal to tax net worth by 1% for one time. a household with an income of £ 1 million. With a repayment term of up to five years, they estimate it could raise £ 260 billion. Arun Advani, one of the researchers, explained: “Very often we are told that the only way to get significant tax revenue is income tax or VAT. This is not the case, so it is a political choice where to find the money ”.