New Stripes or Same Tiger? IMF Frames of Progressive Taxation and Its Effects

• In Event: The Global Economy and the Welfare State

Abstract

Broadly dismissed in the Washington Consensus period, progressive taxation is gaining traction as a legitimate policy tool in the International Monetary Fund. Drawing evidence from IMF policy documents, Fund staff interviews, and analysis of the American Economics Review and the AEA Papers and Proceedings from 2010-2020, this paper identifies three major variables explaining this shift and their effects. First, the framing of progressive taxation developed in a manner consistent with the Fund’s technocratic culture. Second, recent shifts in the ‘common sense’ of mainstream economics around issues of inequality helped move redistributive fiscal policy into a legitimate policy terrain for IMF staff. And third, the legitimacy of redistributive fiscal policy, including progressive taxation, is further amplified by the institution’s role in managing a growing list of destabilizing global economic and political indicators. However, the Fund remains primarily focused on tax efficiency, not redistribution, in both its new calls for ‘inclusive growth’ and support for the SDGs. And when progressive taxation is supported, it is coupled with spending on time-limited benefits rather than universal safety nets or more robust welfare policies. This reinforces institutional incoherence and arguably distrust between the IMF and its member-states.

Author

• Mark Hibben, Saint Joseph's College of Maine