IMF backs new taxes on corporations and the wealthy, furthering organization's historic shift

• Increasing taxes on the wealthy and corporations could help the global economy rebound.
• That's according to officials at the International Monetary Fund, who say it could level playing fields.
• This further cements the IMF's shift toward progressive economics, as wealth taxes grow in popularity.

Lifting taxes on wealthy individuals and corporations could improve the global rebound from the coronavirus recession, officials at the International Monetary Fund said Wednesday.

New stimulus and an improved rate of vaccination led the IMF to raise its global growth forecast earlier in the week, but the organization is already looking beyond the initial rebound. Governments will eventually need to retract their fiscal support to avoid possible debt risks. Balancing stimulus with austerity will be a key challenge in the coming years, and reforming both domestic and international taxes can help bring about a more equitable and environmentally friendly economy, the IMF said.

"To help meet pandemic-related needs, a temporary COVID-19 recovery contribution levied on high incomes is an option," a team led by Vitor Gaspar, director of the fiscal affairs department at the IMF, said. "Over the medium term, revenue collection should be bolstered, especially in low-income developing countries, which could help finance development needs."

The contribution could emerge as a surcharge on the personal income tax or the corporate income tax, Gaspar said in comments to reporters, according to Bloomberg.

The statement marks a major contrast with past IMF statements. The organization previously preached the neoliberal themes of cutting government spending and lowering taxes as ideal for economic growth. Critics have often accused the IMF of pushing austerity that stifled growth, particularly in developing economies.

The institution's tone changed after the global financial crisis, and this marks further evolution on its part.

The IMF stressed its mixed outlook for the recovery in emphasizing the need for greater tax revenue. The organization now sees the global economy expanding 6% in 2021, up from the previous estimate of a 5.5% bounce. Growth in 2022 was also revised higher in the IMF's latest outlook report. Hefty fiscal stimulus - particularly in advanced economies - will help the pandemic recession leave smaller scars than the financial crisis, the IMF said.

Yet emerging economies and those with less flexibility in passing fiscal stimulus are lagging their larger peers, the organization added. The IMF estimates that 95 million more people fell into extreme poverty last year than would have without a pandemic.

The world economy's plodding rebound from the 2008 downturn led the IMF to accept it had underestimated the importance of fiscal policy in driving growth. Now, with major economies erring on the side of overfilling the hole in the economy, the IMF has called for prolonged fiscal support in tandem.

Tax hikes, as well as health care investments and employment programs, can help even the playing field between large and still-struggling economies, the organization said.

"Governments have gone to exceptional lengths to shore up their economies, but further work is needed to get ahead of the COVID-19 pandemic, provide flexible yet targeted support now, adjust when a recovery is firmly in place, and set the stage for a greener, fairer, and more durable recovery," the IMF said.

"Until the pandemic is brought under control, however, fiscal policy will have to remain flexible and supportive," the IMF said Wednesday.

One-off wealth taxes have gained traction worldwide

A wealth tax to address the fallout of the coronavirus pandemic isn't necessarily a remote possibility. In fact, Argentina has already passed a one-off millionaire tax, which would target the top 0.8% of the population. It could raise up to $3 billion, according to the BBC, and will help pay for COVID relief measures.

In December, a panel of experts also called for a one-off wealth tax in the UK. Their proposal was a simple 1% tax for five years on individual wealth over £500,000. That Wealth Tax Commission found that such a levy could raise just around £260 billion (around $357 billion). It's not without precedent, as the UK has had one-off taxes before, although that proposal might meet resistance from the UK's Conservative Party.

In the US, there's Sen. Elizabeth Warren's Ultra-Millionaire Tax Act. It targets households with a net worth between $50 million and $1 billion, who would see a 2% tax, and those with a net worth over $1 billion would be taxed 3%. That's not a one-off measure, but it could raise $1.4 trillion over 10 years.

Some of the ultrawealthy who would have to pay up have asked for their taxes to be increased. In July 2020, 83 millionaires around the world asked their governments to tax them more in an effort to offset the pandemic's economic damages.