The International Monetary Fund (IMF) is looking to pursue ‘solidarity surcharge,’ a policy that allows governments to implement wealth taxes, as a solution to raise funds amid the pandemic.
Earlier this month, the IMF has issued a policy paper urging policymakers to consider the implementation of wealth taxes.
The initiative appears to be an aggressive turnaround for an organization that prioritizes tax cuts in its policy menu.
Solidarity surcharge to alleviate the pandemic’s economic impact
As recession looms globally, the IMF, in its latest policy paper, has urged governments to consider implementing new tax policies to raise income as the COVID-19 pandemic hammers the economy worldwide.
In IMF’s Special Series on COVID-19 notes under “Tax Issues,” the institution called on policymakers to review the solidarity surcharge model, a measure that involves ramping up the property, income, and wealth taxes.
Using the said measure, the government should decrease payroll taxes and cash transfers to help hardest-hit individuals, particularly those who lost their jobs due to the health crisis.
“Inequality of opportunity. Inequality across generations. Inequality between women and men. And, of course, inequality of income and wealth. They are all present in our societies and – unfortunately – in many countries, they are growing.”
The organization was forced to shift its focus and start proposing new measures after discovering a slow growth in closing the gap between the rich and the poor, according to The Guardian.
Exceptional measures might be needed
On Monday, April 20, Georgieva shared the organization’s plan to propose “exceptional measures.”
The initiative was decided to help hard-hit countries — particularly developing and vulnerable nations — to alleviate the economic effects of the pandemic.
The need for new policies came up following the IMF’s economic forecast.
Based on the institution’s data, the pandemic could lead the entire world to an economic meltdown, citing a 3% decline of global GDP this year.
Senators Sanders and Warren helped to introduce wealth taxes to the public
In the U.S., both Democratic Senators Bernie Sanders and Elizabeth Warren helped in uncovering the importance of wealth taxes through their presidential campaigns, pushing the idea into the mainstream media.
Both presidential candidates wanted to implement wealth taxes to curb inequality and utilize rich people’s fortunes to fund an accessible healthcare system and rid of student debts.
On the one hand, the U.S. government had already exhausted over US$6 trillion [AU$9 trillion] in response to economic relief to individuals and businesses in forms of unemployment benefits, grants, and stimulus checks, according to the Washington Post.
Some variations of the said wealth tax policy reportedly can be utilized to cover federal spending amid the pandemic.