I’m not a big fan of the International Monetary Fund, largely because the folks in charge oftentimes advocate toxic policies such as bailouts, higher taxes, and currency devaluation.
But there are some top-rate economists working at the IMF, and the bureaucracy has published some good studies about the economic benefits of reducing government spending and others warning that tax increases can be self defeating (by the way, too bad we can’t get the Joint Committee on Taxation to also acknowledge the Laffer Curve).
Now the IMF has a new study about the relationship between economic growth and different types of taxes. Those finding are interesting, and I may even write about them in the next few days, but I want to focus on some amazing data from this research that shows exactly why proponents of limited government should resist the value-added tax.
These charts are taken from page 10 of the IMF study and they depict changes, over the past several decades, for both personal income tax (PIT) revenues and consumption tax revenues, both measured as a share of economic output. The charts are divided to show trends in low-income countries, middle-income countries, and high-income countries.