Thread by @Reuters

Increased tax rates could be a positive for markets and governments as they look to manage debt accumulated over the last year and to reduce inequality, which has reportedly limited growth according to the IMF reut.rs/3lEUbb3 1/8

In both the U.S. and UK, governing parties have begun work on raising taxes. The tax rises won’t be welcomed by rich individuals, and has prompted Wall St investment banks to cut their 2022 forecasts 2/8

Yet, most investors and economists appear unperturbed and some even say targeted tax hikes that reduce burgeoning inequality will benefit markets in the longer-term. While there appears to be little appetite for a return to the ‘austerity’ policies of a decade ago 3/8

So far, investors note, efforts to raise personal taxes in major Western economies have been modest and won't necessarily knock economic growth and equities markets. Plus, redistribution may even support growth 4/8

However, global indebtedness, including government, household and corporate and bank debt, sits at nearly $300 trillion, the Institute of International Finance estimates, with $4.8 trillion added in the second quarter of 2021, much of which was financed by central banks 5/8

Nonetheless, the past year showed in fact how effective targeted spending can be; pandemic aid programmes cut U.S. poverty rates by almost half compared to 2018 levels, an Urban Institute study found 6/8

The crisis also shone a light on the wealth gap: figures quoted by Oxfam show the world's billionaires got $3.9 trillion richer between March and December 2020 7/8

A study presented at this year's U.S. Jackson Hole conference posited that income inequality exacerbated downward pressure on bond yields, since the wealthy usually save a bigger portion of their income.

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