In January, the International Monetary Fund (IMF) published a paper named Fiscal policy and income inequality.

In short, it confirms that inequality has increased and that a bit more taxation on wealth and better targeted spending on health and education would help to resolve it.

But there are two fundamental omissions: the scope and fairness of taxation.

In a presentation of the paper, David Lipton, First Deputy Managing Director of the IMF, said: “How much redistribution the state should do is, at its core, a political choice that economic analysis cannot answer”.

But since when does the IMF stay out of politics?

The IMF was – and still is – a staunch advocate of privatising public services in sensitive areas such as health care, education and pensions, as well as the tightening of eligibility criteria for social security and unemployment benefits.

Lipton’s comment does not stand up to evidence – even the paper highlights the “support [of] macroeconomic stability” as a primary objective of fiscal policy and acknowledges that “[t]here is growing evidence that high income inequality can be detrimental to achieving macroeconomic stability and growth”.

In short, the strength of redistribution heavily impacts on inequality, which in turn determines macroeconomic stability – the IMF’s core mandate.

However, the institution tends to shy away from drawing the right conclusions and labels the size of redistribution as “a political choice”.

This is economically inconsistent.

Doing research on the impact taxation has on inequality without considering the amount of said taxation is like discussing the quality of a car without mentioning the engine.

The shrinking redistribution effect of tax and transfer systems was widely documented by the Organisation for Economic Co-operation and Development (OECD). As causes, the OECD mentions “changes in [the] receipt patterns and generosity” of benefits.

“There is nothing inevitable about growing inequalities,” writes the OECD.

“Globalisation and technological changes offer opportunities but also raise challenges that can be tackled with effective and well-targeted policies. Regulatory reforms can be designed in such a way that they make markets more efficient and encourage employment while reducing inequalities at the same time.”

The second issue dodged by the IMF is fairness.

According to the IMF’s own data, tax revenues in advanced economies accounted for a total of roughly 33 per cent of GDP in 2011.

Incomes generated roughly half of these revenues, while corporates shouldered only slightly above 10 per cent – yet recommendations remain silent about the taxation of business and the financial sector.

The fact is that it is not money that is lacking, but the will of the top one per cent to return to a fair tax distribution.

The game the IMF is playing looks like what economist Thomas Palley describes as “Gattopardo economics” – the illusion of change created by the elite to keep things the same.

Furthermore, it seems as if the economic science has lost the ability to guide politicians by reflecting upon policy outcomes because reality itself has become a matter of politics.