The International Monetary Fund (IMF) has raised concern over the risk that the United States’ rising public debt to GDP ratio will pose to the global economy and has urged the President Joe Biden administration to raise tax on residents earning below $400,000.
Americans whose income falls short of $400,000 are immune to tax hikes.
The IMF raised the alarm in its Article IV Consultation for the country, seen by NewsNGR.
The US debt has hit $34.9tn, according to the latest data from the Treasury Department.
IMF directors noted in their assessment that there was a pressing need to reverse the ongoing increase in public debt.
The Washington-based lender said the general government fiscal deficit and debt are both projected to remain well above prepandemic forecasts over the medium-term.
The IMF directors said “Such high deficits and debt create a growing risk to the U.S. and global economy.”
The Directors emphasized the need for the US to embark on a frontloaded fiscal adjustment, through both revenue and spending measures.
The directors also urged Washington to redirect some of the fiscal savings to programs to alleviate poverty.
To put debt-GDP on a clear downward trajectory, the directors said, “Fiscal adjustment will be needed that shifts the general government to a primary surplus of
around 1 percent of GDP (an adjustment of around 4 percent of GDP relative to the current baseline).
“There are various options to achieve this adjustment over the medium-term including
raising indirect taxes, progressively increasing income taxes (including for those earning less than US$400,000 per year), eliminating a range of tax expenditures, and reforming entitlement programs.”
But the White House said, “Biden’s Budget will cut taxes for working families and lower deficits by trillions of dollars over a decade by making the wealthy and big corporations pay their fair share—and no one earning less than $400,000 per year will pay a penny in new taxes.”