14 November 2006

GST: Reshuffling the Cards of Wealth?

Okay, the bomb is out, and the blogosphere is, expectedly, buzzing like a disturbed hive. The primary reason outlined for the hike is

to finance the enhanced social safety nets, needed to help the lower income group

That sounds great, huh? Why then is the blogosphere so angry? Is it an instinctive response to blast any penalising policies of the hegemonic government, or are they seeing something I cannot? Seriously, if we raise taxes to help the poor and bridge the rich-poor divide which is dangerously becoming a threatening social issue, what's wrong with that?

Unless you're in financial difficulties, the rise in GST won't pose much problems for you. Certainly with my stingy lifestyle, it will be the least of my worries. Of course, the poor still has to buy stuff and hence the increase will affect them, but as mentioned, there are social nets that'll help them overcome this barrier. Furthermore, it is usually the more affluent that makes more purchases, so they will be the one who pay more. And if this money they pay gets channeled back to the poor, then isn't that a good idea?

Of course, there are better ways to fund this purpose, specifically a rise in income tax instead of GST. However, income tax hikes will pinch the richer citizens much harder than a rise in GST, and since most (if not all) of the MPs and ministers earn five digit salaries every month, they naturally won't support such a motion. (This assumes that our MPs and ministers are selfish, which I see no reason why not to, given our fanatically meritocratic and elitist system. It's no use challenging this assumption; it is a fact of reality.) So that leaves GST as the second best option available (enlighten me, anyone, of better plans that I've missed).

That is not to say I support the hike, however, at least not yet. The principle of the hike is good, but I must wait for the details first before deciding if I really agree with the hike. It is no use if the "safety nets" mentioned is just an appeasing farce, an empty gesture. It is redundant if these nets have holes big enough for the likes of Tan Jee Suan to fall through. In another words, my official stand is: I'm neutral with the hike; I need to see the details before making my decision.


gecko said...

"are they seeing something I cannot? "

Hi Pandemonium,

The blogosphere is here to help you gain new insights. Reading the thoughts of other bloggers gives you viewpoints you could never get from mainstream media.

Sometimes, the instincts of the masses run counter to the calm collected thoughts of a select few on the blogosphere. Keep reading and you will gain better understanding.


Pandemonium said...

Hi gecko!

I browsed through some of the articles posted on Intelligent Singaporean's digest for today (it was up after I've posted my entry). In general, most of the unhappiness with the hike was that it won't help the poor. I find this weird as one of the chief aims of the hike was to fund policies to help them in the first place.

Of course I could be wrong, and that the government is just using that reason to cushion the people's resentment, while in truth it was meant to compensate for the drop in corporate taxes. However, we'll never know if that's true or false at this point of time, which is my stand to wait for details first before commenting.

Anyway, I do not read The Straits Times or watch ChannelnewsAsia. Worthy articles will be put up by other bloggers anyway, so I maximise my time by reading blogs instead.

The Negative Man said...

My objection to the hike lies only in my general disfavor of any form of involuntary wealth redistribution.

People should be encouraged to help the poor according to their concience, instead of being forced to help the poor.

In any case, if there was a choice between increasing income tax rates or increasing GST rates, I would choose the former. Any consumption tax tends to disporportionately hurt the poor.

Pandemonium said...

I see... I suppose it is clear that I do support a certain level of forced "social levelling".

Admittedly, however, I still see no reason why people are kicking such a big fuss over the matter at this moment.

warhammer said...

Our government is hegemonic? I always tot it was monolithic, nvm hah.

How's the GST hike suppose to help the poor? I don't even see how it's suppose to work.

The money is meant to be channeled back to the lower income sections of the population but already the process for this leaves a lot to be desired, there's tons of schemes to help the poor but no one knows they exist or how they work.

At least with income tax brackets you specifically target the filthy rich.

Pandemonium said...

Haha, monolithic...

Okay, serious stuff. Now, big question: how does the GST hike help the poor? I can easily think of a simple method that will make this GST hike help the poor. It all lies in the great big mysterious unknown offset package.

Suppose the offset package will supplement monthly the poor by, say, giving those households which earn less than $3000 a month with a sum of $X, where X = (3000 - salary) / 3. So, e.g.

Salary / Supplement
$600 / $800
$1500 / $500
$2100 / $300
$1000000 / $0

Of course there's those unemployed and working part-time to consider, but those are details. Well, you get the idea: it is possible for the hike to help the poor. It all depends on the offset package. Which is why I hold the stand of not judging the hike until the details of the package are out.

(I presume the anti-involuntary wealth redistribution The Negative Man will be horrified at my suggestion.)

Ya, but I do agree that the welfare process needs lots of improvements. Holes have to be patched up and nets have to be widened. But that's another matter aside from GST hike, right?

As for income tax hike, on top of the selfish-MPs and ministers argument, I have another argument why this may not be as good. An income tax hike have holes which let people slip through, e.g. my parents (OOPS!). Since they're retired but has a nice sum to keep them comfortable, even if the income tax shoots to 100%, it'll not affect them at all. But GST is one tax they can't evade.

The Negative Man said...

I'm not too horrified. But I would rather see money being spent on improving the wages and employablity of the poor.

In the ultimate worst case, I would prefer that the government hire the jobless for trivial (but still somewhat constructive) jobs, rather than handing out the money just because.