The Tribune

YOUR SAY

By RICK LOWE

IN a recent “Insight” column, Ms Alison Lowe took on the question of inequality in The Bahamas.

Citing Department of Statistics data from 1973 to 2011 she says it “shows a laudable closing of the income inequality gap from one of quite severe income inequality in The Bahamas in 1973 to a vastly improved position by 1989.” But, points to a declining trend, albeit “not massive”, from 1999 onwards.

Her solution seems to be changing the tax system to something more “equitable.”

(As an aside, while some taxation is necessary, can the government forcibly taking your money be equitable in any taxation system).

Part of this fix is taxpayers should be charged a higher percentage of taxes as they relate to GDP and import duties are unfair because they allow “the wealthy to pocket a greater share of their incomes…” so should be changed. So a Value Added Tax is one recommended method.

Noting that The Bahamas pays no inheritance tax she recommends it so the state can take redistributive steps to assist those people “whose initial life chances are not so rosy”, as one more tax to help solve the problem of income inequality.

Anyone that is involved with churches, charities and service clubs understands the devastation that poverty leaves in its path, but the argument that an even greater paternalism by the state will solve the problem of inequality and poverty is not very saleable these days.

In a Policy Analysis for The Cato Institute of the US, Michael Tanner points out that:

“Clearly we are doing something wrong. Throwing money at the problem has neither reduced poverty nor made the poor self-sufficient. It is time to re-evaluate our approach to fighting poverty. We should focus less on making poverty more comfortable and more on creating the prosperity that will get people out of poverty.”

Tanner concludes: “That means that if we wish to fight poverty, we should end those government policies—high taxes and regulatory excess—that inhibit growth and job creation. We should protect capital investment and give people the opportunity to start new businesses. We should reform our failed government school system to encourage competition and choice. We should encourage the poor to save and invest.”

Closer to home, Barbados comes to mind. They pay a VAT (17.5 per cent), Personal Income Tax (33 per cent Avg), Business/Corporate Income Tax (25 per cent) and Import Taxes from 40 per cent to 150 per cent or higher (2011). But their income equality is not held up as a beacon for people to emulate.

A major factor that seems to be left out of the discussion is income mobility. Facts are that the same 20 per cent that are poor today might not be poor tomorrow. This applies to those that are rich as well. Personal bankruptcies happen. Investments go bust. Entrepreneurs succeed. People get married, others divorce or separate. Some get raises, some lose jobs. All these things affect where a person might fit on the income scale. So some wealthy people drop from the top percentile, while middle class and poor people move up or down in the categories. Income mobility is not static and should be accounted for.

Ms Lowe does mention the fact that education plays a large role in income inequality and our public educational system is certainly not helping here.

Redistribution of wealth in this manner, instead of economic growth, is no less destructive than government using tax dollars and public debt to bail out their cronies. In fact, taking from one group to give to another cannot be moral?

In addition, calling for higher taxes without spending constraints on the government is simply helping deepen the morass of ineffective government policy while adding to deficit and debt that all Bahamians are on the hook for.

Finally, most people want the poor to be better off. But it’s the choices of public policy where the great divide exists. According to many experts, continually using the same policies that have not succeeded in other countries is not necessarily the best approach.