EDITOR, The Tribune.
There are few problems easier to fix than the fiscal “crisis” facing The Bahamas.
We spend the lowest proportion of our Gross Domestic Product on our people (18%) in the region and among the lowest in the world (which averages 35% to 45%).
Meanwhile, we burden the majority of our population with massive taxes on consumption yet collect no progressive income taxes on wealthier locals or even on corporations that earn millions of dollars exclusively from the pockets of those overtaxed consumers.
Not only does the consumption tax drag down the economy by reducing disposable income, but such taxes as are paid by businesses (like business license fees, VAT and duties) are themselves regressive in that they disadvantage small and emerging businesses and benefit large and established ones.
As former Member of Parliament Gregory Moss once pointed out in probably the most honest and on-point statement ever made in that chamber, insofar as we have a national debt it is essentially the size of the tax break we have over the years extended to the rich.
By reducing or removing consumer taxes and taxing incomes and property instead (like almost every other independent country on earth) we would not only increase and make more flexible our revenue stream but also boost the economy by freeing up disposable income. The government that did it would remain in power for probably a generation.
Yet they don’t. In fact, one after another politician stands up to boast about their lack of plans to do so.
Why? Because, at least in part, politicians have listened to their own inherited narrative for too long. It is a narrative informed by a simplistic and one-sided view of fiscal matters that looks only at the spending side and ignores the revenue side. And it serves vested interests.
The fact that The Bahamas spends too little rather than too much on its population’s needs is laid bare by the reality that, while they frame discussions on fiscal issues in terms of “discipline”, every government since independence has known better than to actually engage in “belt-tightening” sufficient to meaningfully impact spending. If they did, it would not only be deeply irresponsible but would rightly result in electoral decimation.
The result is a predictable cacophony of “reformers” and pro-rich interest groups pushing for austerity and politicians pretending that they can deliver it while also meeting the administrative, social and infrastructural needs of an over-taxed, under-served majority.
To date, they have managed this contradiction by a reliance on borrowing, a testament to our historic creditworthiness with institutions (like the IDB) that listen to groups like Moody’s and Standard and Poor’s.
It has allowed our leaders to maintain the pretense that our regressive tax and fiscal regime are somehow normal, or at least can be sustained alongside developmental needs that militate against austerity.
With each downgrade borrowing gets harder, making this false narrative harder to sustain. Eventually, our leaders will simply have no choice but to shift taxes away from consumption and onto wealth and property and thus move this country into a virtuous cycle of growth and equity.
What a pity it takes a fake ‘‘crisis” to make them do it.
November 14, 2021