Monday, October 11, 2010

Statists' penchat for more taxes

In one of my various discussion yahoogroups, one member there, an unabashed statist (but personally, we're friends) called my ideas "free market cure-it-all dogmatic belief." He then proposed that portfolio investments (aka "hot money") be taxed. So that recent plans or moves by the Philippine government to increase the toll fees and abolish the MRT/LRT subsidy (resulting in train fare hike) will not be necessary. And that the US government's intervention in its economy ("bail-out", "fiscal stimulus", "quantitative easing" (QE)) is one proof of the failure of the free market model.

Well, at least he did not bring up his earlier useless and pathetic thesis that "services sector is useless, only material economy matters". At least for now.

I called his proposals as plain "state intervention, regulation and taxation cures-it-all dogmatic belief." For the following reasons.

1. There ARE lots of taxes on hot money, cold money, lukewarm money or any other form of money in the Philippines. Capital gains tax, documentary stamp tax, corporate income tax, bank interest earning tax, other national taxes. Then there are local government taxes. Thus, his "more state taxes cures it all" thinking is right on target. Make the number of business taxes double or triple than what they are now.

2. The endless intervention by the US govt in its economy -- bailouts, stimulus, QE, whatever term -- is proof of the US economy becoming more state controlled than a free market economy. Why would a government come in to failing corporations? Corporate expansion and corporate bankruptcy are 100 percent part of capitalism. Why would people and governments cry and wonder when there are large corporate failures? Do they also cry and wonder if there are large corporate expansions, like microsoft, google, facebook, and youtube capitalism?

3. RP's budget deficit is growing like crazy. About P287 B per year from 2005 to 2009, P325 B in 2010, and P357 B in 2011. Government is living beyond its means. A household that has combined earnings only of P30,000 per month but spends on average P35,000 or more per month even without emergencies, can easily be called "mayabang, maluho, magatos, magarbo, irresponsable" (braggart, spending-crazy, irresponsible). Living beyond its means. Then why cant we call a government such terms? Do statists and socialists really stick to their double standard, of excusing endless fiscal irresponsibility and think only of tax-tax-tax as solution in their vocabulary?

4. Removing the subsidy on light rail transit (LRT) and metro rail transit (MRT) is correct. Why subsidize commuters of Metro Manila only? Why not put up an MRT also in Cebu, CDO, Davao, Tacloban, Iloilo, Dagupan, other big Philippine cities and subsidize it as well? Why tax people in the provinces and don't give them transport subsidy, but give only transport subsidy in metro manila?

Being a time-tested statist, I urged him to rally the Office of the President (OP) and the Department of Finance (DOF) to give additional subsidy to all commuters in the whole country. Subsidize provincial and city buses. Expect P500 B/year in budget deficit and call for more taxes. Perhaps DOF should also tax yahoo, yahoogroups and google to raise more money to finance his and his fellow statist friends' favorite sectors for subsidy?

5. Leave current multiple taxes on hot money, cold money, lukewarm money, as they are. Do NOT add more burden. Foreign direct investment (FDI) money needs lots of long-term expectations, like good infra, rule of law, good governance, stable power supply, etc. Hot money does not require that much. If they think they can make money, they will come in. If they don't see such, like having to live with more costs to doing business like more taxes to existing ones, more statist regulations, then they won't come.

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