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Has T&T’s wealth been distributed equitably?
In the last few weeks, I have intervened in several discussions in which people have complained about the excessive burden of taxation that the current administration has imposed on the population, as the government struggles to get the population of this country accustomed to a lower standard of living.
One strand of the intervention was to point out to a blogger that the governments in the last 20 years or so have transferred a substantial percentage of the wealth that T&T has earned from its energy revenues back to the people of this country.
It is clear to me that a majority of adults in T&T do not appreciate the fact that a subsidy is a transfer of wealth. And that when budget analysts complain that more than 50 per cent of the country’s total expenditure is allocated to transfers and subsidies, these analysts are objecting to the fact that the government is distributing the country’s wealth to the population to improve their standard of living.
In other words, a majority of the taxes (T&T’s wealth) that governments have collected from energy companies in the last 20 years has been distributed to the population in the form of subsidised gasolene, subsidised electricity, subsidised water, subsidised healthcare, subsidised pharmaceuticals, subsidised education, subsidised inter-island transport—both people and cargo—along with subsidised houses and mortgages.
The tragedy is that very, very few citizens of this country appreciate the fact that their children could have received an excellent education in this country (from nursery to tertiary) without parents or guardians having to pay for the cost of the education. Along with the “free” education, many children in this country get meals at their schools on a daily basis and, for many years, children also received free school books.
But do the parents who have received this massive subsidy with regard to the cost of sending their children to school ever stop to consider that that subsidy is part of the country’s wealth?
Or what about the thousands of citizens across this country who receive free prescription drugs and other pharmaceutical items to help them manage a range of illnesses including diabetes, high blood pressure, cardiac diseases, glaucoma, epilepsy, depression and Parkinson’s as a result of CDAP, the chronic disease assistance programme?
Do the citizens who are enrolled in CDAP ever consider that the money allocated to the programme could be put to some other use?
What about the citizens who are fortunate enough to be living in a subsidised HDC housing, paying a subsidised TTMF mortgage, receiving subsidised TTEC electricity and drinking subsidised WASA water, while sending their children to a subsidised primary or secondary school and perhaps receiving CDAP drugs for their diabetes?
Do those citizens ever wonder how they would “make ends meet” if they had to pay the full price for education, healthcare, the house they live in and the mortgage they pay, as well as higher prices for the water they drink and for the electricity that gives them light and runs their computers, refrigerators, stoves and washing machines?
The next time some politician asks “where the money gone?” with regard to the $285 billion that the previous administration spent during the 2010 to 2015 period or the $105 billion that the current administration will spend in 2016 and 2017, the answer is more than half of those sums of money were disbursements of the State’s wealth to its citizens by way of transfers and subsidies.
It is obvious that every T&T citizen—from the billionaires to the paupers—has benefitted from this transfer of wealth by way of subsidies
It is also true to say those at the lower end of the income pyramid have benefitted the most.
How then can people in this country still argue that the country’s wealth has been shared by “only with a select few,” referring, of course, to those who have benefitted from corruption and bribery etc?
The problem is that very few people realise that the way governments in this country have transferred wealth is by reducing the cost of education, healthcare, gasolene, electricity and water thus allowing a greater percentage of the average household’s income to be retained by that family.
But if the taxes that the government collects go to pay for your child’s education, pays for your diabetes and hypertension medication, pay for your hospital stay, while ensuring that the cost of your water, electricity, gas bill, trip to Tobago is a fraction of what it could be, HOW IS THAT NOT A TRANSFER OF WEALTH?
T&T and its citizens have become so dependent on its energy wealth that there is less wealth for the government to share with the population.
In consigning T&T to junk bond status last month, the credit rating agency said its decision to downgrade T&T’s issuer rating to Ba1 from Baa3 was based on three key drivers, including that “the authorities’ policy response has been insufficient to effectively offset the impact of low energy prices on government revenues, as fiscal consolidation efforts have mostly relied on one-off revenue measures.”
The real reason Moody’s downgraded T&T to junk bond status is because that rating agency wants most of that adjustment to come from fiscal consolidation—mostly reductions in transfers and subsidies and by freezing or cutting public sector wages.
Imagine the state of this republic if we followed Moody’s advice:
• no water subsidy;
• no electricity subsidy;
• no inter-island passenger or cargo subsidy;
• no more “free” education from nursery to tertiary
• user fees at public hospitals and clinics
Based on Prime Minister Keith Rowley’s speech in Diego Martin on May 2, it is clear that the PNM is attempting to facilitate a “soft landing” for T&T by:
• making gradual cuts to recurrent expenditure by reducing fuel subsidy, closing down non-performing state enterprises, reducing GATE
• trying to raise revenue through property taxes, adjustment of VAT, 30 per cent tax on companies and high-income individuals, seven per cent tax on online shopping, higher excise duties/taxes on cigarettes, alcohol, luxury cars etc
• Running down the country’s foreign savings by selling US dollars at an artificial rate and by rationing
Which would you prefer: soft landing or hard (Moody’s) landing?
Hear what Moody’s says could lead to T&T receiving an upgrade from the credit rating agency: “Moody’s would consider moving the outlook to positive if we conclude that fiscal consolidation will likely lead to lower fiscal deficits in 2018-19, and stabilise government debt ratios faster than currently anticipated.”
It is clear to me that a majority of adults in T&T do not appreciate the fact that a subsidy is a transfer of wealth.