Recently read an article that grinded some of my gears about wealth tax. Now financial literacy is my advocacy, you'll hear me rant and talk about money if you give me the time and I got no problems connecting with strangers that share the same passion for it. Wealth taxes have been proposed before and I have yet to read any worth while excuse why these aren't passed by the Congress because I know these people are incentivized to protect their net worth from any bills that take away their riches.
Some quotes from the article: Recto says ‘wealth tax’ is not necessary in PHL
“But I’m telling you, why should you also tax those who are working hard,” he said.
It's the middle class the breaks their backs supporting the economy and they are being punished for working so hard for wages that can't keep up with inflation while the rich have the essential means to not worry about how inflation affects their daily necessities. It becomes an inconvenience when their chosen luxuries become more expensive.
“We have real property taxes on land and buildings. The more land, the more houses you have, the more tax you get,” Mr. Recto said.
He does make a point on this one, more properties just means more taxes being paid but I'm no tax man to make a good expert opinion on this. What I know so far is that there's no progressive tax for people or corporations that want to acquire more land. There is a uniform tax yearly for keeping the property I learned from here but it doesn't really answer the growing gap against wealth inequality between rich and everyone else. An average middle class person will be limited to 1 mortgage to fund their house and lot while paying for the same taxes.
A rich person will also pay the same taxes but they got deeper pockets to acquire more properties in the market. Now imagine the rich person or corporation who has deeper pockets just steeping in and acquiring more properties paying for the same level of tax while reducing the supply for other middle class. What's a tax method to deter the rich or making them at least think twice about acquiring more land? a progressive wealth tax where for each property they acquire to their name, they get more taxes in the acquisition of more properties. It doesn't have to be applied uniform as this might mean crippling real estate businesses from thriving but it does hit wealthy individuals who like to acquire properties here and there all over the country. It becomes a rich people problem to want to own more properties. The middle class person would just mind 1 property and that's their own dwelling.
Below is a quote from Mr. Africa that resonated so much with me:
“Unlike the consumption taxes so favored by the government and economic managers that always add to inflationary pressure at the time of imposition as well as permanently raise the general price level, the billionaire wealth tax already filed and refiled in Congress does not affect inflation or prices at all,” he said via Viber message.
Implementing the "Sin Tax" bill before might have been a good idea on paper to deter people from buying cigar and alcoholic beverages but I learned from the ground that there's no stopping anyone who really wants their regular dose of cigar and alcohol. It just makes them pay more. The problem with consumption taxes is that everyone gets it including the poor which is the class that has no choice but to spend bulk of their budget hounded by value added taxes. Why consumption taxes don't really work on the rich?
Imagine there's a rich dude that orders an expensive drink in a bar vs 1000 middle class dudes that orders that same drink. Which party do you think stimulates the economy more with their consumption spending? there are too few rich people in society and they consume far little in terms of essential goods and services unlike the rest of society. And yet the people who break their backs are the ones that are targeted by the consumption taxes.
The elephant in the room that the rich don't want you to know is that they own the debts of the government and yours.
When the government has a deficit in budget, they issue some bonds or simple IOUs to fund their projects, and who buys these IOUs? people who have deep pockets to support the government. And how does the government pay back these IOUs? they collect taxes. In a way, the government is acting like a middleman tax collector for the rich entities that rule at the background of society. And you also pay your dues to these entities through the goods and services they provide, they own the mortgages and loans you subscribe to. If you default on your mortgage, they keep the deed to the house and you realize you're just borrowing the place temporarily while they own everything. It is debt in many ways and we need to understand that someone owns these debts.
There's always an economic incentive to bar any initiatives for wealth tax because this hurts specific groups of people and not the rest of the masses. Would a middle class really worry if there was a law that says if their income exceeds 300 million means more tax for them to pay? would a middle class worry that if they acquire their 4th or 5th property, they have to agree to pay additional % of taxes from the deed of sale? that's right, it's a rich kid's problem and not a middle class problem. But we've been told it's bad for the economy to impose these wealth penalties.
Remember when the pandemic hit and everyone suffered except for those at the top 50 richest Filipino on the list? if you compared the Forbes list from 2020 vs 2023, the 2020 says the top 50 has a 150$ billion net worth, but to get to top 50 at 2023 list, the threshold was 170$ billion. How was that possible when the narrative was everyone was suffering from the economic losses except the same names that occupy the top 50 richest Filipinos?
I tell you, there is an economic incentive to not fix the problem for the people that are in charge of fixing it. As people run for political positions to safeguard their businesses and maintain their social control over their constituents, you wonder why oligarchy or crony capitalism thrives? ask the dumb voters.
Thanks for your time.