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Are You Ready for Higher, More Taxes?

March 8, 2011

“A government big enough to give you everything you want, is strong enough to take everything you have.” — U.S. Pres. Gerald Ford

Lots of people in these parts, most of whom are schooled and professionals, continue to believe in fantasies and fairy tales and refuse to look at reality, as they embrace the soothing balm of the political and statist soothsayer who reinforces their parochial, anti-reason beliefs.

We now witness an era of heightened progressivism in the Philippines, with the introduction by our statist/leftist politicians of a number of political measures allegedly designed to help the poor, address overpopulation problem and inequality, alleviate poverty, and provide everyone, especially the less privileged, free education, health care, housing, transport, RH care, among other welfare state boons.

From the state-funded classrooms of the University of the Philippines to the halls of Congress to the streets of EDSA, Liwasang Bonifacio and Mendiola, thousands, if not hundreds of thousands, of left-leaning and confused Filipino statists clamor for more subsidized goods and services. The so-called iskolar ng bayan at UP Diliman and some SUC (state universities and colleges) students call for a higher education subsidy and get mad when someone tells them that ‘education is NOT a right’. The leftist hippies are determined to block government’s plan to stop giving subsidy to our mass transit transports. And there’s this group of hypocritical RH bill do-gooders who believe that they can be so generous by spending other people’s money.

The problem with most of these Filipino statists is that they don’t give a damn about the means our corrupt and irresponsible politicians use to achieve their altruist-collectivist goals. For instance, those who blindly, strongly support the RH bill, now euphemistically called Responsible Parenthood bill, don’t care whether the alleged goal of this fascist political measure is to be achieved by taxing the people, persecuting and prosecuting employers and health care providers, and giving the government tremendous power to control the entire business industry, medical profession and education sector. Really, did these Filipino fascists read the bill?

The problem with the pro-education subsidy mob at UP and other SUCs is that they are sold to that mediocre lie that they are “creme de la creme” simply because they are part of and/or admitted at the so-called Philippine’s prestigious state university. They somehow believe that simple “proper budget allocation” is enough to address their call for a higher education subsidy. This simply shows that these college-bred “creme de la creme” (according to statistician, NOT economist, Winnie Monsod) have very little knowledge of reality-based politics and economics.

Now let me state here that I was vindicated by UP president Pascual, who recently published his so-called “vision statement” for his “great university.”

Thank you very much, statist intellectual Pascual, for admitting that your academic vision requires more taxes. That in funding your ‘plan implementation’, you openly admitted that “one possible source that can be explored is the corporate income tax, among others.”

Let me ask this question again: by what right does Mr. Pascual propose to tax corporations and all income-earning entities and individuals? Just because he spouts great sounding snippets of common good and free education does not give him the right to call on the government to use the power of extortion- er taxation- in order to finance his statist vision.

We have already crossed the age of heightened progressivism, as more and more statist intellectuals spout some soothing bromidic mantras to fool the people (e.g., sacrifice, common good, greater good, equality, public welfare, pro-poor programs, pro-women, etc.)

Consider this statist think tank called the Philippine Institute for Development Studies that recommends “tax financing” as the only way to achieve the government’s Millennium Development Goals (MDG).

The medium-term targets for 2015 include the following:

  • Potable water and sanitation services for the whole country by 2010, prioritizing 200 waterless municipalities nationwide, and 200 waterless barangays in the NCR;
  • Ensure universal primary education, raising net enrollment rate at the primary level to 93% (from 90% in 2002); raise the cohort survival rate to 78% (from 70% in 2002); raise the secondary school net enrollment rate to 84% (from 58% in 2002);
  • Achieve the MDGs for health such as reductions of infant and under-5 mortality rates, maternal mortality rate, and incidence of malaria and TB; and as well as dissemination of modern reproductive health practices;
  • Achieve the MDG target for hunger, i.e. reduce underweight prevalence among school children to 17%.

PIDS, whose source of funding remains unclear, published a study/report entitled “Assessing Development Strategies to Achieve the MDGs in Asia: Philippines”. The statist think tank’s (PIDS) Keynesian “economy-wide computable general equilibrium (CGE) model”, which is founded on the premise that the government must assume the role of a nanny state, identifies the most potential VICTIM for the achievement of the administration’s welfare-state MDG: WE TAXPAYERS!

Since Briones et al. realize that financing increases in government spending through domestic and foreign borrowing and foreign transfer would have a negative impact on the economy, they thus argue that “This [situation] leaves tax financin…g for achieving the MDGs.”

Those who support these ‘fiat’ rights to education, RH care, transport, and government subsidies don’t have a right to complain about very much possible tax increases!

Here’s the abstract of PIDS’s report:

The Philippines is a developing country with strong commitment to the Millennium Development Goals (MDGs); however, it faces challenges in closing MDG gaps, owing to mediocre growth, macroeconomic instability, and financing constraints. Since the 1990s, increases in per capita incomes have been pulled down by tepid growth in productivity, rapid population growth, and macroeconomic instability. Since the mid-1980s, however, various reforms have been implemented to lay the foundation for sustained growth and poverty reduction.

The external imbalance was a concern in the 1980s and 1990s, as the country endured balance of payments crises and persistent trade deficits; however, recently capital inflows have soared, due mainly to rapid growth of overseas remittances. The fiscal balance remains a policy challenge; public finance through borrowing, whether domestic or foreign, is complicated by large and persistent debt stocks. ODA has shrunk, owing in part to institutional factors. Recently public finance through taxation has suffered from tentative revenue effort.

The country’s record in the MDGs is mixed. Progress has been made in child health, potable water, and sanitation. However, inroads against extreme poverty are complicated by an anomalous relationship between poverty and growth. The responsiveness of education outcome to public spending is apparently low; goals for education and maternal health remain elusive.

While service delivery can be greatly improved, escalation of public expenditure for social programs remains essential. An economy-wide computable general equilibrium (CGE) model called MAMS, applied to the Philippines, examines economy-wide scenarios for attaining the MDGs through increase resource outlays. Application of the model finds the following: first, under a business-as-usual scenario, the country will likely fail to reach MDG goals for education and maternal health, while achieving only marginal reductions in poverty. Second, closing the MDG gaps will entail a massive increase in public spending. Financing such increases through domestic or foreign borrowing leads to unsustainable levels of debt stock. Financing via foreign transfers minimizes fiscal impacts but is infeasible owing to recent declining ODA trends. This leaves tax financing for achieving the MDGs. As for income poverty, under business as usual the projections indicate failure to achieve the first MDG goal. Apparently per capita income growth fails to translate into poverty reduction, as the economy fails to create higher paying jobs (for better educated workers) fast enough within the simulation period to 2015. Fortunately, poverty reduction is faster when government spending is directed towards closing MDG gaps, though insufficient to make appreciable headway in achieving MDG 1.

The study recommends attempting to close the MDG gaps using tax financing. This financing option is feasible in the sense that the required revenue effort has been achieved in previous decades. Admittedly, it entails a dramatic improvement in revenue effort compared to most recent (decadal) trends. This underscores the urgent, development-based rationale for raising tax collection efficiency, introducing new tax policies, in combination with public sector reforms for cost-effective service delivery.

Of course, everything will come from us, taxpayers! The government has no money. It is not a productive agency. The government is the worst parasite in this country. It can only achieve its stated welfare state goals by stealing wealth from the productive and successful. Is this difficult to understand?

Like U.S. President Gerald Ford said: “A government big enough to give you everything you want, is strong enough to take everything you have.”

For further commentary on PIDS’s report, I can only recommend freemarket economist Nonoy Oplas‘ blog article: A discussion venue about the role (and misrule) of big government and high taxes.

6 Comments leave one →
  1. March 9, 2011 3:38

    Thanks for the plugging, Froilan. I will mention this article in my follow up blog post about the subject. I will also forward this to the President of PIDS. Meanwhile, the DOF and Malacanang wants to make us more busy. They just produced a new regulation requiring that all people who earn P500,000/year or more shd file a statement of assets and liabilities, with lots of fines and penalties for non-compliance, as usual, Let’s gang up the DOF on this,

    • March 9, 2011 3:38

      Thanks for the info, sir.


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