“Instead of taking the pants off the taxpayer, it might be better to take the vest off the vested interests” -- Mark Twain
Last Monday, Albay 2nd District Rep. Joey Salceda filed a bill which can be argued as another “tax the rich more measure”. House Bill 6993 “seeks to increase the tax rate of non-essential goods to 25 percent. At present, Section 150 of the National Internal Revenue Code imposes on jewelry, perfumes and yachts a 20 percent tax rate based on wholesale price or the value of importation. The bill not only seeks to increase the rate but, expand the list of so- called non- essential or luxury goods. This tax will be on top of all other taxes.
The bill seeks to add several items to the so- said list such as:
-- wristwatches, bags, wallets and belts worth more than PHP50,000;
-- sale of real property worth more than PHP100,000 per square meter;
-- beverages above PHP20,000;
-- paintings above PHP1 million sold by those other than the artist;
-- antiques worth more than PHP100,000;
-- automobiles, brand new or second hand, worth more than PHP10 million.
Essentially, since these items are beyond the reach of the majority of Filipinos, this bill clearly wants to increase the taxes on our more affluent or wealthy citizens.
This is actually a milder version of a bill filed in 2021 by the Makabayan bloc which proposed a wealth tax for people with taxable assets worth over PHP1 billion. This bill proposed that people with over PHP1 billion in assets should be required to pay 1 percent of the total amount in additional taxes while those with over PHP2 billion pay 2 percent and those with PHP3 billion, 3 percent.
The authors of the bill said that “the tax would help shift the burden away from regressive tax measures such as consumption taxes toward the handful of the wealthiest who are capable of contributing more to our public coffers. A regressive tax scheme like the VAT is one that is usually applied uniformly and thus takes a larger percentage of income from the low-income earners rather than the high-income earners. Progressive taxes take a larger percentage from high income earners.
Many analysts believe that an actual straight wealth tax or a pure progressive tax would be better than a higher tax rate on luxury goods. A wealth tax, they say, would generate more revenues for the government and it would be more equitable.
Progressive factions in the country have been increasingly vocal lately on the call for a wealth tax. For these factions, a wealth tax is a potent tool for equality and justice. These factions call attention to the widening gap between the rich and poor and the need for a more equitable tax system.
Wealth taxes and straight progressive taxes seems to be a popular way to generate more funds and alleviate the suffering of the poorer sectors of society. A business analyst once opined that wealth taxes “allow the engine of capitalism to roar and then have the winners compensate the losers. By taking care of those who lose out in the capitalist system, the winner ensures that the losers won’t want destroy the system completely.”
Unfortunately, no nation has successfully managed to get enough money out of progressive taxation to properly fund a system of social programs. Even so-called progressive European nations fund social programs such as medical care for everyone and welfare fund the same by making everyone pay a portion of their income not just the rich. Their tax programs feel like insurance rather than wealth redistribution.
Opponents of wealth or pure progressive taxes point out that most wealthy people are the ones with the talent and ability to take the lead in business development in a country. They are the trailblazers and the driving force that create new businesses that in turn create more jobs. Higher taxes targeted specifically at these people will be a disincentive for them to stay in the country. They will just go and find other countries with lower taxes and set up businesses there.
Also, countries with higher progressive tax rates are actually a deterrent for investment. Let’s face it, investors invest to make money and keep as much as it that they reasonably can. Less investors means less jobs.
Higher taxes on non-essential items often just alter spending habits. It does not guarantee higher revenues.
Clearly, higher taxes for the wealthy may not be the magic bullet that some of its proponents claim it to be.
This is my oblique observation.
Editor’s note: The opinions expressed in the foregoing article are solely the author’s and do not reflect the opinions and beliefs of the Philippine News Agency (PNA) or any other office under the Presidential Communications Office.