Bloomberg, a private media company headquartered in New York City that specializes in financial data, published two stories this month that hopefully will get the attention of all of our leaders who cling to the philosophy (known as trickle-down economics) that extended tax breaks for the rich will uplift the masses in our country. The fact is that the only thing the masses receive through that type of economics is migas – crumbs.
The first Bloomberg story, written by Andrew Atkinson and published on December 9, says the recently established Wealth Tax Commission in the UK had proposed a 5% tax on wealth that could raise US$350 billion to help fix “the coronavirus-hit public finances” in that country. The commission said that to raise the kind of money needed to fix the economic problem would “require a broad-based raid on incomes and consumers by hiking income tax, national insurance contributions or value-added tax”, and that it found the wealth tax to be “fairer and more economically efficient.”
We have to hope that this suggestion coming from highly regarded economists in the UK will resonate in Belize, because things are not bright here. Our former Prime Minister, Hon. Dean Barrow, had warned that our finances were in terrible shape, and our new Prime Minister, Hon. John Briceño, after his first meeting with the Financial Secretary, Mr. Joe Waight, said our economy is actually worse than he expected.
It’s early in the new administration, but to date neither they nor the old administration have indicated that they were contemplating putting a tax on wealthy Belizeans to help pull us through. The talk we heard from the last Prime Minister was his hope that the big countries/lending agencies would consider reducing or wiping out our debt.
How much of an impact on our economy that wealthy Belizeans giving up 4 or 5% of their earnings in Belize dollars would have, is for the economists in our country to say, but it can’t have a negative effect.
The second Bloomberg story, “Fifty Years of Tax Cuts for Rich Didn’t Trickle Down, Study Says”, which was written by Craig Stirling and published on December 15, commented on research by David Hope of the London School of Economics and Julian Limberg of King’s College London that looked at fiscal policies in 18 countries over 50 years and found that tax cuts for the rich led to inequality and did not help anyone besides the rich. The researchers said tax cuts for the rich did little to promote job creation or growth, and so policy makers in the UK shouldn’t “worry that raising taxes on the rich to fund the financial costs of the pandemic will harm their economies.”
All that Belize has to show, after copying the blueprint of trickle-down economics since independence, is growing poverty, with over 50% of us falling into that category before the pandemic began.
The citrus and farmed shrimp industries are doing poorly at this time, and it would be unrealistic to demand that they increase wages, because they aren’t making a profit, but in good times and in bad most of our big businesses pay the minimum wage to too many of their workers, BZ$3.30 per hour.
Our workers who get employment with foreign-owned or big businesses do not earn a good wage, and unfortunately government after government has stood by, has not intervened to ensure that Belizeans get paid properly for their labor. The new government has promised to increase the minimum wage to $5.00 per hour, but that is unlikely to happen in a system that practices trickle-down economics, and gives extended tax breaks to investors. If the government does pass a law mandating $5.00 per hour as the minimum wage, we will find that the increased wages will be eaten out by increases on the taxation of goods.
Foreign investors (the FDIs) provide much capital for infrastructure in our major industries, and Belize is dependent on the foreign exchange that’s earned for our country by the companies these foreigners invest in, though a quite substantial sum that our country earns through the tourism industry never reaches our shores. In the sugar and banana industries, foreign investors help Belize access markets that are interested in doing business with foreign corporations. The prices we get for our products aren’t the best, but the foreign exchange we derive is essential for our survival.
Big businesses do not have a monopoly on our capacity to earn foreign exchange, however. In respect of the necessary foreign exchange earnings, the big boys don’t control ALL the markets out there. There are people across the globe that will pay a better price for our products so that our small business owners can earn more, and give better wages and conditions to Belizean workers.
Our small sugarcane farmers are on the brink of losing their share in the industry. They can continue providing sugarcane for the factory at Tower Hill, and they should also be allowed to explore niche markets that will pay higher prices. The sugar destined for these niche markets could be processed at smaller factories owned by the cane farmers. Our government has to increase its support of the citrus industry, so that the big boys don’t gobble up the smaller growers.
Our response has to be to give more incentives to small businesses of every kind. The focus in Belize must shift from promoting big businesses that demand special tax breaks and pay low wages, to small businesses that provide better paying jobs and keep the foreign exchange we earn at home.
Christmas is about sharing and caring
The Christmas season is a beautiful time in Belize, full of history and love, but it is also a very sad time for those who don’t have money or are missing or have lost loved ones. This year there is increased pain because of the pandemic.
The one whose birthday we celebrate, Jesus the Christ, believed in sharing, as He did with the five loaves and the two fishes, and He comforted those who were sad. We must focus on whose birthday it is, and as we would try and please a close family member or friend by doing what they like on their birthday, so we must try to please the Birthday Boy by sharing and caring for those who are in need.
A blessed Christmas to all, and may we all have a bright New Year.