Taxing the million-dollar men

By Raffique Shah
March 01, 2009

Money MattersFOR too many years we have haggled over what the minimum wage should be in this country: should we pay the poor buggers $9 an hour, or $10? That would amount to less than $2,000 a month, but it’s worth fighting over. For those trapped in this gloomy underworld-not so hidden, since we shop at groceries and stores where they labour every day-it could mean being able to afford an extra “doubles” for lunch, or buying their children the toys they so covet. As far as I am concerned, what we call a minimum wage is in fact starvation wage, a kind of semi-slavery endured only by those who have no other options, except perhaps to turn to crime.

The global financial and economic crises, with the attendant big names and big-bucks scandals-Allen Stanford, Lawrence Duprey, Harry Harnarine-give us the opportunity to address the issue of maximum salaries, bonuses, perks, call them what you will. I am not suggesting we ignore the plight of the poor. But if we focus more on those who command six-to-seven-digit “packages”, we may well find some answers to our current and future financial challenges.

US President Barack Obama has no qualms about confronting those who award themselves salaries and bonuses that boggle the mind. Last week when he addressed Congress for the first time, Obama made it clear that the mitigating measures he had in mind to put those on the breadline back to work, deliver better healthcare, did not apply to those who make more than US$250,000 a year. He signalled to the big-bucks-brigade that feeding trough will henceforth be laced with tax-laxatives that will flush some of the fat from their bloated systems. My hope is that he has the fortitude to implement the egalitarian measures he suggested he would.

We may think that we do not have such problems here, that our executives are more reasonable. That may be true of a few who, like the banker Barack referred to, share their corporations’ fortunes with the people who make it possible. Over the past 10 to 15 years, however, we have witnessed some of the worst excesses coming from corporate executive suites. And the taxation system in place, while it has been simplified, has also allowed for the widening of the rich-poor gap.

The new system is simple, making it easier for Inland Revenue to keep track of and collect more tax revenue. But it is also unfair. Let me explain. Fudging figures from PricewaterhouseCoopers annual Budget Memorandum (2007-2008), an individual who earned $376,000 in 2008, and who maintains children at universities abroad ($60,000 deductible) as well as an annuity of over $25,000 a year, will pay the BIR $57,750 (effective rate 17.2 per cent). Someone who earns $180,000 per year with a similar annuity but no child attending a foreign university pays $23,750 (effective rate 13.2 per cent).

So far, so good. But let us examine the case of a person who makes $100,000 per month (oh, there are a few thousand in this bracket), which will amount to $1.2 million a year. He or she will pay $263,750 in tax (effective rate 22%). Let’s fly somewhat higher, where the big boys and girls pay themselves $1 million a month or more. That’s a cool $12 million a year, and since they own the businesses, they can award themselves what they believe is just reward for their investments or hard work.

But guess what? With similar deductibles to his $376,000/yr counterpart, he will pay $2,963,752 in income tax. That’s 24.6 per cent of his gross income, and he will pocket $8,891,250! Lest readers think I am over-dramatising the income-differentials in this country, what if I tell them there’s a handful of very wealthy executives who pay themselves up to $60 million a year?

Suffice it to say that maybe 50 per cent of the workforce in this country earn less than $60,000 a year (hence have no tax liabilities), with another 30 per cent making less than $100,000. At the latter level-mainly young professionals-many insist on living beyond their means. They see the well-heeled flocking bars where beer is sold at $20 and a plate of food costs $150, and these relative paupers join the conga-line.

Bad spending habits aside, government cannot continue to turn a blind eye to this horrendous income-disparity.

You cannot tax the young professional 13 per cent (effective rate) while the super-rich get away with paying below 25 per cent of their multi-million-dollar packages. I am prepared to concede up to $100,000 a month for those who, by virtue of hard work and years of experience, deserve such packages. But $12 million a year? Sixty million?

What does a man do with so much money anyway? I would go “bazodee” if I saw a million smackers. Seriously, there must be some disincentive to stem this executive-tsunami. Impose a tax rate of 50 per cent on “packages” over $1 million a year and 75 per cent over $3 million. You pay yourself big, the Treasury benefits bigger. Maybe draconian measures like these would curb the greed among those who wallow in the pork barrel.

6 thoughts on “Taxing the million-dollar men”

  1. I remember years ago Raffique Shah supporting Malcolm Jones’s salary at Petrotrin which was close to a $million a year. Thank god he has seen the light. Not only taxes need to be restructured but salaries as well. To increase the minimum wage would be catastrophic to small businesses and the very same people who receive that wage.
    I also challenge Shah to look at the taxes of the US and compare it with Trinidad (he did the same for hotel rooms recently). It would reveal who are the real crooks in the society.

  2. It should be the right of ALL receive a higher level of minimum standards so at least the basic requirements are met.
    Health, good living standards, good and free schooling. The average person should not have to be concerned about these things. In an ideal “utopic” society one should pay their taxes into the system to help upkeep and maintain the system.
    I can agree partially with Mr. Dalglish. We must restructure not only or tax system but our thinking and mentality of what we (the government) actually do with the taxes collected from the nation.
    There is no perfect system, but we have seen the recent faults and short comings of a laizzes faire governing.
    ( I do not apologize for my philosophical waning)

  3. This is astounding! Here is Shah, not even going far enough as a former labor man, but at least beginning a dialogue about the outlandish salaries that thieving company executives are appropriating unto themselves.

    Now, here comes a response to freeze the wages of ordinary workers at the minimum level because of some perceived harm that would befall small business. This is the same lie that has been used repeatedly in the US to keep working people poor. The truth is, that when the minimum wage has been increased, the standard of living improves, more disposable incomes pump more vibrance into the economy and society as a whole benefits.

    One has to be hopelessly brainwashed to believe that high salaries for executives are okay but meager increases in the wagees of workers would cause the sky to fall in TNT.

    And then we wonder why people are turning to criminal conduct as their main occupation. With this sort of thinking, which has become the norm, no solutions to our problems would be forthcoming. We would always end up with the same prescription–more police, more arrests, more protection for witnesses, more prosecutions, more hangings–which has not produced any cure because this is not a law enforcement issue alone, as it has been portrayed by those who are getting richer and richer under the current system which has inequity as its foundation.

    Your “waning” is not “philosophical” at all. It is ideological and self-serving.

  4. As a fellow “Triniabraod” I have to agree that raising the minimum wage will not lead to the all out catastrophe that certain members alone in the society believe will happen. I presently live in a part of the world which is considered very expensive by most means where salaries are high and so is the minimum wage. I am more than satisfied that the taxes I pay there go to work in helping to maintain the system than in a third world system as here (Trinidad and Tobago). Though where I reside now is not perfect, it has a very high standard. If I do compare to Trinidad in terms of prices, I must admit that Trinidad is not at all that cheap. New cars and electric items cost almost the same as where I live. Fast food, popular fast food, is not cheap. Alcohol is the only saving grace in Trinidad, it is cheaper but a Stag can still be vary in price by 5 to 10 dollars depending on the bar. All this considered I must wonder how the average Trinidadian survives with these low salaries and near “international prices” I guess there is a whole other world here in Trinidad for those making 3000 TT and below. A world outside the shopping malls and all inclusive feats.

  5. I apologize, Mr. Maharaj, if it erroneously appeared that I had pointed the finger at you for calling for the masses of poor people in TNT to be kept in the basement of the economy. You certainly did not say that. There are others, however, who use any opportunity to provide some insane rationale for not adopting public policies and programs that would serve to improve the quality of life and standard of living in our nation.

    It is only common sense, which conservatives do not demonstrate because of greed, that workers who earn a decent wage are more likely to pay taxes, become less dependent on government dole and are more capable of performing society’s expectations. Lack of money, the root of all evil, leads to the type of society we are now witnesses to in TNT. It is quite ironic that there is little, if any, outcry when a CLICO is “bailed out,” which is a gentle euphemism for wholesale transfer of the taxpayers’ dollars to a corporation and its bosses, who continued to live high on the hog even when objective, worldwide economic reality demanded that they did otherwise. How could this be justified, but a call for an increase in the minimum wage be greeted with alarm and warnings by the Governor of the Central Bank, as to the dire consequences that would befall the country if such were to occur?

    TNT is rooted in inequality, from slavery to the present day. The tragedy is that by being “educated” in schools and universities of our former masters and neo-masters, we are unable to free ourselves from their ideologies, which are all geared toward a society which promotes unlimited wealth for the few at the expense and suffering of the masses.

    Generally, this would lead to an explosive situation. That’s why they have their armed police, army, prisons, etc. to maintain the status quo by force.

  6. From Triniabroad
    “Generally, this would lead to an explosive situation. That’s why they have their armed police, army, prisons, etc. to maintain the status quo by force.”

    These words ring so true and so horrible. But I do not think any armed forces will eventually stop the true undying will of a people. How much can a people take? There has been a talk of “change” since the days of the NAR.
    A truly civilised society is not one of hi tech and mono rails and and other shiny distractions but a society where the state (not the government) cradles the development of every single member of it’s citizens, despite creed or race or ideology. In that vein TnT will not reach these levels unless there is some level of social upheaval or revolution. Notice I did not use the the word change again.
    To say that I am just waxing and waning is not true. There are models of this type system available to study if only on is willing to look.

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