Someone asked me - is it fair for the government to raise taxes when they are using only half of the investment income from the reserves. Should they use all of the income before they start to raise taxes? What is the rationale for using only half of the income?
Here is my answer.
I support the rationale to use only half of the investment income. The other half of the investment income should be retained to preserve the real value of the reserves.
Over the long term, the average investment yield is 6%. Half of this yield, say 3%, should be considerd as being contributed by inflation. The other half can be considered as real income.
However, before raising taxes, the government should look into the following items rigorously:
a) Are we spending money prudently? The spending of $195 million for the new MRT signalling system is an example. Is this spending prudent?
There is just one of many cases of big item spending. We need a system to evaluate the spending to be prudent and necesary. We should avoid wasteful spending.
b) Should a part of the proceed for land sale be used to fund the infrastructure spending, rather than rely on taxation?
c) Should additional taxes come from the wealthy and the high income earners, rather than from GST, which hits the lower income hardest (even though some of those affected are compensated by GST rebates).
Here is my answer.
I support the rationale to use only half of the investment income. The other half of the investment income should be retained to preserve the real value of the reserves.
Over the long term, the average investment yield is 6%. Half of this yield, say 3%, should be considerd as being contributed by inflation. The other half can be considered as real income.
However, before raising taxes, the government should look into the following items rigorously:
a) Are we spending money prudently? The spending of $195 million for the new MRT signalling system is an example. Is this spending prudent?
There is just one of many cases of big item spending. We need a system to evaluate the spending to be prudent and necesary. We should avoid wasteful spending.
b) Should a part of the proceed for land sale be used to fund the infrastructure spending, rather than rely on taxation?
c) Should additional taxes come from the wealthy and the high income earners, rather than from GST, which hits the lower income hardest (even though some of those affected are compensated by GST rebates).
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