Budget 2018: More thoughts

In the post Budget 2018 discussion, I feel there are some wong arguments, but also opinions based on value judgements where there isn’t a clear right or wrong.

First, there are the usual snake oil sellers who tell you that we can spend more money without raising revenue, or insisting we should draw on our reserves. And those who advocate cutting spending in other areas such as defence. Or even worse, making the usual asinine arguments about cutting ministerial pay, which is so insignificant as part of the budget, it isn’t even a rounding error.

We should all unite to condemn the people making these arguments which are not only wrong, but dangerous. Fortunately, I don’t see many reasonable people making these arguments.

Most of the debate I am seeing falls into the value judgement domain, which unfortunately because of fierce partisan loyalty, sometimes is being mistaken to also fall into the previous category of wrong/dangerous statements.

Take economist Donald Low’s opinion of perhaps using more of the NIR contributions instead. His argument is plain: If 50% is acceptable, and 100% is unacceptable, is there any reason why any number that falls in between isn’t also acceptable? The truth is that there isn’t – but the government has made the value judgement that using half and saving half is prudent. But it’s a rule-of-thumb not a divine law.

It is also a value judgement that increasing GST is better than using more of the NIR. SMS Indranee has posted that using 10% more NIR assumes that it is always equivalent to 2% more GST. But the reverse is also true: that choosing to increase GST assumes that 2% of GST is always equivalent to 10% more NIR. (In good investment years, 10% NIR could surpass 2% more GST and in bad years, it may be less).

Choosing a GST increase instead of using more NIR also makes the judgement that a more consistent, stable revenue flow from GST is better than relying on the vagaries of investment income. BUT, it also makes the value judgement that this consistency is worth putting an extra tax burden on the people. It is a value judgement, an opinion, and we can argue till the cows come home and nobody can win this argument. Our elected officials have thus chosen to take a stand on this on a matter that there is no clear right or wrong. That’s what they are elected for – to make these difficult decisions one way or the other. But it doesn’t mean they are absolutely right.

The Government has also taken the stand that a capital gains or wealth tax will jeopardise Singapore’s position as a wealth management hub. In my opinion, this is also a value judgement. We don’t have to take the Government’s opinion as the gospel truth on this matter – I don’t.

I do not believe that wealthy people choose places to live in, or to park their wealth purely because of tax. Otherwise, tax havens such as the BVI and Cayman will be overpopulated with wealthy people. They are not because wealthy people make these decisions not only purely on tax rates, but also other factors such as political stability, living environment, infrastructure, availability of financial expertise and talent, and so on. These are things that Singapore ranks very highly on, and is a result of good governance. Taxes pay for good governance. I truly think that a low single-digit capital gains tax isn’t going to suddenly cause an exodus of capital from Singapore. BUT mine is a value judgement as well. We won’t know until we try and I think we should. The Government takes the opposite view. But I don’t think either view is dangerous or wrong, and a matter where reasonable people can choose to disagree on.

What I have no doubt at all is that we need more revenue in the coming years. Like all ageing economies, we have a demographic challenge when the baby-boomer generation reaches old age. Fortunately, unlike the Western developed countries, we do not have an expensive welfare system to upkeep, including unsustainable pension pay-outs.

Yet, we will need to spend more. My question in my first Facebook post was exactly how much? And what will we be spending on? Are we building more hospitals? More old folks homes? More subsidies? Making infrastructure more elderly-friendly?

I think Singaporeans are reasonable people. If you ask us to pay more so Singapore can be a better place, we will. But we want to know what we are paying for. Why the 2% increase? What are we spending on? Why in the decade after 2020? Why not after?

The 4G still has plenty of time to answer these questions and forge a new social compact.

In the meantime, let’s not get overly divisive in our arguments on social media. There are a few wrong opinions, but most of the matters involved are issues where reasonable people can disagree. We don’t have to demonise people for having a different opinion from us.