Voting to be poor

Empirical evidence broadly points toward stagnation, if not reduction, in the disposable income of the middle and the low paid class. This class is deemed to be the backbone of democracy, over the past decade, which ultimately is the catalyst for my recent epiphany that the Pakistani voter deep down has masochistic tendencies! The counter argument to this keen observation is obviously that empirical evidence also points towards a similar stagnation in the decade before, under Martial Law. Definitely, in fact I am even willing to concede that things might have been worse under the dictator; but you, the defenders of democracy miss the point: I, the voter, was not responsible for that disaster. Contrarily, in the last decade, I apparently voted to get poor!
And please don't parade the rising stock market indicating prosperity theory again. Over the last ten years, the Stock Market Index probably trebled, did the minimum wage treble over the same period? Forget the minimum wagers; did the middle class get similar salary increases? The fact that common Pakistani is gullible and naive enough to believe in the Great Stock Market Theory, perhaps refutes the earlier epiphany; the ruling elite probably never sufficiently invested in educating the masses for this very reason!
And how do I conclude that disposable income of the middle class and poor class has stagnated or gone down? In the absence of relevant and comprehensive data for wage increase and inflation my analysis is based on a singular parameter, taxation. Officially indirect taxes are 60% of total taxes collected, however if you adjust for withholding taxes, which are basically indirect taxes in the garb of direct taxes, this ratio moves to over 80%. Indirect taxes, which are regressive in nature, alone have increased by Rs 1.4 trillion over the last ten years; note that all this time policy efforts were directed towards reducing the corporate tax rates, progressive in nature and basically on earnings of the rich. It was bad enough that the common Pakistani voted to be forced to pay more taxes, he now, ridiculously, cheers the government for increasing the tax to GDP ratio!
"While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth", Fiscal Monitor October 2017- Tackling Inequality, International Monetary Fund (IMF) (The Report). It is rather amusing for me that gurus and pundits in Pakistan only read reports and information that supports their pre-conceived, ferociously obsessive, views. Nevertheless, getting back to the extract, on the social cohesion and political polarization criterion, we are batting a 100%. As regards growth, my views have always been insanely contrarian on GDP and hence I ignore it. Shortly I plan to come up with another write up to slam dunk GDP; the eventual objective is to kick out GDP from discussions on the domestic economy, forever!
For the moment let's focus on celebrating, because finally, the guru of all gurus, IMF, in the Report, accepts that empirical results do not support the argument that progressivity in taxation policy negatively effects growth; hallelujah! In very difficult English, what IMF says in the Report is that you can tax the rich; there is no need to reduce corporate taxes, higher taxes will not hurt growth. In fact, quite the reverse, more taxes on capital, rather than labour, is good for national cohesion and economic growth. And even more amazingly IMF admits that, "However this could be difficult to implement politically, because better-off individuals tend to have more political influence, for example, through lobbying, access to media and greater political engagement". It would seem that IMF is writing about Pakistan where the elite dominate the political system with that tacit assistance of the media; and under all likelihood, come next election, Pakistani voters shall once again vote to get poorer.
Moving forward the Report is replete with wondrous findings and recommendations; I almost feel that someone hacked the IMF publications department. In June 2014, I wrote an article which was published in Business Recorder, titled "Zakat and Thomas Piketty"; Piketty's suggestion in his famous book "Capital", to tax wealth as a solution for income inequality was almost out of the Islamic Economic Systems textbook. Apparently it's time to write an article titled "Zakat and IMF"; "Taxes on real estate or land are both equitable and efficient and remain underused", The Report". Except come next election we, the voters, will ridicule anyone who even suggests that taxes should be imposed on the landlords and the capitalists; we shall again vote for our favourite political parties for some passionately emotional reason entrenched in our subconscience, which will then continue to introduce tax policies that shall make us poorer.
The final gem in the Report is on addressing inequalities in education and health, "Investments in education and health can help reduce income inequality over the medium term, address the persistence of poverty across generations, enhance social mobility, and ultimately promote sustained inclusive growth". And remember I am not saying all that, IMF, whom we trust as a dear friend, said all that!
But will we, the voters, listen to IMF and vote for a manifesto which only focuses on education and health and increasing taxes on capital? Definitely not! There are far more important things than education and health and taxing the rich; corruption, infrastructure, CPEC and whatnot! But, hey ignore me as well, I only write for the fun of it! Keep voting as you have always voted, to get poor!
(The writer is a Chartered accountant based in Islamabad. Email: [email protected])