Eliminate The Income Tax with Tariffs?

The idea of eliminating the income tax is far from practical. Recently, former President Donald Trump suggested replacing the federal income tax with tariffs on imports. In a private meeting with GOP lawmakers, Trump floated the idea of a so-called “all-tariff policy.” Broadly, the concept aligns with Trump’s long-standing protectionist trade agenda.

Tariffs can be thought of as taxes imposed on imported goods. They are ostensibly paid by importers. But the costs are typically passed down to consumers through higher prices. When tariffs are applied broadly, as Trump appears to be suggesting, the price increase affects a similarly broad set of goods. Retailers and wholesalers will pass on those added expenses to consumers, leading directly to higher prices.

Source: https://www.financialexpress.com

Such price hikes in everyday goods disproportionately impact low and middle-income households. This converts a progressive income tax into a regressive tax, akin to a sales tax. As such, in the near term, the only groups benefiting from the elimination of a broad-based income tax and the ratcheting up of tariffs are those folks at the higher end of the socioeconomic spectrum.

Everyday necessities, like clothing, food, and household goods, as well as significant purchases like electronics, vehicles, and equipment, will immediately increase in price. Even goods entirely produced domestically, and thus not directly subject to tariffs, may see price hikes—as demand outstrips supply.

For example, if a broad 25% tariff on all imported goods is placed, the cost of every imported good will go up by at least 25%. Retailers and manufacturers will have passed that added expense on to consumers. This will cause consumers to choose domestically-produced lower cost goods, to the extent they are available. As demand shifts to American made goods, in the absence of a matching level of increased production in every sector of the economy all at once, there will be more demand for domestic goods than supply. Prices will increase just as they did during past supply chain crunches.

In essence, tariffs act as a regressive tax. They were broadly eliminated in favour of an income tax in the late 19th century for just that reason. Their regressive nature means that lower and middle-income consumers would bear the brunt of the cost of financing the public services.

In 2024, the U.S. federal government has collected $3.29 trillion. In 2023, imports totaled approximately $3.9 trillion. A back of the envelope math will quickly illustrate that replacing the former with a tax on the latter is infeasible. An average tariff rate of nearly 85% on all imports would be required to replace income tax revenue with tariffs.

Export countries would unquestionably retaliate with their own tariffs, potentially leading a worldwide trade wars that further increase the costs of goods and further damaging the global economy. The fluctuation in import volumes based on economic conditions would make tariff revenue unreliable compared to the comparatively more stable income tax system—potentially leaving the federal government unable to fund basic services.

The U.S. has been there before. The Smoot-Hawley Tariff Act of 1930 raised U.S. import duties with the goal of protecting American farmers and other industries from foreign competition. The Smoot-Hawley Tariff Act is now widely blamed for worsening the severity of the Great Depression in the U.S. and around the world. The law is commonly referred to as the Smoot-Hawley Tariff or the Hawley-Smoot Tariff. It was sponsored by Sen. Reed Owen Smoot (R-Utah) and Rep. Willis Chatman Hawley (R-Ore.).

• The Smoot-Hawley Act was created to protect U.S. farmers and other industries from foreign competitors.

• The Smoot-Hawley Act increased tariffs on foreign imports to the U.S. by about 20%; at least 25 countries responded by increasing their own tariffs on American goods.

• Global trade plummeted, contributing to the ill effects of the Great Depression.

• Prior to signing the Act, more than 1,000 economists urged President Hoover to veto it.

• Hoover's successor, President Franklin D. Roosevelt worked to reduce tariffs and was given more authority to negotiate with heads of state under the Reciprocal Trade Agreements Act of 1934.

So, the dumb and demented Trump is at it again. And the Democrats have a “ghostly” Joe Biden who couldn’t finish sentences at the last debate. When will America wake-up, two silly clowns to choose from? It impacts the world not just America!

References:

Can Trump eliminate the income tax? Maybe with an 85% tariff, Andrew Leahey, Forbes, 14 June 2024

What is the Smoot-Hawley Tariff Act? History, Effect and Reaction, Will Kenton, Investopedia, updated 23 May 2024-07-02

Is Obesity a Serious National Disease?

A recent survey by the Health Ministry found that over 50% of Malaysians are overweight. Most of them are living unhealthy lifestyles. The survey found that the percentage of overweight or obese adults rose alarmingly from 9.1% in 2011 to 54.5% in 2023.

The Small and Medium Enterprises Association of Malaysia (Samenta) and the Malaysian Employers Federation (MEF) have raised the alarm. A nation may not progress if half its people are obese. No work will get done.

The MEF, which saw an exponential increase in its membership with “over 5,000 organisations from various industries and sizes and 22 industry groups’ associations” under its wing believes in the role employers can play to rid the Malaysian workforce of this ‘disease’. Employers could help encourage their employees to reach the health ministry’s recommended goal of walking 10,000 steps a day.

Source: https://en.wikipedia.org/wiki/Obesity

We are plagued by heart disease, cancer, diabetes and hypertension. We see overcrowded health facilities despite building more hospitals and clinics throughout the country. The drug companies are having a field day. Half the people are suffering from obesity – which is the root cause of many diseases, illnesses and health complications. In 2024, the (projected) revenue of the pharmaceuticals sector in Malaysia is expected to reach $1,618m. 

Meanwhile, people of all races and religions in Malaysia are clearly overindulging in unhealthy food and drinks. This is true, even during Ramadan.

In some government departments, employees are said to take several meal breaks: breakfast, a 10am break, lunch, teatime and even a bite over teh tarik after work at 5pm.

In Thailand, for example, each police personnel are given a uniform. If the uniform does not fit you, you cannot exchange it for a larger-size replacement. Instead, you are given one to two weeks leave to go exercise, eat right and get back into shape to fit the uniform. Many of our defence and security uniformed personnel are clearly obese. They may not be fit to defend the nation, let alone curb the increasing crime rate.

Some blame the fast-food chains. Others will say they do not have much choice as both working parents are left with no time to cook healthy meals at home. The high obesity rate may also be an indicator of the rising cost of living or high poverty. Obesity leads to ill health and under-performance and directly affects the nation’s productivity. 

We need a ‘revolution’ to reset our poor habits and change the landscape of work, play and eating. The Health Ministry needs to work-out a campaign and incentivise people to eat, work and play right. There must also be penalties for high BMIs. How do we finance it? We will get pharmaceutical companies to contribute 2% of their revenues to an Obese Fund!

Reference:

Obesity a serious national disease in Malaysia! JD Lovrenciear, ALIRAN, 30 May 2024

Why Did Rishi Sunak Call for an Election?

After 14 years in power, the Conservative Party faces a likely wipeout unless there is an unprecedented reversal in its dismal opinion polling. The Conservatives are blamed by many for a Britain widely seen as being in decline.

Real wages have stagnated for well over a decade; health care waiting lists and house prices are soaring; sewage is being pumped into the rivers and sea; dysfunction blights everything from the country’s railways to its prisons; and Brexit — once the Conservatives’ cause célèbre — is now widely deemed such a failure that most politicians prefer not to discuss it at all.

Source: https://en.wikipedia.org

Because of election law, Sunak had to call the vote at some point this year. Even so, his decision to act immediately — while his party languishes a colossal 20 points behind the opposition Labour Party — has deeply angered many of his own lawmakers. Many observers are wondering: why now?

Rishi Sunak has deployed the only weapon left in his arsenal: the element of surprise. At the very least, he fired the starting pistol on his own terms, and showed that he has the backbone to go for it proactively. But even the prime minister’s traditional allies seemed to share a sense that Sunak may also have sounded the final bell on 14 years of Conservative rule.

The right-wing newspaper The Daily Telegraph went with: “Things Can Only Get Wetter,” a reference to a  1990s British dance classic. That was the song played by demonstrators at the gates of No. 10 Downing St., which threatened to drown out Sunak’s address. 

Electoral history is full of shocks, of course, but no party in the history of British politics has reversed anything close to the current polling chasm this close to a vote. The current landscape is bleak for the Conservatives. But recent slivers of good news may mean this actually is as good as it might get.

Inflation has fallen to 2.3% — down from a 40-year high of 11% in late 2022, the worst in the developed world. (Inflation in the United States was 3.4% in April 2024.)

The prime minister may also be hoping for a polling boost from the launch of his flagship immigration policy, a plan to deport asylum-seekers to Rwanda. Amnesty International called it “a stain on this country’s moral reputation” and a “national disgrace.” But 42% of voters — and 58% of Conservative voters — think immigration here is too high, according to Redfield & Wilton Strategies, a London pollster and consultancy. Net migration to the United Kingdom has risen sharply, despite Conservative promises that Brexit would do the opposite.

Sunak’s supporters also claim that, while the prime minister might be unpopular, the public doesn’t seem to have warmed to his chief opponent, former prosecutor Keir Starmer. Despite his party polling well, the Labour leader’s personal net favorability rating is minus 17 (vs. Sunak’s minus 51), according to YouGov.

So, could Sunak win on 4th July?

It is easy for me to outline but perhaps the following could have been his strategy when he first came into power:

(i) reduce or eliminate waiting times at hospitals. Fund NHS fully and build/re-build hospitals;

(ii) get a grip on cost of living by having subsidies on electricity/utility tariffs;

(iii) process all illegals on French soil and stop all boats from landing;

(iv) build/privatise land for new housing; 

(v) build the high-speed rail line to Manchester;

(vi) eliminate issue of homelessness with social services funding; 

(vii) refuse to support foreign military ventures of the U.S., like in the Ukraine; and

(viii) find new taxes to fund above costs, e.g. use the Tobin tax and “excess” profit tax on oil companies, pharmaceuticals and banks.

Was that really too hard to do? Actually not, if you are from Oxford and Stanford!

Reference:

His party is deeply unpopular so why did British PM Rishi Sunak just call an election? Alexander Smith, NBC News, 23 May 2024

Motac: 1Q2024 Tourism Earnings Top RM22b!

Malaysia welcomed over 7.56 million foreign tourists in the first four months of the year, marking a growth of 27.5% compared to the same period last year. Tourism, Arts and Culture Minister noted that this achievement places Malaysia as the second-highest recipient of foreign tourists in Asean, behind Thailand with 12 million tourists and ahead of Vietnam with 6.2 million, Singapore with 5.71 million, and Indonesia with 4.1 million during the same period.

During the first quarter, Malaysian tourism contributed RM22.23 billion to the national coffers, reflecting a 66% increase compared to the first quarter of 2023. In 2023, total tourism revenue amounted to RM71.31 billion, up from RM28.23 billion in 2022.

Motac has implemented a comprehensive strategy to further boost the tourism sector. This includes active participation in international tourism exhibitions, conducting roadshows in key markets such as Australia, China, Europe, India, Japan, Korea, the Gulf and Nordic countries.

The ministry is leveraging digital channels, such as social media to enhance visibility among tourists and travel agents in target markets, while also tailoring tourism products to specific segments and market demands, as well as improving accessibility with increased flight frequencies and seating capacity.

Discussions with the Ministry of Home Affairs and the Immigration Department is on-going to streamline entry processes for foreign tourists, potentially introducing visa-on-arrival (VOA), multiple-entry visas, eVisas and transit visas.

The number of Chinese tourists visiting Malaysia more than tripled to 1.12 million from December 2023 to April 2024, compared to 332,144 tourists during the same period the previous year. Meanwhile, Indian tourist arrivals also increased by 82.3% year-on-year to 380,737 for the same period, compared to 208,907 tourists previously.

This augurs well for the hospitality, transport, retail and other related sectors. Motac seems to have got its mojo back!

Reference:

Motac: 1Q2024 tourism earnings top RM22b, tourist arrivals up 27.5%, TheEdge / CEO Morning Brief, 25 Jun 2024

Did British Colonialism Kill 100 Million Indians in 40 Years?

Recent years have seen a resurgence in nostalgia for the British empire. High-profile books such as Niall Ferguson’s Empire: How Britain Made the Modern World, and Bruce Gilley’s The Last Imperialist, have claimed that British colonialism brought prosperity and development to India and other colonies. Two years ago, a YouGov poll found that 32 percent of people in Britain are actively proud of the nation’s colonial history.

This rosy picture of colonialism conflicts dramatically with the historical record. According to research by the economic historian Robert C Allen, extreme poverty in India increased under British rule, from 23 percent in 1810 to more than 50 percent in the mid-20th century. Real wages declined during the British colonial period, reaching a nadir in the 19th century, while famines became more frequent and more deadly. Far from benefitting the Indian people, colonialism was a human tragedy with few parallels in recorded history.

Source: https://en.wikipedia.org

Experts agree that the period from 1880 to 1920 – the height of Britain’s imperial power – was particularly devastating for India. Comprehensive population censuses carried out by the colonial regime beginning in the 1880s reveal that the death rate increased considerably during this period, from 37.2 deaths per 1,000 people in the 1880s to 44.2 in the 1910s. Life expectancy declined from 26.7 years to 21.9 years.

In a recent paper in the journal World Development the estimate of the number of people killed by British imperial policies during these four brutal decades show some 50 million excess deaths occurred under the aegis of British colonialism during the period from 1891 to 1920.

How did British rule cause this tremendous loss of life? There were several mechanisms. For one, Britain effectively destroyed India’s manufacturing sector. Prior to colonisation, India was one of the largest industrial producers in the world, exporting high-quality textiles to all corners of the globe. The tawdry cloth produced in England simply could not compete. This began to change, however, when the British East India Company assumed control of Bengal in 1757.

According to the historian Madhusree Mukerjee, the colonial regime practically eliminated Indian tariffs, allowing British goods to flood the domestic market, but created a system of exorbitant taxes and internal duties that prevented Indians from selling cloth within their own country, let alone exporting it.

This unequal trade regime crushed Indian manufacturers and effectively de-industrialised the country. As the chairman of East India and China Association boasted to the English parliament in 1840: “This company has succeeded in converting India from a manufacturing country into a country exporting raw produce.” English manufacturers gained a tremendous advantage, while India was reduced to poverty and its people were made vulnerable to hunger and disease.

To make matters worse, British colonisers established a system of legal plunder, known to contemporaries as the “drain of wealth.” Britain taxed the Indian population and then used the revenues to buy Indian products – indigo, grain, cotton, and opium – thus obtaining these goods for free. These goods were then either consumed within Britain or re-exported abroad, with the revenues pocketed by the British state and used to finance the industrial development of Britain and its settler colonies – the United States, Canada and Australia.

Britain nor any other imperial power of that period – France, Belgium, Russia, Netherlands, Germany or Japan – have acknowledged their misdeeds. It is also the same with the U.S. – the “beacon” of democracy. It is when they do that reconciliation and restoration could begin. When will that be? When more people in those countries learn of the inhumanity of their forefathers that some form of apology and reparations could begin! Until then, the former imperial powers will continue to behave badly.

Reference:

How British colonialism killed 100 million Indians in 40 years, Dylan Sullivan and Jason Hickel, Al Jazeera, 2 December 2022