SINGAPORE — Terry Xu asked me a very interesting and intriguing question — Are there policies that help the rich, more than the poor?
Well, arguably, here are some examples:
1) Working Mother’s Child Relief
So, for a lower-income working mother, the relief may be of no use at all, because she wouldn’t have to pay any tax or hardly any tax, in any case.
For example, a working mother with an income of $30,000, and 3 children, would not have to pay any tax.
In contrast, a working mother with an income of $100,000, and 3 children, would have her chargeable income reduced to $70,000.
So, richer mothers benefit more, relative to poorer mothers.
In summary, what this may mean is that it may be discriminatory to those women, and consequently, their children, who do not earn enough to pay any or very little income tax, as they do not benefit from the above procreation tax benefits.
For the rich, the higher the income, the greater may be the procreation tax benefits.
Why not just give the same benefits to parents, regardless of their income? After all, I understand that about 40% of Singaporeans do not or hardly pay any income tax.
In this connection, 680,900 resident workers earn less than $2,500.
The labour force participation rate for females is 63.4%. https://www.singstat.gov.sg/find-data/search-by-theme/economy/labour-employment-wages-and-productivity/latest-data
With our TFR at its lowest ever – perhaps we should consider what other developed countries do – and that is to distribute procreation benefits equally, without any discrimination by virtue of the women’s economic status.
The notion that giving more financial incentives to the higher income and educated, may be “statistically” flawed.
Statistics have always indicated that the lower-income and lower-educated are the ones who may tend to procreate more.
If you are a lower-income women’s family, the benefits may make a world of difference. But, if you are highly paid, how much more motivation is there for you to procreate by dangling more financial incentives?
How can the principles and ideals of meritocracy be truly procreated when our procreation incentives are so lob-sided that they pay out, as I understand it, historically, a few times more for procreation tax benefits vis-a-vis non-tax-related procreation benefits?
For illustrative purposes only – if the sum total of procreation tax benefits is $8 billion, like the working mother’s tax relief – wouldn’t it be fairer, more equitable and effective, to distribute it equally to mothers, regardless of their income?
In the final analysis – this is a policy that distributes government expenditure or benefits, which are, after all, taxpayers’ money, that belongs to all taxpayers whether rich or poor, more so to help the rich, relative to the poor.
2) Discrimination against lower-income?
Are we discriminating against lower-income families and contributing to inequality and discrimination against lower-income women by having schemes like the Child Development Account in its current form?
I refer to the article “Parents of 4 in 10 firstborns have benefited fully from CDA” (Straits Times, May 21, 2018).
It states that “A Ministry of Social and Family Development spokesman told The Straits Times that 42.1% of firstborns since 2016 – the First Step grant was started in late March that year – have hit the maximum government matching contribution. For the second child, the figure is 35.8%, and it is 10.9% for the third, 4.8% for the fourth, and 1.2% for the fifth child and beyond.”
As to “For the 2011 birth cohort, which hit its halfway mark for saving last year, 71.2% of the firstborns have received the maximum government matching contribution, and it is 66.6% for the second child, 38.8% for the third, 23.7% for the fourth, and 9.8% for the fifth child and beyond” – why is the subscription rate apparently quite low?
Isn’t it arguably, a no-brainer to contribute because of the matching grant?
After all, “the money in the CDA can be used for childcare fees, medical expenses and more, at approved institutions.
In the year that the child turns 13, the unused funds in the CDA go into the Post-Secondary Education Account (PSEA) under the Ministry of Education (MOE).
When the account user turns 30, the unused money goes into the Central Provident Fund (CPF) account”.
Is the primary reason for not contributing due to the financial difficulties of the parents?
Why do we continue to have such a scheme which may arguably contribute to greater inequality and discrimination against women by virtue of their economic status?
This is also a policy that distributes government expenditure or benefits, which are after all taxpayers’ money, that belongs to all taxpayers whether rich or poor, more so to help the rich, relative to the poor.
3) HDB: Rich get $190k grants, poor get $80k?
The maximum housing grants for Built-To-Order (BTO) HDB flats is $80,000, and it is income means-tested – household income not more than $1,500 to get the maximum $80,000.
In stark contrast, the maximum grant for resale flats is now increased to $190,000, and there is no income means test – only that the income ceiling cannot exceed $14,000.
Why are we giving more help to, arguably, richer people, to buy more expensive resale flats, relative to poorer people who may only be able to afford BTO flats?
Also, is it arguably, fair or equitable to have public housing policies, that enable richer people to buy immediately (with up to $190,000 grants), whereas the poorer people may have to ballot (and have to be means tested to determine the grant amount) and wait 4 to 5 years for a flat?
This is also a policy that distributes government expenditure or benefits, which are after all taxpayers’ money, that belongs to all taxpayers whether rich or poor, more so to help the rich, relative to the poor.
Are there any developed countries in the world. that has so many policies, like the above, which arguably, spends government expenditure or benefits, to help the rich more than the poor?
