What do you think are the reasons that small businesses can't
pay a higher wage rate?
It's "their policy" of taxing the lower and middle income earners
more instead of the
higher income earners
Higher income earners have more disposable income, if they make a
million a year, after
taxes of 20%, they will be left with $800,000 a year. They won't
spend everything, they
will most likely save a large substantial portion of this. High
propensity to save (save
more)
Low income earners have less disposable income, if they make
$20,000 a year, after CPF
contribution, they will be left with $16,000, with the $16,000 they
have left, they
are most likely to spend everything on perishables and necessities.
After the GST, they
will only have like $15,238 left. Low propensity to save (save
less).
When you spend more and save less, you tend to stimulate the
economy.
Assume you save only 5% (low income earners) of your income.
ABC spends $100 in DEF's shop, DEF spends $95 ($100 x 95%) in GHI's
shop, GHI spends
$90.25 ($95 x 95%) in JKL's shop, JKL spends $85.74 ($90.25 x 95%)
in MNO's shop, ....
If you add up total income = $100 + $95 + $90.25 +
$85.74...............
It will add up to $2,000 = $100 / 0.05
When you perform this with a savings of 50% (high income
earners).
You will get $200 = $100 / 0.50
This means less income will be generated.
The growth of our economy was based on Solow's model of savings and
growth. That's why
CPF still remained despite the completion of our MRT project. But
as the economy matures
to a stage, I think it would be counter productive to have too much
savings.
Pre-mature economy (low savings):
1 computer (capital stock) to 1,000 people
Mature economy (balanced savings):
1,000 computer (capital stock) to 1,000 people
Mature economy (high savings):
1,000,000 computer (capital stock) to 1,000 people
Having too much capital will bring diminishing returns, because you
can't utilise the
capital efficiently. That's why you see earlier in the year,
Singtel did a share buyback,
so they can return excess capital to shareholders as they can't
find good investments.
I don't understand why they always have to have a budget surplus,
sometimes a balanced
budget, or a slight budget deficit will be more favourable. I think
it should only be right
that you tax the higher income earners, as they make more money,
they should return to
the society what they have taken.
Maybe to enticed multi-national corporations here, they can use tax
incentives.
Instead of cutting the top bracket of income tax to 20% for all
income tax payers.
They should distinguish between public listed company (with a
certain capital and turnover)
and non listed (privately owned enterprises)
