Monday, 12 May 2008

150,000 gross income exempted from income tax

We were listening to the news on the way home, and there was a report about the income tax exemption of people earning 150k a year. The bill is now on its 3rd reading (i don't know which house). So we estimated that people earning 10k a month will be exempted.

Increase in the income tax rate
I don't want this to happen because it will be the struggling middle-class, fair off middle class and high(?) class who will pay these. It's unfair for us who are able to earn more than 150k a year, especially for the struggling middle class. If a lot of struggling middle class families fail to make ends meet, then more families might cross the poverty line, consequently increasing the number of poor people in the Philippines

Inflation
another con in this bill which i think is highly feasible, is its effect on inflation. Right now, we are experiencing a surge in prices.When this bill is passed, the inflation rate will again increase. When the people exempted from income tax receive their paychecks (or whatever), their purchasing power has increased because they now have more disposable income. Hence, they have more money to spend, their demand for goods and services will also increase; And seeing that demand is directly proportional to price (P=D/S), Prices will shoot upward and thus, inflation.

I know a lot of people will think that this bill is beneficial. People think that with the increase in prices,an increase in their purchasing power will help them make ends meet, but the result is quite the contrary. Although, I also think this bill is beneficial, but still, this is not the time to implement it if ever it becomes a law. A lot of Filipinos fall under those who are earning 150k or less a year and the sudden increase in the number of legal tenders is one sure way of starting economic inflation.


Disclaimer: I am no economics expert and all the things related to economics found in this blog entry, especially regarding inflation are based from the things that I learned in school under the subject: Economics, Taxation and Agrarian Reform.

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