What’s wrong with a progressive payroll tax?


“I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income” – Martin Luther King, Jr


One of the topics mentioned in the Throne Speech was the introduction of a progressive payroll tax.

One of the keys to the continued recovery in 2017 will be the introduction of a progressive payroll tax to “ease the pressures on lower income earners.”

This is one of the topics that both parties are in support of that I think takes us in the wrong direction.  I’m firmly of the believe that rather than introducing a progressive payroll tax, Bermuda should pursue some form of an unconditional universal basic income.  I’ve previously written about it here and here and it is actually a concept I’ve been advocating as an alternative to tax cuts since way back in 2007.

Am I crazy?  Maybe.  The thing is in the last few years I quit my job in international business to become an entrepreneur.  It was a big risk which meant years of not paying myself and even now only making a fraction of what I used to.  I am lucky in that I was provided the opportunity for a good education and was willing to put in the hard work and make sacrifices. Most people aren’t as lucky.

The problem with tax cuts for low income earners is that it is like that old adage, “Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime”.  It may help someone live a little easier but it doesn’t help if they want to take time off working to retrain for a better job or start their own business.  A universal basic income, basically an unconditional monthly payment provided to all residents, enables more opportunity than a tax cut.