IN MEXICO, SALES TAXES ARE NOT REGRESSIVE, ACCORDING TO TREASURY FIGURES:
One of the most popular planks in the winning PRD platform in July was the pledge to repeal the odious 50% increase in the IVA (value added, or sales, tax) imposed over two years ago by the PRI. The reduction, from 15% back to 10%, is still a prime goal of the political opposition and is supported by a majority of the folks. However, in a display of what may be political sleight of hand or third-world reality, the Zedillo administration is claiming that in reality, the rollback would hurt, not benefit, the poorest Mexicans, while significantly augmenting the life style of the rich.
At first blush, such an idea flies in the face of all accepted theories of taxation in the US, which point out that since the poor spend almost all their money on necessities, taxing groceries and cooking gas for example has a disproportionate effect on them, whereas the rich only spend a small amount of their income on necessities. Taxing all persons equally, furthermore, fails the “more income, more taxes” so-called progressive income tax test. And in industrialized, first world countries, this must be true (voodoo trickle down economics aside).
However, says the treasury, Mexico is a third world country, in which the vast majority of citizens are in desparate poverty. Since almost all the buying is being done by a few very rich folks (the middle class in Mexico is not as large, proportionately, as it is in the US), denying the government one third of its present IVA revenue will result in drastic reductions in entitlement programs to benefit the poor (who hardly pay any taxes), and giving windfall tax deductions to the rich (who do).
The claim is bolstered by the following statistics: 67% of IVA is being collected from the top 30% of income, and only 7% from the lowest 30%; if the budget is to be maintained, a 50% decrease in IVA will have to be matched by a 15% increase in with-holding from employees, or a 12% increase in the tax on rent, or a 23% increase in the cost of goods sold (so that the amount collected will be the same, even though the IVA has been decreased by 5 points).
Taken at face value, this means that the top third of the earners in Mexico spend nine times as much as those on the bottom third. And the bottoms, it is claimed, get almost 50% of their support from the public sector in the form of social services, schools, etc. The threat is clear: continue to pay the extra 5% or lose a lot of necessary social services.
Now, aside from the known fact that while figures can’t lie, liars sure can figure, it seems to me that there are enough holes in this argument to drive a fleet of Dina diesel buses through.
First and foremost, who says that sales taxes are the only way to go? Why, the folks who don’t want their incomes taxed, that’s who. And who do they support? Why, the country’s foremost market-rate neo-liberal egghead, that’s who. So how do you spell more-for-the-rich? Why, PRI, that’s how.
Secondly, if the poor (most of whom work at less than a living wage) are net consumers of public services, why not just raise their wages and let them pay for services? Who could be against that? Why, the bosses and the bankers and the caciques, that’s who: living wages would have to come out of their pockets, and while they don’t mind emptying them they prefer to put the contents into secret bank accounts in Switzerland and Texas. And how do you spell protect-the-rich-at-any-cost? Why, PRI, that’s how.
Sorry, Ernesto, this one just ain’t gonna fly. You may be able to block any change in the Senate, where the PRI still enjoy a majority, but the PRD isn’t giving up on this one. The scare tactics (“A PRD victory in July means total chaos; vote PRI for more of the same”) didn’t do it for you in July, and neither will this little bit of politico-economic sophistry. And make no mistake about it, this is a lose/lose scenario for you, Ernesto. If, as is likely, you block the IVA reduction for now, it will come back to haunt your party in the elections of 2000. If you fail to block it, the top 30% (whom, according to your Treasury report, would benefit from the reduction, but whom in actuality understand it as a step in the direction of real income taxing) will be looking for an alternative to the PRI.
“LETTERS FROM MEXICO” ABOUT TO LOSE ITS CURRENT WEB SITE:
It is with genuine sadness and regret that I write to inform you that as of the end of this month, Dream Machine Network Services, the publisher of my deathless prose for the last three-plus years, is shutting down.
Site of some of the most popular and courageous providers on the Internet, including the first homegrown web “star” if measured by readership, Roger Davidson, teen movie critic, DMNS was alas done in by the same forces of history that have turned the lights off for thousands of others: inability to generate enough money to pay the bills.
Thousands of hours of unpaid labor went into keeping the site open, including that of the ISP, Skypoint Communications, whose own financial difficulties finally made going on impossible. While some of us “capitalized” on the free work we did (I, for example, gained a certain cachet which I have been able to turn into a book, this newsletter, and my Oaxaca orientation classes), none of us ever directly realized a penny for our postings.
Now what? Well, I am hoping to convince some other webmaster to take on my stuff, and to this end I am sending out emails of enquiry. I already have one tentative “probably”, so I will probably be ok.
If no-one else wants to do it, I will put it on Delphi and try to maintain it myself, although that is not my first choice and I hope it doesn’t come to that: as my webmaster consistently points out, I lack that certain sort of anal retentiveness that makes for good html composition.
So, this is certainly not goodby, or even see-ya-later; merely stay tuned, I’ll let you know as things develop.