Bermuda’s low-income workers are caught in “a reverse Robin Hood effect”, according to economist Craig Simmons — and the tax breaks in the latest Budget do not go far enough to pull them out.

On the other hand, Keith Jensen, head of the Bermuda Employers Council, noted that the payroll tax reforms placed a heavy burden on high earners, and that executives paid $900,000 a year will end up with double taxation — in a jurisdiction that professed to have no income tax.

In an opinion piece in today’s edition, Mr Simmons said that while the demand for skilled labour was growing, unskilled workers were under threat from “a tide of technological innovation and outsourcing” that was eating away at “working-class, inflation-adjusted incomes”.

However, Mr Simmons also recognised that Bob Richards, the Minister of Finance, had little room within which to manoeuvre, with the island’s towering debts standing as “Public Enemy number one”.

While the Bermuda College lecturer conceded that Mr Richards’ Budget statement on Friday noted that the gradual economic recovery “has not raised all boats”, Mr Simmons said that acknowledgement would bring scant comfort to “thousands of Bermudians at the bottom of the socioeconomic ladder”.

Such workers were hard pressed to get a foothold in those sectors of Bermuda’s economy that show growth, Mr Simmons added, leading to a decline in work among “unskilled, prime-aged men”.

The payroll tax reform in the 2017-18 Budget “does not go far enough”, he said — suggesting that earned tax credits might prove “a more effective way of making low-paid work more financially rewarding”.

The Budget Statement, delivered on Friday in the House of Assembly, identified the $186 million for debt service in the coming fiscal year as “astounding”, with Mr Richards telling MPs that it highlighted “the lack of room we have to help Bermudians who need help”.

Mr Simmons praised the government’s efforts to bring down its spending while raising taxes to make “meaningful” progress is bringing down the island’s debt.

Debt service payments stand as “a reminder of what we could have spent the money on”, Mr Simmons said.

Mr Jensen said the payroll tax break for persons earning $96,000 a year and less could stand to have a positive impact on entrepreneurs as well as small employer payrolls.

The BEC head said that the latest Budget had maximised what could be extracted from taxpayers to support the Government.

However, Mr Jensen said the burden had shifted “to higher income earners and to decision makers who can impact future behaviour”.

A person earning $96,000 in two years’ time will take home almost the same net pay after taxes as a person earning $100,000,” Mr Jensen said.

“This may cause persons in line for a promotion, for example, to question if it is worth it.

“Highly paid international business executives face a double increase by removal of the payroll cap and an 83 per cent increase in the tax rate. For example, an executive being paid $900,000 a year, someone who influences whether to be in Bermuda or not, effectively has his personal tax doubled in a country that ostensibly boasts no income tax. Meanwhile, the likelihood of tax reductions loom in the US. Therefore, that payroll tax change may have to be revisited.”

The Budget also shifts Customs rates: the lowest three brackets remain the same, but higher rates are increased — something Mr Jensen said stood to impact not only the rate of inflation, but “the cash flow of businesses — many of whom pay the tax in advance of the products being sold”.

Mr Jensen called the tactic of seeking revenue through tax increases “a double-edged sword”, and said the new Financial Services Tax on banks and insurance companies would likely “wind its way through the island’s economy adding to individual and business costs”.

“Increasing productivity and growth while reducing red tape is as important for the Government as it is for the private sector,” he said.

“Growth, in addition to generating tax revenue, should start to reduce reliance on social assistance. Bermuda has to be the quality destination and the best place of choice for international business and visitors to sustain our tax structure and our standard of living.

“Growth will mean new work permits for international business that will drive more opportunities for Bermudians in a rising economic tide that lifts all sectors yet dilutes health insurance costs.”

Mr Jensen also sounded a warning over the island’s overall debt — saying that it “blunts the use of government’s economic tool to stimulate the economy, if needed in future years”.