Bermuda’s wealth gap getting wider — economist
Wealth inequality in Bermuda is the worst it's been over the last century, according to economist and Bermuda College lecturer Craig Simmons.
The economist warned that failing to listen to the concerns of the people would only encourage the now ubiquitous cries of distemper. “Let's first accept that the level of inequality in Bermuda today is about as large as it's been in the last 100 years,” said Mr Simmons.
A copy of the French economist Thomas Picketty's paradigm-shifting book Capital in the Twenty-First Century tucked neatly in his bag, Mr Simmons said that dismissing the demands of the People's Campaign as hot air would be ignoring a narrative that is taking root across the globe.
While international business has provided Bermuda with untold wealth over the years, Mr Simmons pointed out that IB executives are only becoming more wealthy, while the average working class Bermudian is being slowly dragged below the relative poverty line. The trend is an inevitability in a capitalism, Mr Picketty argues in his book, and Mr Simmons agrees. “The people at the very top are doing a heck of a lot better than they've ever done, and to the People's Campaign point that the majority of working class people have seen their real salaries stagnate over the last ten years — unfortunately we look at the People's Campaign as being all talk — but it's real,” he warned.
“The people at the top who are making these big incomes have to understand how that can undermine the social glue, how this inequality of income and wealth can cause a society to unravel and we end up losing everything.”
If the economy is growing, asked Mr Simmons, why is it that the benefits of that growth cannot be spread more equitably?
“One solution, he said, begins with restructuring the payroll tax in Bermuda, which is now capped at $750,000. Put simply, if a person makes more than $750,000 a year, they become exempt from taxation.”
“How is that fair?” asked Mr Simmons.
“Most people would agree a flat tax makes sense. You could say, if the flat tax went all the way to infinite, the first $50,000 an individual makes is tax-free.
“So if you're making $49,000 you don't pay any tax on your income.
“Whereas if you're making $5 million you're going to pay a fixed percentage of that, the same as someone making $100,000.
“Those are fairly easy ways of introducing a degree of progressivity.”
Equally important to the structure is where those tax dollars are then invested, said Mr Simmons.
“I would also argue for progressive Government spending. Given the complexities of our economy you're going to need to provide a disproportionate amount of government funds for those at the bottom, for the poorest 50 percent.”
Marrying a flat tax structure with a progressive spending policy aimed at funding things like social assistance, scholarship support, a top-notch education system, and affordable healthcare, said Mr Simmons, enables tax hikes elsewhere, such as social insurance.
Very few people, he pointed out, would object to paying higher taxes for education and healthcare.
“Those can be progressively structured so that the people at the bottom do have access to good healthcare, a good education, and when they lose their job they can in fact get some assistance, as opposed to letting them hang out there and find their own way.
“I don't think given the complexities and sophistication of our society we can allow people just to wallow in poverty. We have an obligation.”