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Cautious welcome for working poor tax cuts

Social justice campaigner Martha Dismont has welcomed tax reform pledges to help the working poor, but warned they could also bring unwanted consequences.

Ms Dismont, executive director of Family Centre, described finance minister Bob Richards's acknowledgement of the less fortunate in last Friday's Budget as a “victory” for those who need help.

However, she warned that some struggling families might be hit by higher taxes unveiled for middle-income earners.

On Friday, Mr Richards announced people earning less than $96,000 will receive payroll tax cuts over the next two years, but those earning more than that will pay more tax.

The minister conceded the economic turnaround had not trickled down to everyone and that tax reform could help those who cannot pay bills and put food on the table.

Ms Dismont said she was grateful for the payroll tax break for lower-income earners, but pointed to potential problems with the hikes for middle-income earners.

She said: “If there is increased tax on their salaries, this will impact the lower-income bracket still, as middle-income family members will have less disposable income to support lower-income family members.”

Customs tariff rate changes were also announced in the Budget. Mr Richards stressed the rate on several essential goods would remain the same to “avoid placing extra burdens on the least well off”, but said other increases would yield an extra $19.5 million in duty. These include discretionary goods such as machinery or electrical equipment.

Ms Dismont wondered if such increased tariff rates would ultimately be inherited by low-income earners.

“If the costs in Bermuda for small business owners and retail shops are increased due to increased taxes, those costs will likely be passed along to the consumer and once again force locals to shop overseas rather than buy Bermuda,” she said.

“In addition, local businesses may cut costs by laying off individuals, or choose not to hire staff. This will ultimately impact unemployment figures.”

She said that addressing Bermuda's debt was an “important priority” but insisted care should be taken that this should not be the expense of the wellbeing of the people.

“Notwithstanding the lack of ‘wiggle room' in the Budget, or the risk to an unstable economy with a looming debt, we need to be creative and prioritise spending on behalf of the able-bodied unemployed, or underemployed,” she said. “This is necessary for the sustainability of our people and ultimately the strengthening of this economy.”

Major Frank Pittman, Bermuda's Salvation Army divisional commander, whose organisation is set to receive a Budget bump next year from $400,000 to $800,000, said the money would address existing operational costs — not additional programming.

“For the past three or four years, we've continually got a cut in budget each year,” he said.

“We're struggling to survive where we are today.”

While “delighted” by the cash infusion, he said increased costs, coupled with budget cuts, had left the organisation “holding a very heavy pot”.

Major Pittman said programming, including job and skills

Martha Dismont

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Published February 27, 2017 at 8:00 am (Updated February 27, 2017 at 12:53 am)

Cautious welcome for working poor tax cuts

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