What I discovered about TRAIN (1)

I interviewed Rep. Joey Salceda (2nd District, Albay) on the tax reform bill—it is called Tax Reform for Acceleration and Inclusion, or TRAIN — that the House of Representatives has just passed by an overwhelming majority. Salceda is one of the few congressmen who actually is worth every penny of his salary and emoluments. He is vice chair of the most important committees in the House — economic affairs, ways and means, local governments, and finance.

And he does his homework. He can never be accused of having “his incompetence only matched by his stupidity,” or of not knowing what the system of checks and balances in the government actually means (e.g., Speaker Pantaleon Alvarez’s ignorance of the fact that the Constitution gives the Supreme Court the role of interpreting the Constitution, duh!).

Congressman Salceda gave me a course in TRAIN 101 and, more importantly, shared his materials with me — thank you for the transparency, Joey — which allowed me to see past the buzzwords and the rah-rahs  of the so-called “Duterte Express.”

Let me share with you what I discovered, Reader.

1. TRAIN itself (tax reform), or Package 1 of it, which includes reforms on the personal income tax (-P144.5 billion), value-added tax (+P81 billion), petroleum excise (+P73.7 billion), automobile excises (+P14.1 billion), sugar-sweetened beverage excise (+P47.0 billion), tax administration measures (+P43.8 billion), and complementary measures (+P18.9 billion). The figures in parentheses are the estimated impact of the measures for 2018. On this basis, the package would result in a net gain of P133.8 billion for the government, equivalent to about 0.8 percent of the country’s gross domestic product.

But get this, Reader: The total impact of TRAIN is negative for the majority of our people — it will reduce the household income of the bottom 60 percent of our households. Ironically, it increases the income of the top 40 percent of our households, except for the top one – tenth of 1 percent (those whose incomes are over P1.38 million a month) — their incomes are reduced by something like P8,000 a month (sob!). The richest ones, those earning more than P2.75 million a month, get their incomes reduced by P21,000 a month.

2. Good grief! What kind of tax reform is that? But never fear, Congress is here! House Bill No. 5636 has come up with a transfer scheme to solve the problem. It will transfer to that bottom 60 percent an amount more than enough to compensate for the losses imposed on them by TRAIN. Where will it get it? It has earmarked 40 percent of the petroleum excises, or roughly P30 billion for this transfer.

Not content with compensating the bottom 60 percent, our Congress also decides to distribute largesse to the seventh and eighth deciles which includes the minimum-wage-and-above workers. Why? Because maybe the minimum wage workers are a noisy lot, so why not spread the wealth (and gain votes)?

What does this transfer scheme do? It will give P3,600 a year to the bottom 50 percent and P1,500 a year to the next 30 percent. Why not P3,600 a year to the bottom 60 percent who have been harmed, and P1,500 a year to the next 20 percent? I have no idea. But the “informal worker” who is in the sixth decile has just been left out to dry.

3. Isn’t that a great solution? NO. Why? Because: a) It will be a bureaucratic and a logistical nightmare. Remember, this tax-transfer scheme involves 80 percent of Filipino families, or roughly 16 million families. Congress has not quite worked it out. Congressman Salceda says the Department of Social Welfare and Development will handle it. But its hands are full with the 4Ps program and disaster relief. And you can imagine all the possible glitches, and the opportunities for “financiers” to make money on the poor, who need the aid now, so are willing to sell their cards, or whatever, at a discount.

And b) Far worse, it turns out, the transfer scheme does not continue as long as TRAIN does. Funds for it have been earmarked for only one year. Congressman Salceda says the transfer program will last four years, but that’s a promise, not a fact.

It looks like the poor are being screwed again. Unless the Senate puts a stop to it. (To be continued)