Time for tax relief for the low income

Tia Belau Editorial, April 2, 2012 —-

The national government now operates by fiscal year 2012 budget – public law RPPL No. 8-40. The budget law was passed but not before the public saw the rancor that was in display between the two houses of the Olbiil Era Kelulau.  The fiscal year 2012 budget bill joined the casino bill earlier as the only two legislations that passed the OEK with considerable support of abstention votes.

However, as the saying goes, there is a silver-lining with every cloud. In the fiscal year 2012 budget, the Olbiil Era Kelulau to their credit was able to insert back into the bill the $75,000 low income assistance originally proposed by President Johnson Toribiong.

The $75,000 is for the purpose of providing subsidies to households by way of paying the stipend of $100 per month to each family identified by the 2009 Household Income Survey (HIS) conducted by the ministry of finance as having no income.

According to the Household Income Survey of 2009, there are 205 Palauan families who are identified with no source of income and would be greatly helped by the subsidies. However, there are even more families struggling to keep up with the rising cost of living that are outside of that income category. Of the 3,528 Palauan households in the 2009 HIS, 788 families earn between $1 and $5,000 annually. These are not individuals but Palauan families consisting of four members on the average.

One of the best ways to provide economic assistance for these income group of families can be addressed through tax relief. A version of this concept was proposed by President Toribiong’s proposal to adjust the wages and salary tax for the lowest paid employees.

The idea is to decrease the wage and salary tax from 6% to 3% for the lowest paid employees in Palau. These are the employees who are making $8,000 per year or less, which constitute about 69% of the labor force. And it is from the adjustment to this salary range that the 788 families could begin to feel some sort of relief.

The income tax reduction will result in a net gain in their pay of 3%. As an example, those who are making $5,000 will realize a tax savings of $150 a year. Considering that flat rate fee to water and wastewater has increased by $5 per month, the tax reduction will be more than enough to cover the increase for the whole year.

The reduction of the tax burden to the lowest paid employees can be offset by increasing the rates to those in the higher income brackets. In these economic hard times, those who earn more must be able to shoulder more of the tax burden to help those who are living at a very bare subsistence.

Our true strength as a nation depends on what we can do to help those who are indigent among us.

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