Pampering the super-rich!

WE live in a country where politicians often shed tears for the poor, but they favour the wealthy when in office. The culture inevitably results in greater income inequality, which threatens social order and the pace of growth. Hence, it does not require anyone to be a radical socialist to understand why the practice of coddling the super-rich should be reversed for the sake of social and economic sustainability in the future.
We Bengalis have always been fertile in spawning political parties.  These countless parties, however, are polarized between two major camps – both of which endorse the market economy as their economic policy.  Of crucial importance has been this very consensus for Bangladesh which entered a new era of growth acceleration since the early 1990s.  This new phase was made possible mainly for two reasons: a new stage of democratisation and political consensus on gradual economic openness through the market economy.                                                  
Unfortunately, this growth acceleration has blinded us in the areas of income distribution and social equity.  While the market economy was a medium, we often took it as a destination.  The market is not a self-correcting mechanism.  Rather the divide between rich and poor will be widened unless the wild horse of market mechanism is bridled properly.  Herein lies the importance of government tools like taxes and subsidies that act as great equalizers of society so long as a political will is sincere enough to make it happen.
The upcoming budget of FY2014-2015 is planning to offer another tax cut for the corporate businessmen.  This stands as the latest example how the business lobby always wins and the government enjoys spoon-feeding the super-rich.  It seems we are living in a paradise of capitalism such as the US under a Republican President.  High are the frustrations when a party, like Awami League, which is supposed to be more committed to the interests of the middle class and peasants, is in power.  At least Awami League was not born with the initial blessings of military personnel, corporate tycoons, and the ultra-rich.  Thanks to the CPD for being vocal on this issue of growing inequality when others are quiet.
The minimum corporate tax rate in Bangladesh, 27.5%, is already one of the lowest in South Asia.  Of valid reference is the case of our neighbouring India where it is as high as 34%, which did not stand in the way of their higher level of growth and development as an excuse by Indian money moguls.  When Bangladesh finance minister talks of further tax cuts for the business magnates under the pretext of investment augmentation, it portrays unfair favouritism.  Much to our sadness, this attitude is faintly reminiscent of Pakistani army regimes where the power-hungry generals patronized the rise of the bourgeoisie who would, in turn, lend support to the rulers.  Even now in Pakistan, which grew through multiple bouts of military coups and state-sponsored capitalism, the corporate tax is 34% – much higher than ours.  
Does Awami League need to vie with other extreme rightist parties in the worship of the super-rich?  If India can ascertain 35% investment rate even in the face of the 34% corporate tax rate, why can not we ensure investment rates higher than the existing 25% in the presence of only the 27.5% tax rate?  The problem lies elsewhere such as infrastructural bottlenecks, low business confidence, political vandalism, and finally lack of law and order.  Never have the tax rates been a valid excuse.
Warren Buffett, once the richest man on earth, asserted that tax rates are not impediments to the investment-decisions of the wealthy; because money breeds money after a certain level of wealth accumulation.  He wrote an article in the New York Times (Aug 14, 2011) where he proposed much higher tax rates for the affluent to help the US economy move forward by weathering fiscal deficits and mammoth debts.  Of late, Thomas Piketty in his bestseller, Capital in the 21st Century, has suggested reducing income inequality in all developed nations.  A failure to do so will make democracies tumble and erode growth potentials.
Why is so? The poor spend extra income, if any, for effective consumption that boosts output and growth.  In contrast, when the rich are already full to the throat, any extra income is likely to be used for toxic investments, land grabbing, buying political clout, or high-profile corruption like money laundering.  Days are not far away when our whole parliament will turn into an elite club of corporate monsters.  This trend must be reversed to make our emerging growth figures sustainable and democracy functional.  A steeply progressive tax system is warranted in Bangladesh to harness resources for spending behind infrastructure.   Tax policy to favour the small and medium enterprises (SMEs), which are the mainspring of the economy, will prove more productive than to oil the oily heads.  
The recent culture of pampering the super-rich should not go unchecked for the greater interest of sustainable growth and equal democratic values in society.

The writer is Associate Professor of Economics at the State University of New York at Cortland.