Basket.

Headline news today: "GST hike needed to pay for social spending: Tharman".

What follows is yet another insistent declaration of the necessity of raising the Goods and Services Tax from 5% to 7%, and how this measure, which is going to make everything more expensive, is really intended to help the poor.

I think we have enough of a unique economic policy around here to deserve a name for it. I shall christen it "Tharmanomics" in honour of the august Second Minister for Finance and Minister of Education, whose political star is apparently currently shining as brightly as his polished bald patch at the moment.

Tharmanomics apparently calls for, very baldly (pun fully intended), a policy of robbing the poor to give to the rich. It is immediately obvious even to the layman who the GST hike will most greatly affect: the less well-off sectors of the population. The reason? They have less money to spend on things, and when these things get more expensive, they will be able to buy fewer of them. Especially essential items such as rice, flour and milk powder, which no household in Singapore can do without. The GST hike is concurrent with a drop in the corporate tax rate, which will most benefit enormously wealthy multi-national corporations out to make themselves yet wealthier.

Is this not a fairly transparent attempt at robbing the poor to give to the rich? Reducing the amount the rich have to pay, and making up for the loss of revenue by increasing the financial burden on the poor? Or am I missing something here?

It is argued, of course, that the recently-announced Budget has measures in place that will aid the lower-income groupings. The increased employers' CPF contributions (up from 13% to 14.5%) is welcomed but long overdue. Workfare is a commendable initiative, but the amounts involved are really peanuts (S$1,200 a year for those over 45, S$900 a year for those between 35 and 45). GST credits are peanuts as well, and so are virtually all the various other handouts the government so sonorously proclaims. How much can all this really help, especially when much of it is short-term or one-off? The GST hike to 7% will be forever - until they raise it again, that is. The lasting effect will be to make the rich richer and the poor poorer.

What is surprising, however, is that the government now expects a budget deficit: S$1.28 billion for Financial Year 2006 and S$0.69 billion for Financial Year 2007. It is good to know that our government is not as pathologically fearful of budget deficits as I initially thought. However, it seems to be made clear that deficits are to be avoided as far as possible and getting one is like getting the plague. It seems that there will be deficits only when there is no choice; even the most authoritarian of governments must contend with public opinion. Still, considering that our reserves are S$197 billion, these deficits are infinitesimal. Larger deficits could be run over the medium term to help out the people with little ill-effect. But our government would rather preserve their warped form of financial stability than adequately perform the sacred duty of all governments down the ages: to look out for the well-being of their people.

The government does not even have to run large deficits to appear more reasonable. One measure proposed was to exempt GST, or at least the GST hike, on essential items such as rice and milk powder. Somehow this proposal has never been considered. It makes eminent sense to me. But it seems they'll rather have the money than genuinely help out the needy.

Nonetheless, I recognise that our government cannot run budget deficits year after year. Extra revenue must come from somewhere. But it can come from somewhere else other than GST hikes - it can come from hikes in personal income tax. As we run a progressive tax system, a hike in income tax rates will affect the poor less and the rich more, which is as it should be. In fact, the government can actually simply raise the income tax rate for the highest annual income bracket (S$320,000 and above): say, from 20% to 22%. The marginal effect on people in this tax bracket would be relatively low, because how much money do you need anyway? Seventy-eight percent of S$320,000 is still S$249,600 a year, which is more than ten times the yearly GNP per capita. Plenty of room for extravagance.

This way, the whole system would be a lot more humanistic and make a lot more sense. It would, for one, help close the income gap (widening in recent years, as demonstrated by the rise in Singapore's Gini coefficient from 0.49 in 2000 to 0.52 in 2005). It would truly improve the plight of the lower-income grouping in Singapore. It would not put us in the ludicrous position of robbing the poor to give to the rich.

Not that it's ever likely to happen. Thatcherism ruled Britain in the 1980s while Reaganomics held sway in America. Tharmanomics is going to be here forever.