The Price of Poverty in the Bahamas

by Craig Butler

Last time I discussed some of the reasons contributing to rising poverty in the nation rather than spending the time shedding light on the actual problem.

The problem as I see it is that far too many of our brothers and sisters are going to bed hungry every night. In the past, although things were hard there was in most instances some sort of food on the stove. That is not the case any longer as many people can’t afford the basic necessities of life, especially if they are on minimum wage or not working at all.

World food prices have spiked this year due to shrinking harvests, burgeoning demand and skyrocketing fuel prices. When you consider that we are a service-based economy, rely almost exclusively on imports, and get our revenue from the duties on those imports, the future does not bode well.

Rising world prices are even more acutely felt here when we couple the duties imposed with the store mark ups. And that does not consider that our dollar is equivalent to the US dollar but our minimum wage is far less. Based on a 37.5 hour work week the minimum salary in the US is 245.62 per week. In the Bahamas we have a private sector minimum wage of $150 per week and in the civil service it’s approximately $212 per week.

Increasing the minimum wage does not sit well with private enterprise, which often takes the opportunity to remind us of the myriad of problems they face to justify maintaining the present structure.

If you think that a problem is not on the horizon then think again. On April 7 in Haiti we saw a manifestation of popular unrest over rising prices. They took to the streets in a riot that bought the city to a standstill and resulted in a few deaths.

We are a peace-loving people, but the denial of the basics of life can be enough to make even Job lose his patience. What our people are now facing is a decision on how to spend their money, of which they do not have much in the first place.

Something has got to give. Imagine that you are one of those who have only $150 to spend and three children to feed. This is very real, and it's happening quite a bit. Tune in to the radio talk shows and you can hear the pain of the people.

Rent is $75 per week, so half of your money is gone to maintain a roof over your head, and with the remainder there are just too many things that need to be accomplished. It’s no wonder that many people are so delinquent in paying their bills.

Social Services can only provide so much but in austere times such as these, more emphasis must be placed on relieving the suffering. The annual budget debate is to begin soon in parliament and it will be interesting to see what the government has allocated to this Ministry.

I have seen what some bloggers have had to say in relation to what I wrote last week and I can agree with some of it. More importantly, however, is that they too also realize the seriousness of the problem.

One called for the printing of more money, and whilst I can’t agree with that, we do need to ensure that more money gets into the hands of the people. This means that there must be the creation of more opportunities for the masses and the only way that this is going to happen is for government to undertake even at such a hard time the upgrading and expansion of the present government infrastructure.

There are many projects that all of us would agree need to happen. We all know that the money is not necessarily there for these projects to start up immediately. But if we have to increase our national debt in the short term to prop up and stabilize the economy until the recession in the United States abates then that is what we have to consider.

Additionally the foreign investment projects that have been stalled need to be placed into high gear. I still have serious concerns with the Albany project in respects of the rights of the Bahamian people and its effect on the environment and these have to be addressed and not just pushed aside, but there are aspects of this scheme that can and should begin immediately.

As for the Baha Mar development and the possibility that it can provide relief to a hurting economy, I don’t hold out much hope for that based on what we have seen in the newspapers about the lawsuits between the various parties.

I had noted earlier that there is a problem with real wages in this country and this has to be addressed. One of the bloggers who commented on my article also noted that we in the private sector must do our part and with this I wholeheartedly agree. An increase in the minimum wage is one way. An increase in levels of staffing may also be possible.

As for the outstanding taxes owed to the government which at present are in excess of $410 million, quite honestly I don’t think we will ever collect these and we would be fooling ourselves that this is the answer to our prayers.

Former state finance minister James Smith said the government should forgive this debt. But even in light of the sentiments I just expressed I can’t endorse such a measure.

The more sensible approach would be to seek to collect all of the arrears that are six years or less and write off the older debts. If we were successful in collecting 25 per cent of that amount it could go a long way to easing the pain. But even then we are still going to be faced with many of the same problems.

Don’t just think that this is a problem for the poor because it is not. The Bahamian middle class has practically evaporated and can at best be described as the working poor. Many go from pay cheque to pay cheque. Foreclosures are up as a result, and despite the fact that some are living what appears to be a comfortable life one slight miscue and their roof may come crashing down.

I am surprised that churches and civic organizations have not taken a greater interest in what is going on and I should hope that we see them play a greater role. This is something that all of us need to do what we can to help out. In the long run we will be benefiting ourselves, as the future of our nation is at stake.

Comments

[Bob Knaus]

You named the problem in your 3rd and 4th paragraphs, but failed to include it in your solution. The duty-based tax structure is the problem.

How long will it be before the Bahamas moves to a modern tax system? Duties are regressive. Duties oppress the poor. Duties are wide open to cheating.

I think most Bahamians would agree with what I just said. Why not make a change for the better?

[drew Roberts]

"Duties are wide open to cheating."

And what taxation system could we introduce that would not be wide open to cheating?

Wasn't there some talk of $410 million uncollected with respect to some other form of taxes?

all the best,

drew

[Yellow]

Children need to be taught as early as possible as much as possible about Money in the real world.

Then, MOST IMPORTANTLY, they need to be told just how much money you need to properly take care of a child!

I read an article about Haiti yesterday where the author was offered a child by a mother of 5. She said "I don't care. Just take him and feed him".

I could understand people like my grandparents deciding to have 5 or 8 children. They had boats to maintain, fields to harvest, fish to clean, water to carry. Many hands make light work. But in some areas of haiti where you have to stand on a 15 foot hill of nasty in order to see the nearest tree and you can't get anything to grow (and few even try) people are still foolishly having so many damned children.

If you can't feed yourself half the time why make another mouth to feed?

It doesn't matter if your in Haiti or The Bahamas or anywhere else. If you're broke and can't grow your own food, having a baby is a very stupid idea.

A friend of mine not too long ago racked up $14,000 in debt due to her pregnancy.
I feel a day coming when children will be born into debt.

[Astounded]

Children in this country have been born into debt since the '70s
It is called National debt, and it stands at close to 3 billion.
3 billion divided by 310,000 equates to 10,000 per head.
Check my math it may be more.
By the way, a third at least are not productive people so the debt loat is higher on the ones who pay, The private sector.

[Bob Knaus]

Actually, Drew, different systems of taxation are differentially prone to cheating. Some more, some less.

The biggest thing that lowers the incidence of cheating is a broad-based tax with low marginal rates. A sales tax is an example of this. If you apply it to all goods sold, and set the rate at 4%, it is not worth the effort for most people to avoid it.

The next most important thing is vigorous, prompt, and impartial enforcement. Again taking sales taxes as an example, in Florida if you are 30 days late in paying your sales taxes the state will seize your business assets and shut you down. Draconian? Yup! But delinquency rates on this tax are quite low.

A sales tax is certainly not the only solution for the Bahamas. The Bloggy Boyz agitated for a European style Value Added Tax a while back, but finally gave up on the effort. Income taxes and property taxes are other alternatives. None are particularly pleasant, but all are superior to the current system of duties.

[Bill]

Everyone,

Is "the Economy" the buzz word this week?

Just an observation.

Bill

[Bill]

Hi Bob,

The thing with sales tax, is it decreases consumption. Businessmen would more than likely just add it on to the price of the good- and, a braod bases sales tax, does not control the border.

Also, 4% tax on bread, is not as nice as a 4% tax on jewlery and not as effective as a 4% tax on luxury and exotic foods- drinks and wines and spirits.

While a broad based tax system, sounds good on paper. In reality, it should never and can never truly work, other than its counterpart of price control. In fact, it is simply a variation of price control. Just that its through the back door; businessmen, would be steered into charging the same rate, as they do with gasoline, which has basically a flat tax, which is why their prices countrywide are virtually the same. Does not foster liberation and growth.

I have been thinking about the VAT more and more as I see the issues.

But, as you said, enforcement first and foremost!

In fact, no new tax regime until we fix the system we have now.

Bill

[drew Roberts]

Bob,

are you on the ground here in Nassau much?

There are lots of people who would avoid the 4% sales tax...

Wink, wink, and all that.

As to the "vigorous, prompt, and impartial enforcement", well, there's the rub. We can't seem to do that with duty or property tax now, how are we going to do it with sales tax? And we don't need draconian...

And who wants more intrusive enforcers mucking about in our lives, some, perhaps, with their hands out and their fingers rubbing together?

The VAT is just as bad. Income tax as well. Not going to work if we can't get what we have now to work properly.

A "wholesale sales tax" might just work. You might need to limit the right to import in quantity to wholesalers only and keep wholesalers out of the retail game though. That probably wouldn't work. So, fewer points of control / entities to watch. Anyone have thoughts on this one?

all the best,

drew

[SeekingKnowledge]

Mr. Butler, I am a student researching some information on poverty for a report I am writing. Could you please relay the link for the article you wrote on the contributing factors of poverty?

Thanx