Cleaning Up This Mess

Just got back from some meetings concerning the threatened cuts to local services over here. The mood amongst the workers here is increasingly angry, angry that the banks and fat cats got us into this mess, angry that the government magically found money to bail out the fat cats and angry that now working people who didn’t get us into this mess are taking the hit for this mess. With an election thrown into the mix I expect the next couple of months running up to the election to start getting rather heated, and regardless of which Party forms the next UK Government I can only see working class discontent increasing. At the moment pretty much every workplace here is gearing up for mass strike action; its not a question of if anymore but a question of when.

I imagine Bermuda is also going to face increasing discontent too, with continuing fallout from the Budget and now the takeover of the Bank of Butterfield by CIBC making for a potent mix of Bermudian nationalism and anger from both business and workers.

So, how do we start cleaning up this mess? That’s the all important question here and I don’t claim to have the answers. What I would suggest however are the following measures:

1) Capping of ALL Government salaries, including both civil servants and Ministers, at $100k (and no double Ministry salaries).

2) Immediate suspension of all Government consultants, including the new ones such as the $800k consultancy fee for reforming the municipalities.

3a) Reduction of the payroll tax for all workers earning under $80k to 5%.

3b) Reduction of the payroll tax for all workers earning between $80-100k to 10%.

3c) Increase the payroll tax by 0.1% per every $1000 above $100k (so 1% per $10k; 5% per $50k, etc.).

4) 50% increase of all sin taxes (tobacco, alcohol, regular gasoline*). [*Exemptions on gasoline increases for all car-owners with a child under the age of ten or people with physical mobility disabilities; no increases to diesel.]

5) Introduce an inheritance tax – I do not believe one exists at the moment, but if there is one increase it – where there is no tax on inheritance below $100k, but a 0.1% tax per $1000 above $100k.

6) Calculate and enforce a living/minimum wage for Bermuda – I would suggest $17.50 per hour as a good starting figure, but it shouldn’t be hard to calculate for our staticians.

7) Reduce the cost of foriegn currency transactions by 33% of its level in 2009.

The money saved and generated through the above to be ring-fenced and used to finance free public transportation, free FutureCare for all citizens over the age of 65 and the creation of an unemployment fund able to provide legitimately unemployed with a minimum of $375 per week.

Furthermore, steps should be initiated to democratise the formation of all government budgets on a departmental basis. All government workers should be involved in full participation in budget creation, with total budget approval to be the call of a workers council composed of delegates from every Government section; increases in efficiency to be translated into reduced working hours but not wage reductions.

I’m sure there are plenty other good ideas, and I certainly haven’t sat down and carefully calculated whether the money saved and generated through the above measures will be sufficient, but I certainly think they would be better than the official proposals.

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39 thoughts on “Cleaning Up This Mess

  1. I like where you are going with this Johnny.
    Thought I’d start the comments on a positive note before you get ripped asunder

  2. Jon, only one piece of yours off-base, the minimum wage.

    A labourer is paid between $12 and $14 an hour locally, and that’s a fair wage. People are lining up for that.

    $17.50 is untenable for an unskilled person. Far too much for minimum wage.

    Everything else is spot on.

  3. Well, it was a rough calculation and in need of refinement. The key though is to ensure that it is not just a minimum wage but a minimum living wage in that it should be enough to secure for the individual basic quality education, foodstuffs, healthcare and so on. If this is attainable with a wage of, say $15 as opposed to $17.50, then so be it.

  4. Subject to some tweaking here and there I doubt if many would disagree with you, but how dare you show up our Finance Cog’s failings! You’re as bad as Larry Burchall [although you probably have more than a GED from Berkeley (-;], which means you’ll be hearing from Ms Furbert shortly to put you back in your place.

  5. I contest the notion of a “progressive tax” as unfair and unreasonable.

    Even with our present flat tax system the vast majority of taxes are already paid by higher earners. Shifting the system even further to higher earners is not only unfair but also would act as a deterrant for higher earners to remain in Bermuda as well as for lower income earners to strive to earn higher incomes.

    I continue to advocate a “fair tax” structure where everyone pays the same and gets the same. Namely:
    – Continue with a flat payroll tax, perhaps lowered from what it is now.
    – Increase dutyable rates on nonessential items.
    – Provide a flat national rebate (eg $2000 annually to all citizens, paid out monthly) in the form of vouchers that can be used for public and sanctioned private services. Eg. Health care, transportation, education, etc.

  6. I also contest the capping of government salaries (though removing double ministry pay I agree with).

    Capping like this often doesn’t work because the private sector can often offer more competitive rates thus ensuring that you don’t get top candidates for top positions.

  7. As for minimum wage I think you’re not taking into account the massive impact this would have on costs and inflation.

    While I’m all for a minimum wage as a deterrant against employers bringing in super cheap labor to pay them what no Bermudian can compete with I don’t agree with the notion that unskilled individuals should be paid more than they’re worth.

    The product of raising minimum wage is that costs for all businesses go up. As business costs go up they cut expenses, reduce jobs and increase their rates. These rate increases end up going across the board causing costs of nearly everything to go up. This inflationary effect would counteract the desired goals of the wage increase.

  8. Finally I largely question the whole “Futurecare” notion.

    It is rather unreasonable to expect today’s youth to cover the endless costs of health care for the elderly when our elder generations did nothing to prepare for the future during these last 30 years of boom. Reasonable assistance sure, but free healthcare? No.

    Instead of having taken advantage of the boom period of the last 30+ years they spent frivilously putting aside no funds or nest egg to prepare for the future. They lived the good life while we’re expected to pick up the tab in terms of incredible debts, endlessly increasing education costs tied to high skill expectations to afford the kinds of lives they’ve had. On top of all this we’re expected to pay for their free access to health care?

    Whatever koolaid you’ve been drinking it’s time to put it down.

    I’m not advocating we throw our elders out in the cold but given the treatment we’re getting from them why in the world should we be required to give them a free ride?

    One solid look at our demographics will tell you that we simply can’t afford it. If it gets implemented it will become very simple, the younger generations will leave. Health care assistance? Sure. Free healthcare? Not possible and not even reasonable.

  9. Jon, you might want to check what the term “constructive dismissal” means in the context of salary reductions.

    (sorry – posted this on the education thread as well by mistake)

    and, as Denis Pitcher points out:

    Capping like this often doesn’t work because the private sector can often offer more competitive rates thus ensuring that you don’t get top candidates for top positions.

    To be honest, that’s a general perception now but the sort of caps you’re suggesting would guarantee that the only (formerly highly compensated) people that would remain in government are the ones that no-one else will hire.

  10. It’s weird, I was watching lots of tv yesterday (home sick) and on both the US and Canadian channels, they have all this information about government rebates etc. Ways to help people in the current environment. I wish our government spent as much time trying to make our recovery as speedy as their own…

  11. “5) Introduce an inheritance tax – I do not believe one exists at the moment, but if there is one increase it – where there is no tax on inheritance below $100k, but a 0.1% tax per $1000 above $100k.”

    We already have this:

    – First 50K is free
    – Next $150K is at 5%
    – Next $800,000 is at 10%
    – Balance over $1M is at 15%

    It does not apply to Primary Homestead;
    It only applies to “Bermuda Property” namely real or personal property of any kind situate or being in Bermuda.
    It does not apply to non-Bermuda area currency (i.e. US$)
    It does not apply to non-Bermuda securities or assets not situate in Bermuda.

  12. “3c) Increase the payroll tax by 0.1% per every $1000 above $100k (so 1% per $10k; 5% per $50k, etc.)”

    So you would propose:

    10% on first $100,000 + another 10% per $100,000 in excess of $100,000.

    Given that, a $500,000 Salary would amount to $50,000.00 in Payroll Tax.

    Under the current Government Proposals, that same $500,000 salary would incur Payroll Tax of $80,000

    Maybe that is not what you were saying??

  13. Another thing, your progressive tax notion doesn’t even make sense

    “3c) Increase the payroll tax by 0.1% per every $1000 above $100k (so 1% per $10k; 5% per $50k, etc.).”

    Let’s take today’s earnings, taxes vs your proposal.

    Today’s earnings, today’s taxes, your proposal’s taxes, take home
    50000, 8000, 0, 50000
    110000, 17600, 1100, 108900
    150000, 24000, 7500, 142500
    200000, 32000, 20000, 180000
    260000, 41600, 41600, 218400
    300000, 48000, 60000, 240000
    500000, 80000, 200000, 300000
    750000, 160000, 487500, 280000
    1000000, 160000, 900000, 100000
    2000000, 320000, 3800000, -1800000

    Under your system $260k is the break even point, everyone under $260k gets a tax reduction, as you go up you get significantly penalized. Your system is essentially a cap on earnings at $300k max as anyone making over $500k essentially is taxed to taking home lower than $300k.

    Why even bother with your convoluted system and just propose a salary cap? Then we can watch as international business flees almost instantaniously.

  14. I really don’t understand why the people that voted in the labor party are so quiet. This must mean that they are very pleased at the way the country is being run. I wish I felt like that.

  15. Thank you for all for the feedback; it will take me some time to respond to all of them, and some, such as the discussion on progressive taxation versus a flat rate, may be best developed as separate threads – which I will write when I have the time later on.

    Pitt’s Bay – Thank you for the information concerning the inheritance tax; I had done a preliminary look for it but obviously it was not thorough enough.

    As per the rate increase for payroll tax I had not done the calculations (obviously I guess…). The intention was so that the bulk of people (working and middle class) would actually recieve a reduction while the obscene salaries would be taxed more – I’ll develop this more in its own thread, but its connected to marginal utility and increased overall consumption rates. The exact numbers would need calculated and I guess my 0.1% per $1000 would be inadequate. Perhaps a 0.5% per $1000 would be more appropriate?

  16. The red party does not suppport income tax.
    just a negotiation tactic for recession cheque of $1500 a month for six months to workers who dont own a house or have $10,000 in savings.
    Income tax is a threat to international business.

  17. From RG today:
    “Premier Ewart Brown yesterday launched a vociferous defence of his Government’s financial record — saying it had no choice other than to spend money for the good of the people.”
    “Dr. Brown said the United Bermuda Party Government had left the Island in such a state 12 years ago, cash had to be directed toward fixing social problems such as absentee parents, crumbling infrastructure, ailing Government buildings, antiquated transport system and an out-of-date tourism model. ”

    Um. seriously, has he gone loony tunes?
    None of these problems have been fixed in his term and anyone would be an idiot to think all could be fixed in fours years by spending that much money on the things they did?
    I am speechless by his lack of reality to the situation.

  18. Sara…

    In the hope that you finished your dinner – you might want to read this from BIAW with regards to the Budget.

    In a few short lines it sums up the Government. When it comes down to saying we are blessed in comparison to Haiti, you know it’s time to catch the last bus out of here.

    Blakeney:

    “As Ms Cox said three seats away from him, smiling at his words, he shouted: “And now you are going to attack her through the might of your pen ink by suggesting she’s not prudent, fiscally responsible?

    “Do you not know she has thousands if not hundreds of people that love her in her country, who vote for her. They know we have challenges and it’s not through lack of effort that we are responding to the challenge in honourable ways.” (Did he just have a check yourself moment there? Didn’t want to upset Ewart maybe?)

    He also attacked those who have criticised the cost and time overrun for the new Police and court building.

    “The building will be here for one hundred years,” he said. “Divide that by whatever it costs to finish.”

    He said he could “guarantee” it would be worth more in one hundred years than it cost to build.

    Mr. Blakeney shouted “how dare you” at those, who, he said, were criticising the Government of “the best country in the world”.”

    Perinchief:

    “And Mr. Perinchief backed the Premier’s claim that the infrastructure was in tatters when the PLP took over leadership of the Country from the UBP.

    Many of the PLP’s projects, while creating a deficit now, will reap benefits for many years to come, he said.”

    Burgess:

    “Minister of Works and Engineering Derrick Burgess opened his speech by criticising the fact that the Opposition reply to the budget refers to Minister of Finance Paula Cox as “she” and “her.”

    Mr. Burgess said: “I think that’s unparliamentary and I would ask for it to be removed. I take it personally that this is how they refer to the Finance Minister. It’s unparliamentary language and very disrespectful.”

    He requested a ruling on the issue from Speaker Stanley Lowe. The Speaker said at the end of Mr. Burgess’s speech: “I will take it under advisement.”

    Mr. Burgess praised the budget and said Bermuda is being “prudently managed” by the Minister of Finance.”

    No 6:

    “Independent MP Wayne Furbert said the budget is not perfect, but it is good. He said there are some things he would have done differently “but you can’t help but say that this little country of ours is blessed” in comparison to places such as Haiti.”

  19. none of the problems brown has refered to have been addresses …. its a spin scam

    the bermuda people need to call the uk to take over n clean up bermuda like they did with the turks, ban party politics and form a bottom up democratic government with a social adjenda baded on all the people of bda sharing in the wealth of the country.

    anything short of that is BS

    ALL POWER TO ALL THE PEOPLE BY ALL MEANS NESSICARY

  20. the best way to clean up this mess is with a violent coup lead by the gangs to revisit old school roman style political outstage in bermuda.

  21. Well, lets play out your scenario there black press, nothing wrong with a little hypothesising:

    You’ve led a violent coup overthrowing a liberal democratically elected government. Not sure what you mean by ‘roman style political outstage’ but I’m guessing you mean you’ve ‘liquidated’ various representatives of the government, partly as a message, partly as punishment for their perceived crimes.

    What happens next?

    You can almost take for granted that there will be major capital flight, with IB deserting Bermuda asap, leading to a collapse of our economy. Similarly, you get Bermuda hit with massive travel advisories leading to the collapse of our tourism industry. end result is mass unemployment.

    Additionally you can almost take for granted that, at the very least, the USA will organise a military evacuation of its citizens, as well as NATO citizens. Sanctions are placed on Bermuda immediately. The US, Canada and the UK will likely organise a military invasion to overthrow your junta.

    So, how do you deal with those scenarios? How will you maintain power? How do you build a new economic base for our people? How do you deal with sanctions and mass unemployment?

    Alternatively, say, hypothetically, you do form the government, just like that, no violent coup, executions, any of that. You wake up one day and your in power. What do you do? What policy changes do you initiate? What’s your platform?

  22. Jon, as people have pointed out, the mere suggestion of income tax is perceived as a threat to international business (and government’s failure to extend the 2016 expiry date is becoming worrisome – 2016 will soon be within companies’ five year plans).

    And like it or not, if you think about why international companies are domiciled in Bermuda you’ll realize that out of the top ten reasons at least seven of them are related to tax.

  23. I dunno Blanks, you could be way off base here…

    Top 10 reasons international companies are domiciled in Bermuda:

    10. Few distractions for staff, so they can focus on work
    9. Close proximity to China and India
    8. The Love Festival
    7. Deep well of qualified well-educated locals to fill job vacancies
    6. No income tax (what is the payroll tax you speak of…?)
    5. Bermuda Music Festival (Beyoncé!)
    4. Warm sunny weather and pink beaches (ok that is two!)
    3. Easily donate to a multitude of charities to ease their social conscience.
    2. Stable political environment
    1. The opportunity to train little Johnny and employ him over Sven.

  24. @ Let,

    Good list, the trouble is 10 is not enough. Suggest a few more:

    11) Drive your SUV in a place where you can text, drink coffee, talk on the cell phone and do the makeup all while taking the kids to school with no penalty.

    12 or 9) Close proximity to Singapore and the Playboy Mansion.

    13) Ability to fly in on a private jet with no checks on what you’re bringing in when you land.

    14) Attend a stem cell clinic that runs with no Government controls over what it does.

    15) Pay for a photo op with someone who is nobody just so you can get a few more work permits.

  25. 16) The right to buy a single beer, snuggled in a brown paper bag and drink it while driving. Additionally, the right to deposit: empty bottles may be deposited on the road, in the bushes, other people’s yards, on the beach and in the oceans.

  26. He is still saying the UBP left the country in dismay with so many issues to fix and they cost so much.
    News flash THINGS ARE FAR WORSE THAN EVER. WHAT IN GOD’S NAME HAVE THEY FIXED WITH ALL THE MONEY THAT HAS BEEN SPENT? Is it tourism, education, crime, the environment, opportunities for the poor, health care, what, what has been fixed with the hundreds of millions?

  27. CORRECTION

    Per the budget it is now as follows (subject to passing of the bill)

    – First 50K is free
    – Next $150K is at 5%
    – Next $800,000 is at 10%
    – Next $1M is at 15%
    – BALANCE OVER $2M IS AT 20%

    NOTE: Last line in CAPS is the new part

  28. Relative to the mess Mr. Starling. Having read your comments on numerous sites your adding fuel to a fire. You know it, you enjoy it and you want the flames to rise higher as you stoke it from your Marxist feelings.

  29. Jonathan,

    Reference the thread title – I have just one question.

    Looking at Bermuda today, do you think we are in a mess?

  30. I think we’ve been in a mess for decades. I, and many others, expected the PLP to at least do more to start cleaning it up than the paltry amount they’ve done, most of which end at the point of rhetoric and half-assed attempts at doing the right thing (chronic underfunding for alternatives to incarceation and parole officers for example). The problem with mess, in this metaphorical sense, is that it grows just like compound interest. The longer you fail to address it the worse it gets and the harder it is to actually fix it.

  31. Compound Interest? Are you reffering to the Department of Finance or and interest in Bermuda’s cyclical view of everything.

    Circadian needs an update one thinks when dealing with Onions.

    Gotta………………………..

  32. There have been three PLP governments.

    The first built houses and created jobs for the people.

    The second built houses and jobs for the people.

    This one closeddown the indigent clinic, waste money on travelling and partying and disrespected Bermudians with outsourcing.

    Brown go to hell!

  33. If he’s going to hell….then I want to go with him and all those millions……Bawahahaaaaaaaaaaaaaaaaaaaa

  34. Understand ( per R.G.) first $100,000 now to be tax free. Top layer is still xs $2 mln…..anyone know how other layers are being adjusted?
    That is to say is the second layer now $100 K xs $100,000 K OR does it remain at $150K xs $50K and other layer(s) adjusted.

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