“You’re not to be so blind with patriotism that you can’t face reality. Wrong is wrong, no matter who does it or says it.” – Malcolm X, By Any Means Necessary
The coping classes – formerly known as the middle classes – are under siege like never before: solid, responsible citizens beaten down by the rising costs of living and creative taxation in a hyper austere economy. Many believe things will get much worse before they improve, and there is a fear they might not survive the transition as their broad backs have always been identified as the chief target for Government cuts. There’s this myth that this group is made up of latte-drinking, well-heeled, RAV4 driving yuppies, when actually the middle class encompasses a huge number of families who are far from comfortably off, some living from pay cheque to pay cheque and who were already really struggling.
The coping class in this country is easily the most economically aggrieved group, and the economic anxiety that they feel is real and potent. This group wanted a change in the administration and rightfully so, to ease what they believed was an egregious onslaught against them in particular. There were critical areas of angst that resonated with this group: the NSRL which essentially raised the prices on every commodity available; the University of the West Indies co-pay which, because it was delivered with very little time to prepare, caused shock and undue financial strain, as well as consternation felt by many as their children’s career dreams appeared to be destroyed; and finally, the general disenchantment that came with limited engagement as to what direction the country was going in. Aggrieved, disenchanted, disillusioned and angry.
Then comes post-administration change and we have an emotional groundswell of euphoria in anticipation of a new form of ease. The UWI co-pay has been reversed; dreams restored.
Some concerns linger and others have been amplified. Let’s have a look at them.
National Social Responsibility Levy (NSRL)
The repeal of this menacing tax was widely cheered. However, there has been ongoing complaint from consumers that there has been no downward movement in retail prices. One businessman made the ‘joke’ that Barbadians obviously were not eating enough to burn through the NSRL taxed inventory that had to be causing the seeming lack of price change since its removal. In a recent tour of the Sol Warrens service station, when questioned about the NSRL, Minister Sutherland noted that the Department of Commerce and Consumer Affairs, in doing its work, had realized that freight cost had increased. He said, “The reality too is that there were some goods which did not attract the actual duties that the Ministry would like to see. We are not saying that there is unfair pricing, but we are asking every single one to share the burden”.
In providing Sol’s perspective, General Manager Ezra Prescod said the government “removed the NSRL, but there were additional tax measures that went into how you build up a cost. One of the things that actually increased above everything else, in a survey that I did recently, was the inventory cost of each item… There are some that have come down, but not everything has come down. And then what we have tried to do is add on a margin to that. We buy it at a price and add on a margin and that margin has not changed with the removal of the NSRL. So, essentially what we have seen… is your input pricing on some of the items have still remained up in the air, which is an issue.”
What does this gobbledygook even mean? If I am to interpret this Government Information Service (GIS) report correctly, the government realized after removing the NSRL that it could make more tax dollars by increasing the duty rates and keep the prices as they are. To sum up the catchphrase of the Minister, “every single one has to share the burden”. The coping class voted to have this tax removed because they were carrying too much of the burden. The economic anxiety of no relief from higher consumer good prices continues.
Savings under siege
Commercial banks have compounded the issue of savings anxiety for the coping class. With interest rates contracting to an emaciated and cash consuming rather than appreciating 0.25 per cent, the coping class has looked hopelessly for safe haven and higher interest rates for their hard-earned cash. But at each turn, things appear to be getting worse.
From CLICO and BAICO, after having ResLife established and the sale of British American to Sagicor almost complete, policyholders and investors who breathed a collective sigh of relief after their long and hard-fought wait started to receive payments. This group has once again been thrown into uncertainty about their policy payments and investments. ResLife now seems doomed to be a footnote of the previous administration and the payment to investors and policyholders remains a question mark. The last iteration of this nightmare was a cryptic message to the stakeholders that the future of ResLife and the continuation of payments were caught up in the BERT plan which had to be underwritten by the Government. Since the government is unable to underwrite any debt for the next four years under the austerity plan, the uncertainty about the future of this little-discussed matter remains. In an environment where every insignificant minutia is discussed, this particular item remains little discussed. A smear that spreads across the past two administrations continues to be dragged across the balance sheet of this one. With no clarity, no process and no end in sight, it remains a painful stake in the chest of the coping class.
Government Bonds
Once held as the sacrosanct and touted by no less an authority than the Central Bank of Barbados, government bonds have now become an instrument of death for some and excruciating pain for others, having been caught up in the “everyone must take their share” debt restructuring process. This is a much talked about event, so no need to expand on it. But again, it makes one feel as if they are under siege.
New taxation
A coping class that feels it can be taxed no more, in whatever forms it takes, and survive is having ever more taxation heaped upon it. Taxation has been applied to petrol in an environment where the percentage of electric vehicles on the streets is growing exponentially, so those who cannot afford to change to electric will continue to be taxed. That is until the administration discovers its error by not taxing electric vehicles and that opportunity will soon disappear.
Water and Sewerage tax and Income Tax
This is now double what was normally paid and there is a 40 per cent tax on wages above $75,001 per annum. Now, this one may not get a lot of sympathy from those at the bottom of the ladder, but this one has caused major pain. Middle management and senior executives now have further adjustments to make. Let me put it in context for some who may not understand. Mortgages no longer attract tax rebates; all allowances have been rescinded; travel allowance has to be justified by odometer readings and schedules and reclaimed in annual tax filings. Now, a middle/senior manager who makes more than $6,500 per month pays significantly more in tax. Earning $16,000 per month, one executive was taking home $9,600 – now the net take home is reduced to $8,560. Under siege, aggrieved, disenchanted, disillusioned and angry.
In an era where corporation tax is reduced to 5.5 per cent which seems to be the rich receiving more help, in hope of trickle-down economics, no one will rail against the right of “the rich” to receive help, nor the obligation of the state to support “the poor”. Between these two poles, however, there’s the nebulous mass of the “better off”; although from the standpoint of the economic advisors they could just as accurately be referred to as the “worse off”. They are those without the means to game the system by having their employers pay their legal tax requirement, and who are too proud to ‘beg for assistance’.
The former middle classes, now clearly defined as the coping classes (some add the prefix ‘barely’) are still desperately seeking a pathway to incremental prosperity.
George Connolly is a Finance and Technology professional.
