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No Income Tax For The Young? This Journalist Explains Why The Plan Is A Bad Idea

Swarajya Staff

Jul 27, 2018, 09:31 PM | Updated 09:31 PM IST

Income Tax form (Rajkumar/Mint via Getty Images)

The Congress’ new strategy to woo the young – proposing to do away with Income Tax for those below the age of 35, might not exactly be in the best interests of the nation. Estimates peg around 15 million first-time voters will cast their votes in the 2019 General Elections and the Congress is desperate not to repeat the drubbing it received in 2014 when it bagged just 44 seats.

While there is no news on whether this will make it to the party’s manifesto, the proposal in itself is a bad idea.

Bloomberg Columnist Andy Mukherjee, in a series of tweets, explained exactly why it is so.

Initial thoughts (1/n). 1. Employers will cut wages for <35 by, say, 25%. 2. Anybody >35 will fear being replaced by cheaper <35. 3. Post-tax disposable income and savings at lower end (younger cohorts) will rise, fall more for higher end (older cohorts). https://t.co/hVOlO2CVKv
— Andy Mukherjee (@andymukherjee70) July 27, 2018

2/n: A lesson from Korea, which has a problem of organised sector letting go of costlier, older employees, creating a miserable class of âself-employed.â Avoidable in India. It wonât help a 25-year-old to know her career has 10 good, tax-free years, followed by deep uncertainty.
— Andy Mukherjee (@andymukherjee70) July 27, 2018

3/n: Indiaâs health and social-security costs will rise. Employment intensity of the economy may drop with increased use of robots who pay no taxes. Remove 10 years of taxable life, how will fiscal math work? Will a supply-side boom make the experiment pay for itself? I doubt.
— Andy Mukherjee (@andymukherjee70) July 27, 2018

4/n: Something Indira Rajaraman wrote a long time ago has stayed with me. Because no income taxes on farm income, any fiscal spending in rural areas is seen as largess. If you take 10 in taxes, but spend 20 on the payer (if deserving), it promotes an engaged, empowered citizenry.
— Andy Mukherjee (@andymukherjee70) July 27, 2018

5/n: Nothing to say to âtaxation is theftâ libertarians. But just like the Arthakranti tax proposal was lunacy, this trial balloon (if itâs one) is also in need of puncturing. Even if 28% GST is gone, 18% tax on consumption but no income tax under <35 wld make us very regressive.
— Andy Mukherjee (@andymukherjee70) July 27, 2018

6/6. Last point, and most heartfelt. Somebody whoâs 21 now most likely has parents from post-â91-reform beneficiary gen. But 45 and 55-year-old Indians of today have to take care of a not-so-fortunate older gen. Inter-temporal tax justice is not served by pandering to the youth.
— Andy Mukherjee (@andymukherjee70) July 27, 2018