Phillips: Read my lips - More new taxes

By Aubyn Hill, Financial Gleaner Columnist

Peter Phillips has had a terrible week. The man who was riding high a couple of weeks ago after passing the third International Monetary Fund quarterly test, and from many reports, will pass the fourth, has had his credibility quite severely dented because of the proposed bank-withdrawal tax included in his recently released tax package for fiscal 2014-15.

There were two main reasons many Jamaicans took to every form of media - social, word-of-mouth, radio, television and press - to vent their anger which became more visceral and copious as the Easter weekend rolled on.

First, readers, writers and speakers were angry that Minister Phillips had broken his word about no new taxes published in a banner headline in The Gleaner on January 8, 2014.

Second, Jamaicans were and are incensed that he could enter the very unpopular bank-charges fray and propose this new tax on Jamaicans withdrawing their deposits from banks.

Dr Phillips says the Government will tax the banks: Jamaicans believe and say the banks, as well as businesses that also have to pay banks to withdraw their funds, will find novel means to pass on this tax to consumers.

By the afternoon of Good Friday, at about the time when scripture recorded that darkness had engulfed the city of the crucifixion of Christ, there were 143 comments on the front-page online Gleaner article which almost completely blanketed the finance minister in darkness with unflattering and disbelieving comments.

Dennis Chung was quoted in the same edition that the way the minister went about the tax was a "positive thing", and "I think he (Phillips) has found a creative way of doing it", and in quick order he was rebuffed by the comments of readers.

ERROR IN MAKING THE PLEDGE

It could not possibly be that Dr Phillips is so steeped in American Democratic Party politics for so long, like most Jamaicans, that he was unaware of the enormous political price United States President George H.W. Bush paid by making the now infamous pledge as the Republican presidential candidate, in his acceptance speech at the Republican National Convention in August of 1988, when he said: "My opponent [Michael Dukakis] won't rule out raising taxes. But I will. And the Congress will push me to raise taxes and I'll say no. And they'll push, and I'll say no, and they'll push again, and I'll say, to them, 'Read my lips: No new taxes'."

President Bush the first, at first tried to keep to his pledge of no new taxes. Congressional Democrats became impatient with that approach which sought spending cuts without any revenue-raising taxes.

By 1991, Bush and his staff compromised and agreed to a tax increase. The next day, the New York Post - one of the biggest tabloid newspapers in America - ran the story under a huge headline: 'Read my lips: I lied'.

Republican presidential contender Pat Buchanan hammered the president in his re-election campaign in 1992 by making extensive use of father Bush's 1988 pledge and 1991 compromise, or lie. Democratic presidential candidate Bill Clinton used the broken pledge very successfully in his bid for the presidency. James Carville, Clinton's campaign strategist, devised a television commercial in October 1992 - just before the presidential election vote in the next month - which had a very great effect of highlighting the Bush lie and his perfidious nature. This broken pledge - what Americans counted as a straight-out lie - and an underperforming economy consigned the senior Bush to be a one-term president of the US.

I wonder whose advice Dr Phillips would have taken to enter what had become a festering public sore of perceived unfair and unreasonable bank charges? Why did he mislead his prime minister and Cabinet with such a politically unpalatable deposit-withdrawal tax option? Or why did he succumb to prime ministerial and Cabinet pressure to impose this tax - if that is what happened?

One notes that Prime Minister Portia Simpson Miller in a television interview after Opposition Spokesman on Finance Audley Shaw's speech earlier this week, was unwilling to take withdrawal of the proposed - now unpopular - tax off the table. Was Peter Phillips only flying a very unpopular tax kite for the PM to withdraw it and look good? Maybe by the time you read this the proposed tax may be withdrawn by Dr Phillips.

Whatever the case, Peter Phillips will suffer some permanent damage from this tax proposal debacle.

'IT'S THE ECONOMY STUPID'

Bill Clinton adopted a laser-like focus on the economy as he challenged George Herbert Bush for the presidency in 1992 in a deepening recession. President Bush was focused on a war America was fighting overseas. While he was constantly placed on the defensive with his 1998 'no new taxes' broken pledge, Clinton coined his own: "It's the economy, stupid", which galvanised the American vote and propelled him to a two-term presidency.

Prime Minister Simpson Miller and Minister Phillips appear not to quite fathom the need to really have the whole government apparatus morph itself into one big economic growth-facilitating machine.

We are fast running out of new tax targets, and the country is heading straight into a tall and brutish wall unless we find ways to grow our economy and export goods and services while cutting our big spending items such as imported oil.

To paraphrase Clinton: 'It is growing the economy, stupid'.

Please do not focus on the last word - our actions and results will decide that issue. Let us, wisely, focus on 'growing the economy'. A focus and result that has largely evaded us for most of our 52 years of independence.

Aubyn Hill is the CEO of Corporate Strategies Limited and was an international banker for over 25 years.Email: writerhill@gmail.comTwitter: @HillAubynFacebook: facebook.com/Corporate.Strategies