Pension Funding Depends On Taxes

While one sympathises with the plight of pensioners dependent on the state for their old-age grants, Julie Smith’s plea for those grants to be increased by almost 30% (The Witness, February 18) suggests a lack of realism as to how governments acquire money.

Governments don’t create money –unless they print it like in Zimbabwe and destroy its value in the process. Without taxation, no government can function legitimately. The R6,2 billion the government currently provides for old-age pensions is derived from taxes. Increasing that by 30% would require increasing taxes or finding new sources to tax.

In any event, the effect of tax increases would be reflected in price increases which, in turn, would soak up the increase in pension funding. As Harold Wilson once said, “one man’s pay rise is another man’s price rise.”

With our economy flat-lining and the army of unemployed increasing, a tax hike is not in the interests of anyone as it would push up prices and cause more business failures.

To afford more funding for pensioners, the economy needs to be stimulated so that more tax revenue can be generated. And that can only occur if prescriptive labour legislation is repealed along with the costly effects of B-BBEE and the Luddite influence of trade unions is brought to heel.

Sent into The Witness and published, 19 Feb 2020.

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