Higher taxes and price increases in Cameroon: A Rational Decision Or Anti-Social Agenda ?

By Ngembeni Wa Namaso*

The argument surrounding the observation that "rational policies require that as the citizen's income increases, they can and should increase their contributions to the State budget through higher taxes" involves exploring the rationality of taxation policies, economic theory, and the potential underlying motives behind fiscal policy decisions.

The assertion that higher income should correlate with increased tax contributions is rooted in the principles of progressive taxation and the role of public finance in redistributing wealth for the greater good of society.

However, the contradiction that arises when evidence suggests a lack of real income growth, combined with widespread price increases and tax hikes, warrants deeper scrutiny. The notion that increased taxes and prices in the absence of net income growth cannot be rational calls for an analysis of potential anti-social motives behind such policies.

1. Rational Taxation Policies and Economic Principles

Rational fiscal policies are generally based on the idea that as individuals' incomes increase, their tax contributions should also increase in proportion.

This approach is rooted in progressive taxation, which aims to align tax liabilities with citizens' ability to pay. The reasoning behind this principle is straightforward:

Equity and Fairness :

Progressive taxation seeks to achieve fairness by ensuring that individuals who have more financial resources contribute more to public funds. This approach helps reduce economic disparities and fund social programs.

Economic Stability :

A progressive tax system can enhance economic stability by distributing tax burdens in a way that lessens the impact on lower-income citizens, whose consumption and spending are crucial for economic growth.

Revenue Generation:

Governments rely on tax revenues to fund public goods and services, from healthcare and education to infrastructure and national defense. Higher income levels, therefore, are associated with higher tax contributions to support these services.

2. The Paradox of Increased Taxes Without Net Income Growth

However, the situation becomes paradoxical when we see a scenario in which taxes and prices are rising across the board, but the net income of citizens does not appear to be increasing. This poses a significant challenge to the rationality of such policies:

Diminishing Real Income:

If taxes are being increased while wages and salaries remain stagnant or fail to keep pace with inflation, citizens' real income effectively decreases. This means that, even though nominal income may appear to grow, the actual purchasing power of citizens is shrinking. This undermines the rationale of progressive taxation, as people may be paying more in taxes without having a commensurate increase in disposable income.

Increased Cost of Living :

Rising prices (inflation) exacerbate the problem, reducing consumers' ability to afford goods and services. If citizens are already feeling the pinch from inflation and higher taxes, it becomes difficult to argue that these policies are rational or beneficial for society.

3. The Question of Anti-Social Motives

When policies that appear irrational or counterproductive persist, it is reasonable to question the motives behind them. If there is little evidence that citizens' incomes are rising and taxes and prices are increasing, then one could argue that there might be anti-social or self-serving motives behind these policies. Here are potential explanations for such motives:

Wealth Redistribution to Elites:

One potential anti-social motive is that policies may be designed to benefit a particular segment of society, such as large corporations, wealthy individuals, or political elites. This can occur through mechanisms like tax breaks for corporations or subsidies that do not translate into better conditions for the general public. If a state is consistently increasing taxes without evidence of income growth among its citizens, it may be redirecting resources to maintain or strengthen the financial position of powerful interests rather than investing in social welfare.

Debt Servicing and Fiscal Imbalance:

Governments may raise taxes and prices not for public investment or social welfare, but to meet the obligations of national debt. This becomes problematic when the focus shifts away from creating a sustainable economic environment for citizens and instead toward servicing debt or appeasing creditors. This could result in policies that prioritize economic stability from a global financial perspective rather than domestic well-being.

Concentration of Economic Power:

Policies that increase the tax burden while not adequately addressing income growth can lead to a concentration of wealth and power. If higher taxes on the middle and lower classes do not correspond to greater public investment or social services, it implies a redistribution of wealth from the public to a narrow, more powerful group. This can perpetuate socioeconomic divides and lead to political and economic systems that prioritize the interests of the few over the many.

Public Control and Compliance:

Governments might increase taxes and prices not just for economic reasons, but as a way to enforce compliance or control over the population. For instance, increasing costs of living without providing an economic justification could lead to social stratification and reduced economic mobility. Such a strategy might be employed to prevent a more equitable distribution of resources or to increase dependency on state assistance and policies, which can consolidate power.

4. Why Would Governments Adopt Such Policies?

Understanding why governments might adopt policies that appear irrational or have anti-social motives requires a look into both political and economic incentives:

Short-Term Gains vs. Long-Term Consequences:

Governments may prioritize short-term financial gains to deal with immediate fiscal problems, such as balancing budgets or dealing with economic shocks. However, in the long term, these policies may harm economic growth and reduce public trust.

Political Survival :

Leaders might push policies that appeal to influential business interests or satisfy international creditors rather than those that would benefit the general populace. In this case, policies that may seem irrational are actually strategic moves for political survival or to maintain influence.

Cultural and Ideological Factors :

Sometimes, tax policies may be influenced by ideological beliefs or cultural norms that prioritize certain economic models or visions of governance. Policies may be designed to sustain a particular worldview or economic system, even at the cost of public welfare.

Conclusion

In a rational policy framework, the expectation is that as citizens' incomes increase, their contributions to the state should increase in a proportional and fair manner. However, when this does not happen and prices and taxes rise while income stagnates, it leads to the conclusion that there may be anti-social motives at play. These could range from redistributive strategies favoring elites, prioritizing debt repayment over social welfare, or maintaining control over the population. Understanding these motives is crucial for developing policies that genuinely reflect the needs of the citizenry and support long-term, sustainable economic and social development.

*Ngembeni Wa Namaso is an Environmental Management Specialist and commentator on Society and Politics. He is based in Yaounde, Cameroon and holds a PhD in Forest Econmics and Management. The views expressed are his