It seems there is tax terrorism going on in Congress- JD(S) ruled Bangalore municipality. Bangalore Water Supply and Sewerage Board (BWSSB) is planning to hike water tariffs after a hike in property tax proposal recently. “We are planning to send the proposal to the state government by the end of January. We are still finalising the hike percentage,” Tushar Girinath, chairman of the BWSSB said. “We have been paying for the re-laying of roads, and a lot of money is being spent to get water connection to the 110 villages. It is necessary to boost our funds,” he added. The BWSSB already makes 1,200 crore rupees from water bills every year but it claims the expenses are so high that it is forced to increase taxes on the people of Bangalore.
The people of Karnataka have had to face heavy tax burden on daily use goods and services since the Congress- JD(S) government came to power. The first thing the ‘Mahagathbandhan’ government did in Karnataka was to increase taxes on petrol and diesel, to finance farm loan waivers of 44,000 crore rupees. Rahul Gandhi’s repeated attacks on the Modi government over rising fuel prices looked hypocritical as the alliance government in Karnataka had itself increased the taxes. The backlash from people forced the government to withdraw the decision. However, the Karnataka government has once again increased tax on petrol from 28.75 to 32 percent and on diesel 17.73 percent to 21 percent.
The Congress Party is well known for its ‘Know-it-all’ ministers and ‘Promise-it-all’ manifestos. The party made many unrealistic promises in its manifesto for 2018 assembly elections in Madhya Pradesh, Rajasthan, and Chhattisgarh.
Congress has won elections riding on these populist promises, and now the newly elected governments in these states are facing a scarcity of funds. The governments in these states do not have enough money, therefore, it is almost certain that electoral promises will not be delivered. The money spent on welfare will reduce the space for capital spending which could have spurred economic growth in the upcoming years. The public finance in these states is in the doldrums and credit for it goes to ‘promise-it –all’ manifestos.
The GDP growth of Congress ruled states is generally lower in comparison to BJP ruled states because it keeps the capital expenditure low and taxes high. The tax terrorism reduces the consumption of goods and services. The high taxes increase the price of the goods and services and therefore demand goes down. The GDP growth also goes down with this due to low demand.
The money for the sops that Congress governments distribute in various states will ultimately come by taxing the common people. Such populist promises make bad economics and in order on deliver on them, the government has to reduce capital expenditure thus compromising with capital expenditure of the state. Public finance is a zero sum game and therefore the sops distribution comes as toll to capital expenditure which could propel GDP growth, thus increasing per capita income of people.
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