Let me start with an innocuous question.
How much of your gross legal income do you pay to the government??
Income tax comes first to mind. Let's take 30% initially.
That is it??
Now lets make a rough guess of how much of your post tax income you end up spending for a decent, not luxurious, living. 30%, 40%, 50%?? Let's go with 40%.
Here we are NOT talking about the upper class, rich or the super rich. They are not worried about all these things. It's not worth their time.But unfortunately they constitute less than 5% of the population.
Coming back, practically everything that you spend on, except grocery, are taxed indirectly. Excise, customs, sales tax, VAT, service tax etc. and they may end constituting anywhere between 10-50% of the MRP that we end up paying. Assuming an average of 20%,another 5-10% of our income goes to government. Thus the government has already taken away about 40% of your income.
There are n number of other taxes, which I am neglecting for this discussion.
So you are probably left with 40% of your gross income as saving.
That doesn't sound like a bad number.
Let's see what happens with your savings.
They end up with either a bank, insurance company or small savings like PPF/NSC etc.
Banks consistently give you returns way below inflation, reducing the purchasing power of your savings every year. One of the many reasons for the low returns is that government makes it a compulsion for banks to deposit 25% of their deposits in government bonds, which by themselves don't yield high enough. Thus by default,25% of your banks deposits go to the government. We all consider bank FDs to be investments, but in the longer term we are left poorer.
The bond market is almost non-existent with no direct retail participation, making it impossible for us to search for a better return. In effect we subsidize the government through low cost money.
The story with insurance and small savings is no different with all, but a small portion, the money going to the government.
Off late, even the equity portion of your LIC savings is being played with. Government makes PSU banks pay dividends. Being the largest shareholders, they receive a major part of it. But since banks are in constant need of capital, which is their raw material, government has made LIC substitute for them. LIC has been selling blue chip stocks and been buying PSU banks, with shady balance sheets.
In effect government is withdrawing its own money and asking us to take the risk of a bad balance sheet!!
(just for information, there is a big hole of around Rs.50000 cr. in the PPF/NSC/KVP/PO DEPOSIT schemes, which is not highlighted anywhere)
All this still may not sound bad enough.
What does the government do with all this money? Why does it need more and more money all the time? And more pertinently how does it get away with it??
That the government and it's agents pocket a part of the money is no secret. But it gets away with it by drawing attention away from the financial jugglery going on.
The rule is very simple and was laid down the British. Divide and rule.
Our combustible society was always divisible on the grounds of caste and religion. Government helps that process by announcing various schemes and subsidies which are supposed to uplift the under privileged.
Secularism stands for equal opportunity irrespective of the person's background. But politicians have twisted it, first they divide people on the basis of caste and religion and then announce special packages in various forms in the name of secularism.
I am not against the schemes but if these schemes were indeed good, then they should have died a natural death because the under privileged should have been empowered by now. If it has not happened for 6 decades it is unlikely to happen for the next 6 as well.
That's because the basic intention is to only fool people in the name of these subsidies and schemes.The government keeps asking for more money for exactly these schemes and it is not questioned.
Examples:
They want to subsidise kerosene, LPG, food grains for the poor. The poor get a part of it but it also creates a big black market for the products and probably also funds lot of political parties themselves.
They subsidise electricity to agriculture, but a lot of theft goes unreported and unaccounted under that guise leading to huge losses and load shedding as well as higher power bills.
This economic mismanagement is the reason behind the persistent double digit inflation and a depreciating rupee and of course, reduced purchasing power for common man.
Coming back to your savings, we generally end up using them to buy a house, fund children education or something similar.
If you are buying a house, it's very unlikely that a politician is not being paid behind the screens. In fact, the black money comes back to real estate driving the prices higher and making it difficult for common man to own a home.
In effect, the government has used our money and made life difficult for us.
If the child is a genius, fine. Else given the paucity of government seats for graduation colleges, one will end up paying huge donations or capitation fees or very high yearly fees.Whom does this go to?? Most private colleges are either run by somebody connected to the government or is a part of the government itself.
Generally speaking, your savings, at least a big part of them, are again routed back to the government or its agents.
We all , justifiably, feel happy when we buy a car or go on a foreign tour or dine in a good restaurant. But these are all small mercies which we are allowed, so that we don't revolt. So that we live in our own cocoon not realising or at least not objecting, the loot going around.
At the start we did some calculations using 30% tax rate. So what about those below that slab. Their story is no different. Just that they will not be able to save enough.
Very few are able to make the jump from being middle class to upper or the rich class. Others are on an economic treadmill!!
We can replace the word "government" above by "Congress". Given that Congress has been a part of the government for 5 out of the 6 decades since independence, I can't think of anybody fitting better.
The inimitable Bhagat Singh had predicted exactly this, way back in the 1920s when he himself was only in his 20s. And that's why he opposed the Congress. No wonder Congress sees him more as a terrorist than a freedom fighter and an outstanding thinker. What he could not have probably imagined then was that it would be a foreigner having absolute control over things 6 decades after independence.
So now let me reframe the question asked at the start.
Over your lifetime, how much of your income is taken away by the government, directly through taxes or indirectly through inflation and mismanagement?
And going by the answer, you can probably decide if you are an economic slave or not.
(I am by no means an original in this thinking process. Great scholars and minds have already highlighted these issues centuries before. I am just trying to see and present the Indian version of it)
