Some of the governments in the world not only exempt people with income up to certain limit from payment of income tax, but also extend to them several concessions and welfare measures like subsidized or even free rations, clothing, shelter, transport, medical facilities, education etc. This does not seem to be the correct path for the long term benefits of the beneficiaries or the development of the economy. Some of the considerations for this conclusion are:
(i) Every one should pay part of his income as tax to enable the government to work.The low income people can be asked to pay a smaller percentage of income –may be 5% or even 2% or 1%, instead of totally exempting them from payment. After all they are the beneficiaries of governments’welfare measures.
(ii) The people by paying the taxes will feel and be more responsible citizens
(iii) Obligation to pay income tax will induce people to work harder and longer to earn more to compensate for the tax expenses. This will lead to increase in production of goods and services
(iv) Restricting welfare measures only to those earning up to a certain level will make people not to strive to earn more for fear of foregoing the benefits. This will make people remain in poverty perpetually.
(v) The governments should look after not only the poor people but also those with good income and therefore, welfare measures should be for the entire community and not for those with low income only
(vi) Substantial number of people are poor mainly because of their or their fore fathers’ bad habits, like consumption of liquor, smoking, spending much on cosmetics, indulgence in luxuries, consumption of high cost items etc. Exempting such people from payment of taxes will mean not dissuading them to give up bad habits
(vii) Similarly it is not correct to conclude that rich people have become rich by exploiting others or at others’ expenses. Many people are rich because of their frugal habits, savings, simple life, low consumption, avoiding luxuries etc. They should not be discriminated against, by denying them governments’ welfare measures.
Governments’ efforts should be to provide necessary skills and facilitate employment to all the people and thereby make them earn for their needs. In developing countries, it is very easy to create jobs, as there are innumerable works to be undertaken.