If the government isn’t raising taxes then why is everything so expensive? I’ve seen quite a few comments like this on my recent video about taxes, so let me explain.

Can you believe a beef patty is $260, and don’t even get me started on bread! Bread is up to $500 in some places. 

Well, that has more to do with inflation, not taxes. 

So, I did a video recently explaining how the government plans to fund its trillion-dollar budget without any new taxes. Many of you were sceptical because the price of everyday items has gone up significantly during the pandemic.

But like I was saying earlier, that has more to do with inflation rather than taxation. 

See think of taxes like fees that the government puts on things and collects to help run the country.

While inflation is essentially the rate at which prices for goods and services go up. In Jamaica, we tend to refer to inflation as “cost a livin’”. You know the popular saying “the cost a livin’ high”, that’s inflation. 

Inflation basically changes the value of money. So, the higher inflation is the less power your money has to stretch aka the cost a livin’ get high. 

That’s why our parents can talk about paying J$10 for rent in the 80s meanwhile a one-bedroom these days can go for as much as J$150,000 in upper St Andrew. 

In Jamaica, inflation is measured by the Consumer Price Index, which tracks price changes for goods and services.

Point-to-point inflation compares inflation between two similar points in time – eg. February 2022 vs February 2023.  Jamaica’s point-to-point inflation rate for February was almost 8%. That means that the cost of living, in general, is almost eight higher this year than last year. So if something cost $100 last year, that same item costs $108 this year.

Now 8% is way better than where it was last year, 12%.  But it’s still higher than where the central bank wants it to be, which is between 4-6%.

Many factors can influence inflation. For example, a drought can send the cost of basic food items up.  Two of the biggest factors in the past two years have been the COVID-19 pandemic and the Russia/Ukraine war. 

Both crises placed a strain on the oil industry which made oil prices jump. So countries and companies had to pay more for oil, and then those countries and companies passed on those costs to customers. So flying costs more, driving more and so does electricity. And as these prices increase, so does inflation. 

So, whether or not the Government has taxes on items, the prices would still change because inflation is a normal occurrence. It’s when the rate goes too high, too quickly that there’s a problem. 

That’s also why the Government’s decision not to introduce any new taxes this year is good because inflation is already eating up our paycheck along with the existing taxes on stuff.