The PNP wants you to be able to take home up to $3 million of your salary tax-free! Is that even possible? 

Opposition Leader Mark Golding recently made a call for Jamaica’s income tax threshold to be increased to J$3 million.  That’s almost US$20,000.  This means that you wouldn’t pay income tax on any earnings below that amount.

Right now, once you earn more than $1.5 million a year, you have to pay income tax.  Every dollar you earn over that threshold is taxed at 25%.  This is also known as PAYE – pay as you earn. Those who make more than $6 million a year pay 30% on all earnings over $6 million.

However, people who earn less than one point five million a year don’t pay income tax at all. 

Now, up until 2017, this threshold was much lower. Just $600,000. The promise to more than double it was one of the JLP’s major election promises, and probably helped them to win the 2016 general election.  Under the proposal, workers took home an extra $18,000 a month!

I remember this very well because as a journalist, I covered this story in depth.  I remember going to the JLP’s press conference and grilling Audley Shaw over how they were going to pay for such a big promise.

Income tax is one of the government’s major sources of revenue.  This is how they pay to fix roads, build schools, and pay police, teachers and nurses, among other things.

The JLP, which was then in Opposition, said they wanted to move from direct to indirect taxes.  Meaning they wanted to move away from taking taxes straight out of your pay, and instead, collect more taxes from the things that you buy via General Consumption Tax (GCT) and Special Consumption Tax (SCT).

Now at the time, a lot of people said the JLP’s proposal would never work!  This includes the then-Minister of Finance, Dr Peter Phillips.  And the JLP themselves calculated that this would cost the government over $10 billion to implement!

In fact, after the JLP came to power, they realized it wasn’t as easy as they expected.  Some money that they thought was in a special fund they could use actually wasn’t there, and they had to figure out another way to do it.  But at the end of the day, they did manage to deliver on this promise.

Now, the PNP is insisting that the income tax threshold needs to be doubled again. Opposition leader Mark Golding’s reasoning is that inflation has eaten away a lot of those tax-free dollars. 

So basically, he’s saying that $1.5 mill is worth much less now than in 2016.  Doubling the threshold will put a lot more cash in people’s pockets. 

But what I haven’t heard yet is any details.  How much will this cost? How would they replace that lost income? How much more money will that put into my pocket?  These are questions that Golding will need to answer if we are to take him seriously.

But at the same time, the JLP could end up beating him to the punch? I asked Prime Minister Andrew Holness about this on Taking Stock a few weeks ago.

Now I have long called for income tax to be abolished completely.  I think it’s unfair because only a tiny number of people actually pay it.  And if they raise the threshold to $3 million, that tax burden will fall on the shoulders of even fewer people – because how many people in Jamaica even earn $3 million?  If you raise it that high, might as well get rid of it altogether.  Whereas everybody has to pay GCT.  Focus on growing the economy and thereby growing consumption, and you’ll earn more tax dollars.

I expect that this is going to be a major campaign issue leading up to the next general election due in 2025.

And that’s the bottom line.

Golding clip:

https://m.youtube.com/watch?v=uFaD8Op1am0