Over the past few months, Chinese Nationalist Party (KMT) and Taiwan People’s Party legislators have often asserted that the government has overtaxed citizens, and that they would “return the money to the people” through universal cash handouts. As an academic who researches public finance and government budgeting, I believe the universal cash handouts are neither legal nor logical.
Such a move would likely impose a heavy burden on the National Treasury Administration. If the handouts are written into law, they could be detrimental to the long-term health of the nation’s finances.
First, a tax surplus, what the opposition has framed as “overtaxation,” simply means that the tax revenue collected in a given year exceeded the government’s expectations; it does not mean that the government imposed excess taxes or collected more money from taxpayers than it should have.
The opposition’s notion that the money must be “returned to the people” is entirely unfounded and, naturally, fails to provide a legitimate justification for universal cash handouts.
Second, Article 70 of the Constitution stipulates that the Legislative Yuan “shall not make proposals for an increase in the expenditures in the budgetary bill presented by the Executive Yuan.” In proposing that the government distribute universal cash handouts, legislators are already overstepping their legal authority and contravening the Constitution.
More importantly, the central government had an outstanding debt exceeding NT$5.8 trillion (US$198.6 billion) as of July 4. Even if tax revenue temporarily exceeded the government’s expectations, the funds should be used to pay down the national debt, strengthen the social safety net or support important government functions such as education, national defense and long-term care.
Only when a government is free of its debt burden and has a fiscal surplus — as is the case with the local governments of Chiayi City, and Kinmen and Lienchiang (Matsu) counties — is it appropriate to consider sharing economic gains through universal cash handouts.
Even if the goal is to stimulate the economy, that could be achieved with the distribution of limited time-use consumption coupons and should only be considered during a severe economic downturn. Cash handouts are not only limited in their effectiveness, but might also pose a heavy financial burden.
If legislators force through universal cash handouts without any comprehensive planning or legal basis, the move — while attractive on the surface — could crowd out other government expenditures and lead to the misallocation of fiscal resources.
Liao Wei-jie is an assistant professor of public management at the City University of New York John Jay College of Criminal Justice.
Translated by Kyra Gustavsen
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