[eco-eng] Debate Speech, Deputy Prime Minister.docx

Nadine M. Gonzales BM 204

To begin with, I’d like to thank the Leader of Opposition for telling us his perspective about the problem but we believe that his argument is flawed, because according to a research about the effects of taxes on labor income, higher income tax and consumption spending lead to less work time in the market sector (Davis & Henrekson, 2004). People would then pull out from legal market sectors; hence less productivity of workers in the country. Your honors, ladies and gentlemen, good morning! With clarity of our conviction, we dare say that lowering income tax rate will establish economic growth. As for our next argument, we believe that lowering income tax rate would increase aggregate demand. First, lessening the income tax rate would mean a higher disposable income for consumers. If workers are taxed less, they will be able to receive higher wages or disposable incomes, thus enabling the consumers to boost their purchasing power. (Ozayasar, 2011). With an improved disposable income, people could buy more products and they could even buy luxury goods occasionally. The boosting of purchasing power or consumer spending, in economics term, leads to an increase in the aggregate demand, which in turn raise the Gross Domestic Product (Cloutier, n.d.). The increase in the GDP means that the national economy has improved. Second, lowering income tax rate could raise investments. In this case, high-class people or higher-income earners could invest more in businesses to produce more machineries and build new factories (Pettinger, 2008). Higher investments could increase productivity capacity; and through the increase of productivity, the GDP will boost and the aggregate demand will increase. And again, an increase in the aggregate demand and the GDP means that there is an economic growth. Last, production of goods and services will increase if the income tax rate is reduced. With the consumers having more money to spend on goods and services, there

will be a high demand for more products. “Firms then can expand production based on the higher demand for their commodities” (Cervantes, Dancel, Pagoso & Rillo, 2010). The expansion of production means a higher consumption that will lead to the increase of the aggregate demand. According Socioeconomic Planning Secretary Emmanuel Esguerra in Diola and Cerva’s (2016) report on PhilStar Business, the strength of the industry and services sectors shows an ongoing structural transformation taking place in the economy. This transformation is crucial in sustaining the economic growth in the Philippines. The Philippines has long been suffering from the current high income tax rate. Should the income tax rate be lowered, the Philippine economy would continue to grow. Considering it would increase aggregate demand and it would be a step closer to achieving a sustainable economy.

References: Cerda, J., & Diola, C. (2016, May 19). Phl GDP hits 6.9% in Q1 2016, fastest among major Asian economies. The Philippine Star. Retrieved 4 March 2017 from http://www.philstar.com/business/2016/05/19/1584826/phl-gdp-hits-6.9-q1-2016fastest-among-major-asian-economies Cervantes, M., Dancel, G. T., Pagoso, P. R. M., & Rillo, J. D. (2010). Economics: Basic principle, applications and issues. Manila PH: Vibal Publishing House, Inc. Cloutier, R. (n.d.). Do tax cuts stimulate the economy? Retrieved 1 March 2017 from http://www.investopedia.com/articles/07/tax_cuts.asp Davis, S. J., & Henrekson, M. (2004, May). Tax effects on work activity, industry mix and shadow economy size: Evidence from rich-country comparisons. Retrieved 3 March 2017 from http://www.nber.org/digest/dec04/w10509.html Ozayasar, H. (2011, March 23). The effects of tax cuts on aggregate demand & aggregate supply. Retrieved 1 March 2017 from https://www.sapling.com/8100591/effects-aggregate-demand-aggregate-supply

Pettinger, T. (2008, July 25). Impact of expansionary fiscal policy. Retrieved 1 March 2017 from http://www.economicshelp.org/blog/617/economics/impact-ofexpansionary-fiscal-policy/