The
debate on federalism has been going on for decades. It was debated
as far back as the 1960’s, with pros and cons given wide
coverage in the media. The issue would surface time and again,
especially during times of political, social and economic crises.
While
various dimensions of federalism have been debated publicly,
one question which needs extensive examination is the matter
of financing. How will the proposed federal government be financed?
What will be the system of sharing of taxes, as well as expenditures?
The
resolution proposes that financial resources of the government
will be shared among the federal government, the states, and
the local governments. Seventy per cent of resources raised
will go to the states while 30% will go to the federal government.
Of the 70% allotted for the states, 70% will go to the local
government units and 30% will go to the states.
Students
of public finance have been pointing out that the creation of
an additional layer of government—namely the state—will
inevitably lead to higher levels of expenditures. This is because
the machinery of the states have to be maintained, along with
that of the federal government and the local government units.
Pressure for higher levels of expenditures will inevitably lead
to pressure for increased levels of taxes.
Let
us focus first on the federal government. There are certain
expenditures which have to be borne at the federal level. These
are national defense, justice and foreign affairs. The financial
requirements of these three services, as everyone knows is awesome.
At present, defense is second only to education in magnitudes
of expenditure.
The
most intriguing question is: What about the national debt? This
will have to be paid by the federal government of course. Again,
as everyone knows, the debt service payments alone account for
more nearly 30% of the total budget and is easily double that
of expenditures for education. This does not include payment
for debt principal.
It
is obvious that the 30% of financial resources which will be
allotted to the federal government will largely go to the payment
of debt. It also means that the federal government will either
raise more taxes or borrow extensively to take care of defense,
justice, and foreign affairs.
And
how about the equalization fund? This is to take care of states
which are lagging behind. How will this be funded? Again the
30% share of the federal government may not be adequate.
At
this point, only basic federal expenditures are discussed. We
are not considering state expenditures which would include the
organizational structures which have to be set up, including
physical structures, as well as services to be provided at state
level. These will be discussed in subsequent columns.
What
is obvious is that there will be three levels of taxes—federal,
state and local government. The matter of financing cannot be
ignored "for later." It has to be part of the ongoing
debates.
More
hope
Thank
you to all those who loved last week’s column, "There
is always hope," as well as the preceding one, "For
want of a kidney." Ms. Marilyn Pardo sent the first among
many texts on the need to continue hoping. The column on the
plight of kidney patients drew responses from as far as Belgium
with Marivic Penaflor, Malaysia with Lynn Kulasingham, and dozens
of readers from the Philippines, including DSWD secretary Esperanza
Cabral.
During
the recognition rites of the U.P. National College of Public
Administration, class valedictorian Michelle Cyrille Jimenez,
magna cum laude, explained why she chose public administration.
“I belong to a long line of public servants, including
titas, grandmas, and even great, great grandmas, many of whom
served at a time when government had the reputation of efficiency,
integrity and rectitude. Presented with a choice of careers,
they opted for public service because at this time, that is
where they believed they could do the most good. It was much
in the same manner that I made my own decision, four years ago—that
is to serve the Philippine government, in the Philippines.
