Removing Subsidies Help the Rich
If you remove subsidies, you can afford to reduce taxes. Those with enough income to be taxed, can therefore benefit by having their taxes reduced as a form of reducing the burden of inflation provided by the government. It is easier to pay also by just by reducing the amount of tax that the rich need to pay.
The usual argument against removal of subsidies that it increases the cost of living but not offset by any cash transfer is not even proven, but just the feeling. Actual measurements of how much a rich person loses from the subsides compared to the amount that they get for their necessities, need to be taken. Those expenditures for their leasures should not be counted. Big cars that guzzle petrol should not be counted towards the reduction cost of living hardship. It was not a hardship to the rich any way, of owning big inefficient cars.
The purpose of cash transfer to citizens is to reduce the burden of cost of living due to inflation but not to continue indulging the rich with luxuries. The rich who have been very prudent can recover the cost of their essentials although they do not need any help to survive because they have a larger reserve in their income.
Another argument is that the rich can help increase the GDP of the nation because of their inate higher productivity. They have more skills and work discipline to produce more GDP compard to the poor.The best method to stimulate the productive rich is to reduce taxes, but not to give cash handouts because it will stimulate the productive rich to be unproductive.
How about the poor, will they become unproductive if they are given too much cash that they do not need to work any more? Experiments with UBI (Universal Basic Income) show that this is not true:
"The concept builds on decades of evidence concerning the impact of cash transfers. For example, contrary to popular opinion, studies show that cash transfers reduce spending on “temptation goods” like alcohol and tobacco, do not discourage work, and have a wide range of positive effects."
The paragraph above provides links to research data.
https://www.journals.uchicago.edu/doi/abs/10.1086/689575?journalCode=edcc
Cash Transfers and Temptation Goods
Results show that on average cash transfers have a significant negative
effect on total expenditures on temptation goods, equal to −0.18
standard deviations. This negative result is supported by data from
Latin America, Africa, and Asia, for both conditional and unconditional
cash transfer programs. A growing number of studies therefore indicate
that concerns about the use of cash transfers for alcohol and tobacco
are unfounded.
Debunking the Stereotype of the Lazy
Welfare Recipient: Evidence from Cash
Transfer Programs
Abhijit V. Banerjee, Rema Hanna, Gabriel E. Kreindler, and Benjamin A. Olken
Targeted transfer programs for poor citizens have become increasingly common in the de-
veloping world. Yet, a common concern among policy-makers and citizens is that such
programs tend to discourage work. We re-analyze the data from seven randomized con-
trolled trials of government-run cash transfer programs in six developing countries
throughout the world, and find no systematic evidence that cash transfer programs dis-
courage work.
Briefing
Shaping policy for development odi.org
Understanding the impact of
cash transfers: the evidence
Jessica Hagen-Zanker, Francesca Bastagli, Luke Harman, Valentina Barca, Georgina Sturge and Tanja Schmidt
July 2016
Key
Findings
The impacts of cash transfers on individual- and household-level outcomes:
• Monetary poverty: Cash transfers reduce monetary poverty.
• Education: Cash transfers raise school attendance, but do not always lead to improved learning.
• Health and nutrition: Cash transfers stimulate health service use and improve dietary diversity, but there is less
evidence that they affect the height and weight of children.
• Savings and investment: Cash transfers can help foster beneficiaries’ economic autonomy.
• Employment: Cash transfers are associated with a reduction in child labour. Most show either no effect or a positive
effect on adults working.
• Empowerment: Cash transfers increase women’s decision-making power and choices, but do not always reduce
emotional abuse
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