Press Release August 14, 2016
'Helicopter money' for Filipino families coming
In step with President Rodrigo Duterte's pledge to lessen personal income taxes, Sen. Juan Miguel Zubiri has proposed to splash out tons of "helicopter money" on Filipino families via new concessions that would cut in a big way the taxes now being automatically withheld from everybody's paycheck. "Filipinos have endured for far too long one of the most burdensome personal income tax rates in Southeast Asia. It has become absolutely imperative for Congress to reduce individual tax rates and enlarge personal exemptions at the same time," Zubiri said. "Families deserve stacks of 'helicopter money' by way of a broad-based withholding tax cut to enable every household to spend more and achieve a superior quality of life," the senator said. Economists around the world use Nobel laureate Milton Friedman's parable of a helicopter dumping piles of money from the sky - for everybody to freely collect and spend - to refer to cash injections as a potent stimulant to consumption and growth. Zubiri said his proposal to decrease tax rates and increase exemptions all together would instantly raise the standard of living of Filipinos, create jobs and drive inclusive economic expansion. The senator has introduced Senate Bill 124, which seeks to double from P50,000 to P100,000 the basic personal exemption being enjoyed by every taxpayer, and to raise twice as much the additional exemption for each qualified dependent child, from P25,000 to P50,000, up to a maximum of four children. He has also filed Senate Bill 121, which proposes to cut down to just 25 percent the country's highest individual tax rate of 32 percent. Here's how Zubiri's twofold proposal would effectively raise household incomes by double digits. Let's assume we have a husband and wife who are both employed and who have two dependent children. They have a combined annual compensation income of P480,000, or P40,000 monthly. Under Zubiri's proposal, the couple would pay 68 percent less in withholding taxes every year. They would have to pay only P23,500 in withholding taxes, or P50,500 less than the P74,000 they are currently shelling out. As a result, the couple would enjoy an additional take home pay of P50,500, or "helicopter money" as Zubiri puts it, that translates to a 12.5-percent jump in the household's annual disposable income. Here's how it works. Right now, the couple is allowed only P150,000 in exemptions - P50,000 for each spouse (or P100,000 for both spouses) plus P25,000 for each dependent child (or P50,000 for both children). After deducting the P150,000 in exemptions from their P480,000 in earnings, the couple winds up with a combined net taxable income of P330,000. Applying existing tax rates, the P330,000 is hit with P74,000 in withholding taxes - a flat P50,000 plus P24,000; or P50,000 plus 30 percent of the excess over P250,000 (with P80,000 being the excess taxable at 30 percent). As proposed by Zubiri, the couple would be allowed P300,000 in exemptions - P100,000 for each spouse (or P200,000 for both spouses) plus P50,000 for each dependent child (or P100,000 for both children). After deducting the P300,000 in exemptions from the P480,000, the couple would end up with a combined net taxable income of only P180,000. The P180,000 is then slapped with only P23,500 in withholding taxes - a flat P7,000 plus P16,500; or P7,000 plus 15 percent of the excess over P70,000 (with P110,000 being the excess taxable at 15 percent). Zubiri did not indicate the absolute amount of "helicopter money" that he wants to drop on Filipino families every year with his dual tax benefits. But in the 2016 election campaign, he had vowed to sponsor tax privileges that would deliver as much as P250 billion in new money at the disposal of Filipino families every year. According to the senator, the extra spending money would immediately boost consumption, create new wide-ranging demand for goods and services, push domestic industries to raise output and employ more workers, and spur faster overall economic growth. In his first State of the Nation Address, Duterte had vowed to reduce personal as well as corporate tax rates. "My administration will pursue tax reforms towards a simpler, more equitable and more efficient tax system that can foster investment and job creation. We will lower personal and corporate tax rates," the President said. Zubiri's proposed lower individual income tax brackets under SB 121
Current individual income tax brackets
Allowable personal & additional tax exemptions under SB 124
Zubiri's SB 121 proposes the adoption of the following decreased individual income tax rates:
Under the National Internal Revenue Code of 1997, the current individual income tax rates are as follows:
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