Hearing the cry of the middle class

President Marcos’ fifth State of the Nation Address (Sona) will be remembered not for its length—eight minutes longer than last year’s—but for a pivotal moment when he clearly addressed the concerns of nearly half of the estimated 117 million Filipinos, including gut issues that are likely to remain a priority for the next two years of his administration.

The President delivered his penultimate Sona before a joint session of Congress on Monday, attended by the crème de la crème of Philippine society. But since the Sona is an annual report to the nation, Mr. Marcos’ real audience that day was the Filipino people, in whom democratic power resides, and the electorate to whom he owes his constitutional loyalty and fidelity, having sworn an oath to “do justice to every man, and consecrate [himself] to the service of the nation.”

Mr. Marcos addressed the nation at large, and at one point he spoke directly to a large segment of the electorate who had largely felt unseen and unheard, regardless of who sits in Malacañang. This constituency (which includes many of us) watched from the sidelines for most of the 85-minute speech, yet has been the workhorse of the economy: the Filipino middle class, comprising 40 percent of the population.

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For decades, the middle class—salaried workers, in particular—have complained of being saddled with a disproportionate tax burden (compliant by default because of withholding tax) yet often miss out on ayuda—government financial, livelihood, and medical assistance typically reserved for vulnerable sectors and victims of calamities. Because of inflation and fixed income brackets, we pay higher effective tax rates than the rich (who have tax shields and can use private holding companies), and undoubtedly, we have virtually no chance of tax evasion due to withholding tax. This burden of personal income tax on the middle class is compounded by the regressive nature of value-added tax, which is levied on consumption regardless of one’s income.

This situation is no longer tenable, and Mr. Marcos has seen the plight—and heard the cry—of the middle class, now caught in an avalanche of rising inflation and fuel, housing, transportation, education, and medical costs, amid continued geopolitical tensions in the Middle East that have pushed oil prices to historic highs.

Tax relief. Mincing no words, Mr. Marcos declared that he would “not forget our Filipino workers, particularly our middle class, as well as the small businesses. We all know that they, too, are weighed down by the effects of the (Middle East) crisis. So, to ensure the continued progress of the middle class amidst the lingering effects of the crisis, we will pursue tax relief measures that promote growth, that generate revenue, and advance equity toward socioeconomic sustainability,” Mr. Marcos said.

If these words failed to persuade us that change has come, then what followed may flesh out this good news, which was well applauded.

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The President asked Congress, in an effort to allow us to benefit from our hard-earned income, to raise the minimum annual income subject to tax from the current P250,000 to P350,000; to exempt small enterprises from the minimum corporate income tax; and to broaden the much-needed amnesty for unpaid taxes, including penalties, whether income, estate, donor’s, or value-added levies. In June, the Bureau of Internal Revenue announced a one-time tax abatement program for “micro” taxpayers.

He also broached the idea of excluding or cutting income tax for other low-wage earners. This perfectly dovetails with the increase in the daily minimum wage in the National Capital Region by P85 (from P695 to P755), with the first tranche (P60) taking effect last Saturday.

Pass-on system loss. But what brought the house down was the President’s call for Congress to abolish the unconscionable system loss charges that have victimized electric consumers since the Electric Power Industry Reform Act (Epira) was enacted in 2001.

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“It is not the consumer’s fault that system loss happened. So, it is not right that they are the ones made to pay for it,” said the President, drawing a standing ovation and prolonged applause from the Batasan crowd. He added: “Therefore, we, the people, request—no, we demand—the immediate amendment of the Epira and the prohibition of charging system loss to consumers, including the value-added tax thereon.”

To further lower electricity rates, Mr. Marcos heeded the clamor from middle-income households to remove the cost barrier to solar power by calling on Congress to pass the Sariling Kuryente Act, which will make household installation of solar panels and battery storage systems “simple, easy, and affordable.”

But the focus on the Filipino middle class is not a loss for the poor. This is a false dichotomy, as the President remains passionately committed to a “social protection floor” for the poor and marginalized groups through assistance and livelihood initiatives from the social welfare, labor, and agriculture departments.

(More on the eight-point socioeconomic agenda in my next column.)

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