Modi accuses Congress of planning wealth redistribution through high taxes. Congress denies the allegations and underlines that social justice is its priority. But the Grand Old Party must learn lessons from the disasters in the past.
Prime Minister Narendra Modi has declared that if the Congress is elected back to power, it will snatch the gold and mangalsutras (which by definition belong to Hindus) of people and distribute it to “infiltrators” and “those with many children”. He has further said that the Congress will impose high taxes, including a wealth tax and inheritance tax, that will strip people of their wealth and even bequests to their children — “loot zindagi ke baad bhi.”
He uses the phrase “If the Congress is elected.” Is the chance of that even one in a million? Till now any reference to a Congress victory has usually been made with a snigger. But suddenly Modi has raised it as a possibility that voters should fear. In doing so, he has bestowed headlines and credibility on the Congress that Rahul Gandhi should be grateful for.
Congress has angrily denied Modi’s accusations and asked the Election Commission to stop this hate speech against Muslims and slander of the party. Official Congress spokesmen declare their manifesto says nothing about seizing and redistributing wealth.
But within the party many want to reiterate the old Congress commitment to socialism. The party manifesto promises one lakh rupees per year to every poor family, presumably by taxing the rich. This is surely redistribution, in line with the Congress’ core ideology. One Congress spokesman said, off the record, that he was under attack from both within and without the party.
The manifesto promises a socio-economic survey enumerating all castes and minority groups to reveal who has how much income and wealth, as a starting point for delivering social justice, without specifying the follow-up action. But Rahul has used the slogan ‘Jitni abadi utna haq’, suggesting redistribution according to population share. The manifesto refuses to be explicit to avoid controversies.
Mangalsutras? Muslims? What Congress said about wealth redistribution
Election campaigns are occasions for exaggerations, half-truths and lies. Accusations made by both sides are partly true. BJP has spun a rich-versus-poor issue into a Hindu-versus-Muslim affair. And the Congress has certainly been the party of redistribution since Independence.
Indeed, it enacted draconian redistribution measures in its heyday in the 1970s. But these proved such a terrible flop that the Congress itself slashed tax rates in the 1980s and after. It would be stupid to revive those draconian taxes in the supposed pursuit of social justice.
Indira Gandhi raised the maximum income tax rate to 97.75% and wealth tax rate to 3.5%, to abolish poverty (‘garibi hatao’). Yet the poverty ratio did not fall at all in three decades after independence while the population almost doubled. Hence, the absolute number of poor people almost doubled. That is a terrible indictment of draconian socialism. If anybody had predicted in 1947 that the number of poor people would double after the British left, he would have been called a British stooge. Yet that was the outcome.
Draconian taxes drove business from white to black money, and injured economic growth without reducing poverty. Congress itself later slashed these draconian rates, achieving faster economic growth plus falling poverty.
Nehru imposed an inheritance tax in 1953 and a wealth tax in 1957. These looked draconian on paper, but incapable, corrupt tax departments plus the ingenuity of the rich in devising tax shelters meant that very little money was ever collected as inheritance tax. The Congress itself abolished the Estate Duty Act in 1985 since the administrative cost of collecting it overshadowed the sum collected (Rs 20 crore/year).Wealth tax also yielded miserable returns, but helped spur black money and the migration of thousands of Indian millionaires to tax havens. It was abolished by BJP in 2016 and replaced by a surcharge of 2 to 12% on the highest incomes, fetching far more revenue.
However, Congress is right to complain to the Election Commission that BJP is trying to communalise the issue. BJP says Manmohan Singh in 2006 said Muslims should be the first beneficiaries of redistribution. Overall, Singh’s speech sought aid for the poorest groups — SCs, STs, OBCs, minorities, women and children. But one remark of Singh’s suggested that Muslims should have first priority.
BJP objected at the time, and the government clarified that Singh sought priority for all poor folk, not top priority for Muslims. The proof of the pudding is that Congress remained in power for another eight years but gave Muslims no priority in any redistribution. For BJP to claim that the 2006 debate justifies its current slurs against Congress and Muslims is mendacity.The Election Commission has pulled up a Congress spokesman for insulting Hema Malini. It should act as decisively on the redistribution issue.
This article was originally published by The Times of India on April 27, 2024.
