Distributing the oil wealth? Don’t hold your breath
Presidential candidates in Iran are racing to promise giving people back their oil money. According to the BBC Persian, Mr. Ahmadinejad plans to even include Iranians living abroad (like me). Holding my breath, I reached for a calculator.
I wanted to know quickly how large my check would be if he were elected? I started with the most optimistic scenario in which he gives it all away (optimistic for me because the Blacksburg municipality collects my trash, polices the streets and educates my children, not so optimistic for those who depend on government services in Iran). I figured that next year the net profits of our oil industry should be about $35 billion (I am giving $10 billion back to the oil industry to keep its good work going). That would make my share about $500 next year, or about $1.35 per day. Darn, that will not go very far in paying private tuition for two college kids. The problem is not with my calculator, it is with using numbers where one should not because they spoil the moment.
Perhaps this looks small to me because I live in the US, but then I thought that it might not be so impressive for those living in Iran either, at least according to the poverty lines that have been tossed about. According to one such poverty line — 8,000,000 rials per month for the average family of 4.5–the oil check would come to less than 25 percent of the poverty line (calculator: monthly oil check=500 *4.5* 10000/12 = 1,870,000 rials). So it should not be all that hot a proposal for the average Iranian either, especially if they were to count in the lack of all government services which would ensue if all the oil money was given away.
Perhaps the idea is to finance all government expenditures, the whole $100 billion of it, by taxation. This would more than double the tax revenues that must be collected. Maybe the right (left?) political pitch should be that rich should pay all the taxes and that way they will get to do their share for the country and all. That might work well politically but not too weel in practice since collecting taxes in a country with no history or culture of paying taxes is not easy at all.
In 2007, income taxes accounted for only 13.5% of all tax revenues; nearly half came from corporations and a quarter from import duties. To increase the total tax revenues by 100%, corporate taxes would have to more than double. How would that be collected? Remember the 3.5% sales tax proposal that closed the Tehran bazaar? Forget about income taxes. There would be “tea parties“, Iranian style, all over Iran. Increasing corporate taxes is a dumb idea when they are supposed to expand and create jobs for young people.
And what about jobs? How would distributing the oil wealth help with that? Ask any parents whose not-so-young unemployed son lives with them (they are easy to find since in 2007 about 44% of all youth aged 25-29 lived with their parents) about the value of getting their oil money if it means taxing businesses who might give their son a start on his future. Now, it would be a brave Iranian politician who would pose this question. Or, should I say one who faced an informed electorate?