We have noted the declaration of Finance Minister Omar Davies on his ability to fulfil his promise to hike the threshold at which Jamaicans begin to pay income tax by $82,000 a year to $275,000. To keep his promise, Dr. Davies told Parliament last week, would mean giving up $4.7 billion in revenues and in the context of the current budget, he said, "this is simply not affordable".

On the face of it, Dr. Davies has an unassailable argument. After all, the $380 billion budget that he presented to legislators is, in nominal terms, a mere two per cent higher than the revised estimates that were approved for the recently ended fiscal year. But in real terms, factoring in inflation of 6.6 per cent, this year's budget represents a reduction in government spending of closer to five per cent.

Moreover, Dr. Davies has projected a public sector deficit this fiscal year of 4.5 per cent of GDP he has been at pains to point out that nearly half of that gap represents spending made in the last financial period but are only now formally reaching the books. It shouldn't escape us that the fiscal deficit for last year was substantially higher than the reported out-turn, which will be around five per cent of GDP. In any event, for the 2007/2008 fiscal year, Dr. Davies has a large gap to fill and will need all the cash he can get his hands on, assuming that he is still in the job after the next general election.

Of course, lifting the income tax threshold would be popular with voters in an election year, so we presume that Dr. Davies should be applauded for holding the fort against his Cabinet colleagues on this matter. But much of this turns on perspective and philosophy. And in that context, we are not certain that Dr. Davies has made all the right choices.

Prior to his presentation last week, this newspaper urged the minister to lay emphasis on supply-side issues; that is, we wanted to see policies that would encourage investment and drive economic growth. Our hope was for the real liberation of the private sector.

Among the matters of to be dealt with, of course, is the bureaucratic humbug encountered when doing business in Jamaica. The red tape has to be unravelled. We feel, too, that there is an unimpeachable logic for lowering the rate of corporate income tax, starting with its equalisation with personal income tax.

It is against that background that we raise for debate Dr. Davies' position on the tax threshold. We take at face value the minister's math on the cost to the treasury if the measure was implemented without removing other allowances. In other words, the minister wants any hike in the threshold to be revenue-neutral. That is not necessarily the way to go.

Our view is that the minister and his technocrats could find some of that $4.7 billion by combing the budget and ensuring that it is bereft of fat; they would also have to ensure a curbing of the waste and corruption that conventional wisdom and observation say are prevalent on government projects.

More cash in people's hands will drive consumption and therefore business activity and economic growth, which in turn drive employment. And the more profitable a firm, the more nominal tax it pays; people with incomes pay taxes.

Dr. Davies may be concerned about demand-pull inflation, but workers would be unlikely to spend all their additional cash. They would save some, impacting capital formation. And it can't be beyond the central bank and others to pull the appropriate levers at the appropriate times to maintain equilibrium.

The bottom line has to be about growth.