Will Taiwan's Day Trading Tax Breaks End? Engineer Reveals the 'Root Cause' of Low Wages: 5% Wealth Tax Won't Solve K-Shaped Economic Crisis

At the end of July, Taiwan's Directorate General of Budget, Accounting and Statistics (DGBAS) announced that the second-quarter economic growth rate was approximately 12.92%, surpassing earlier forecasts by over two percentage points. Both investment and private consumption showed stronger-than-expected real growth. Amid Taiwan's recent strong economic performance, concerns over the K-shaped economy have intensified. On July 30, the Legislative Yuan's Finance Committee held a public hearing on tax reform, discussing proposals such as a wealth tax.

In response, the Facebook page 'Engineer Views Politics' pointed out on August 3 that the K-shaped economy refers to a situation where the assets of the wealthy are rising, while middle- and low-income groups, traditional industries, and small and medium-sized enterprises (SMEs) face stagnation or decline. The page also analyzed that, when comparing GDP growth distribution across countries, Taiwan's general workforce does not fully benefit from economic growth.

What is a K-shaped economy? Is Taiwan's situation worsening?

A K-shaped recovery describes a phenomenon where, during economic recovery or growth, different industries, companies, or social groups experience divergent trajectories. In Taiwan's case, strong global demand for AI, high-performance computing (HPC), and semiconductors has driven record revenues, profits, and salaries at tech firms like TSMC. However, many traditional manufacturers, SMEs, and domestic service industries face challenges such as weak exports, currency appreciation, rising costs, and labor shortages, resulting in limited or even declining profit and wage growth.

During the Finance Committee's hearing, it was noted that while high-tech industries like AI and semiconductors have seen substantial profit and wage growth due to global demand, traditional manufacturing, SMEs, and the service sector continue to struggle with export weakness, currency appreciation, rising costs, and talent outflow, leading to widening industrial and wage disparities.

What are the solutions to the K-shaped economy? What directions were proposed at the Legislative Yuan hearing?

The engineer emphasized that Taiwan's labor share of GDP is only 43%, significantly lower than Japan, the EU, and the U.S., all of which exceed 54%. This means most workers cannot enjoy the fruits of economic growth. The public hearing proposed four key directions:

- Impose a 5% wealth tax on high-net-worth individuals - End tax breaks for day trading to discourage short-term speculation - Eliminate duty-free thresholds for small parcels to help traditional industries enter international non-red supply chains - Re-examine tax and subsidy systems

Is Taiwan's GDP growth distribution unequal? Can ordinary workers benefit from economic gains?

The engineer further stated that to solve the K-shaped economy and GDP distribution issues, one must first understand the root causes. Taiwan has about 11 million workers, but its industrial structure is dominated by semiconductors (wafer manufacturing and design), employing only about 800,000 people broadly and around 300,000 at the core. Others do not benefit from the annual tens of billions of dollars in trade surpluses, contributing to wage disparities. High earners accumulate assets, while inflation erodes the purchasing power of lower-income groups, creating a vicious cycle.

Moreover, the root cause lies in the fact that only the semiconductor industry benefits from the Information Technology Agreement (ITA), allowing it to earn foreign exchange, while other industries do not. Therefore, the four proposals from the hearing may fail to address the fundamental problem.

Can a wealth tax fix the K-shaped economy? Is tax reform merely a temporary fix?

The engineer argued that a wealth tax would only give the government more revenue, with no guarantee it would be reinvested in the lower class—citing the example of Overseas Compatriot Affairs Commission Chairperson Hsu Chia-ching spending public funds on overseas travel. Ending day trading tax breaks would affect market volatility and liquidity but is unrelated to industrial structure or wages. Eliminating small parcel tax exemptions would only raise consumer costs and increase government revenue without creating new major industries—otherwise, Taiwan's auto industry would already dominate the market.

In conclusion, revising tax and subsidy systems has limited impact because it doesn't address root causes and could backfire, like housing subsidies that inflate rents. The engineer criticized that the inability to improve productivity in non-semiconductor industries stems from political instability, which worsened after the DPP came to power. 'As long as the core doesn't change, no matter what reforms are made, low wages will persist,' the post concluded.