KUALA LUMPUR: For the M40, Budget 2027 needs to offer more than another tax break.
As housing, food, transport, healthcare and education costs continue to squeeze middle-income households, economists said measures to ease essential expenses and raise incomes could provide more meaningful relief.
Dr Foo Lee Peng, chairperson of the Centre for Business and Policy Research at Tunku Abdul Rahman University of Management and Technology, said M40 households were increasingly caught between multiple financial commitments, particularly families supporting children while also caring for ageing parents.
“The combined costs of housing, food, transport, healthcare and children’s education can leave little savings or emergency room,” she said in an interview yesterday.
Foo said the situation was especially challenging for families raising children with disabilities or learning difficulties, who could face recurring costs for assessments, therapy, specialised education and transport.
She said higher personal tax reliefs could help, but their impact depended on how much tax a household actually paid.
“For an additional RM1,000 deduction, a taxpayer whose marginal tax rate is 11% would save RM110,” she said, adding that households with little or no tax payable would see limited benefit.
Foo said Budget 2027 should therefore combine appropriate tax reliefs with measures to reduce essential household costs, including healthcare, education, childcare and eldercare.
“Services can help caregivers remain in employment,” she said, particularly where families face high and recurring caregiving costs.
Policy specialist and economist Dr Geoffrey Williams said raising incomes should also be a priority, proposing a RM200 monthly tax credit under the Progressive Wage model.
“It would cost about RM3.6bil a year, providing a more direct boost to workers’ incomes,” he said.
Williams also strongly backed raising the minimum wage to RM2,000, calling it a “no-brainer” for helping lower-income workers.
He said concerns over the impact on MSMEs were overstated.
“There is a lot of noise about MSMEs, but most of them are already paying more than RM2,000,” he said.
Williams also proposed replacing student loans with direct grants, which he estimated would cost about RM3bil.
However, he said the government had limited room for additional spending and proposed a 1% tax on electronic payments, which he estimated could raise RM28.8bil.
Economist Prof Emeritus Datuk Dr Zakariah Abdul Rashid said raising the minimum wage was necessary but not a complete solution to Malaysia’s wage problem.
“The minimum wage is a safety floor,” he said, but said the country needed a broader wage “ladder” through progressive wages, higher productivity and better-skilled workers.
Without that progression, a higher statutory minimum could compress wages, where workers just above the minimum see little difference in pay.
Zakariah also cautioned that wage increases not matched by productivity gains could push up labour costs, particularly for small businesses and non-tradable sectors such as food and beverage.
“Wage increases may pass through to consumer prices, creating cost-push inflation and eroding some of the real wage gains,” he said.
He said the longer-term solution was to help small and micro enterprises improve technology, management and capital intensity so they could generate more value per worker and afford higher wages.
“A minimum wage adjustment is an essential nominal adjustment, but the statutory floor alone is insufficient,” he said.
