Taxing the Untouchable: Ahluwalia's Call for State Revenue Boost via Agricultural Taxation

Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission, suggests that state governments could tax large agricultural farms with high incomes to improve their finances. This revenue would remain with the states, highlighting the potential for decentralized financial management and reduced reliance on central government resources.

Economist Montek Singh Ahluwalia has proposed that state governments should consider taxing large, diversified agriculture farms, particularly those generating substantial income, to bolster their financial standing. Speaking at an event on the 16th Finance Commission report, Ahluwalia emphasized that this revenue should be retained by the states, without needing to share it with the central government.

Ahluwalia argued that while the Constitution limits the central government's taxation powers over agriculture, state governments are not similarly restricted. He questioned the long-standing assumption that all agriculture should remain exempt from income tax, suggesting that high-income agricultural holdings could contribute significantly to state revenues.

He also highlighted the importance of empowering lower levels of government in managing human capital such as education and health, citing successful population control in southern states as an example. The economist noted the potential benefits of state-level political decisions aimed at decentralizing resources and achieving international standards.