Federal Tax Reform: A Serious CTF Proposal

[Pliny]

Don't include me with most people. Makes you look pretty silly (to me). You have no idea what my level of economic knowledge is.

I do somewhat. Your understanding seems pretty orthodox. You have confused a fiat currency with wealth. This explains why you do not see the taxation of income as extortion. Not too uncommon an error in today's Economics and almost entirely missed by the average individual. Is redistributing wealth the same as redistributing the representation of wealth, which is what you call our fiat currency? The biggest difference is that wealth is in the hands of government and not in the hands of the people and thus the people are beholden to government and not government beholding to the people. Not bad if you depend on government to run things and government remains benevolent but from the perspective of freedom and liberty it is somewhat precarious.

[msj]

You're not an accountant, are you? It's that accountants that always seem to point out inaccuracies.

My point was that this individual has a very high family income (top 4% of income earners), able to pay for "his" kids, but in the small minority in Canada. He's still getting hammered by our income tax system because his income is in the form of salary, not investment income.

Bottom line: Canada is not a good place for people capable of paying their (and their children's) own way, unless it's split 50/50 between the spouses. It is a great place for low-income earners (vs the US) and for the very wealthy whose income receives preferential tax rates.

Sure, because I point out how inaccurate you are then I must be some anal retentive type.

Whatever gets your ad hominem attack going, I guess.

Back to the point: You completely disregard the integration principle with respect to investment income. The corporation pays tax as do the people who provide the equity to the corporation in order to earn that income.

Of course dividends and capital gains are going to be taxed at lower rates - they have to in order to account for this.

Sure, there are alternatives that could be explored - corporations not paying any tax (for which you would decry as yet another benefit for the rich), dividends deductible to the corporation and fully taxed by individuals, and maybe some kind of inflation adjustment component to capital gains/losses rather than the simple 50% inclusion rate.

These solutions are not necessarily any better than what we currently have.

Besides, I really don't see the big deal with a person making $30M from a capital gain and "only" paying $6.5M in taxes on it.

The fact is this person will never use $6.5M in government services in his lifetime. It is obvious that there is income redistribution going on here.

The person making $40,000 per year and paying, say, $6,000 in tax will use that amount of services in his during the year particularly if he has two kids in school which costs the system something like $15,000 per year (not to forget about the $2,500 he would receive in CTB for these kids who are over 7 years old).

When put into proper context, as above, I think it is clear that Canada has a pretty good system of income redistribution that needs some improvement (lower tax rates and/or higher income tax brackets would be nice).

As for people paying their own way for themselves and their children well, why do you continue to ask the rest of society to redistribute our income to you just because you have children?

Edited February 11, 2008 by msj

[Pat Coghlan]

Sure, because I point out how inaccurate you are then I must be some anal retentive type.

Well, usually nobody but an accountant would point out that somebody's income must be $190,000, not $150,000, to have a $70K tax bill.

So, are you an accountant?

Back to the point: You completely disregard the integration principle with respect to investment income. The corporation pays tax as do the people who provide the equity to the corporation in order to earn that income.

Of course dividends and capital gains are going to be taxed at lower rates - they have to in order to account for this.

There may be an argument for dividends to be taxed at somewhat lower rates, but not capital gains. If someone buys a piece of land for $1M and sells it 10 years later for $2M, there is no prior amount of tax paid to take into consideration.

Who are we kidding here? If you want to keep more after-tax income, take it as a dividend. All of my self-employed peers organize themselves as corporations for this reason.

Besides, I really don't see the big deal with a person making $30M from a capital gain and "only" paying $6.5M in taxes on it.

The fact is this person will never use $6.5M in government services in his lifetime. It is obvious that there is income redistribution going on here.

The big deal is that once someone has "made it" and doesn't have to depend on salaried income, they pay half the tax rates that apply to working slobs - forever.

The person making $40,000 per year and paying, say, $6,000 in tax will use that amount of services in his during the year particularly if he has two kids in school which costs the system something like $15,000 per year (not to forget about the $2,500 he would receive in CTB for these kids who are over 7 years old).

When put into proper context, as above, I think it is clear that Canada has a pretty good system of income redistribution that needs some improvement (lower tax rates and/or higher income tax brackets would be nice).

As for people paying their own way for themselves and their children well, why do you continue to ask the rest of society to redistribute our income to you just because you have children?

I guess it depends on whether having children is something that we, as a country, want to support or not.

If we don't, then it makes sense to not take family status and number of dependents into consideration, perhaps even levy a surcharge on families that have more children.

If we do, then it makes sense to recognize that the families that create the kids need to use a portion of their income to feed, clothe and shelter them - legitimate expenses in the 'business' of raising kids.

You can't have it both ways. Currently, Canada is one of 25 out of 32 OECD countries that does take family status into consideration for tax/benefit purposes.

The reality is that MOST families can't pay for their own kids without public services and tax breaks.

It's very difficult for working families to have more than 1 or 2 kids while the social underclass produce them by the truckload. Regardless of how you want to treat working folk - who are in the best position to produce well-adjusted, productive citizens - you are still going to pay for all the kids from those who've never had a job in their life.

I think people should worry less about the enormous sum of $200 or so per month that we receive in CCTB payments as tax relief for our 5 kids thanks to all the claw-backs, and more about the $2,000-$3,000 per month that somebody who maybe never even had a job and decided to have 6-8 kids that the government transfers from the "less needy" to the "more needy".

[Pat Coghlan]

It may surprise you that the middle class does not bear the brunt of taxation. The wealthy do. The middle class just feel it more. The reason you feel oppressed is because you are. It is intentional that you not rise above your station without great difficulty or gigantic windfalls.

I agree. One can rise from middle-class to upper middle-class, but it's very difficult to move beyond this level - by design.

It can be done, but it requires a lot of patience and possibly more than one generation of investing.

[msj]

Well, usually nobody but an accountant would point out that somebody's income must be $190,000, not $150,000, to have a $70K tax bill.

So, are you an accountant?

There may be an argument for dividends to be taxed at somewhat lower rates, but not capital gains. If someone buys a piece of land for $1M and sells it 10 years later for $2M, there is no prior amount of tax paid to take into consideration.

Who are we kidding here? If you want to keep more after-tax income, take it as a dividend. All of my self-employed peers organize themselves as corporations for this reason.

The big deal is that once someone has "made it" and doesn't have to depend on salaried income, they pay half the tax rates that apply to working slobs - forever.

I guess it depends on whether having children is something that we, as a country, want to support or not.

If we don't, then it makes sense to not take family status and number of dependents into consideration, perhaps even levy a surcharge on families that have more children.

If we do, then it makes sense to recognize that the families that create the kids need to use a portion of their income to feed, clothe and shelter them - legitimate expenses in the 'business' of raising kids.

You can't have it both ways. Currently, Canada is one of 25 out of 32 OECD countries that does take family status into consideration for tax/benefit purposes.

The reality is that MOST families can't pay for their own kids without public services and tax breaks.

It's very difficult for working families to have more than 1 or 2 kids while the social underclass produce them by the truckload. Regardless of how you want to treat working folk - who are in the best position to produce well-adjusted, productive citizens - you are still going to pay for all the kids from those who've never had a job in their life.

I think people should worry less about the enormous sum of $200 or so per month that we receive in CCTB payments as tax relief for our 5 kids thanks to all the claw-backs, and more about the $2,000-$3,000 per month that somebody who maybe never even had a job and decided to have 6-8 kids that the government transfers from the "less needy" to the "more needy".

What does my occupation matter?

As for land? Well, technically, if it is raw land then we are talking business income and not capital treatment but few people know the details of how to maintain capital treatment, if it is possible, better than a tax accountant or tax lawyer.

As for only taking dividends - there are pro's and con's to everything. No salary from your small business corporation then say goodbye to CPP (ok, this is actually a pro).

But it can limit one's RRSP room. RRSP's defer income just like a small business corporation can (once again the pro's and con's have to be weighed).

We could go on all day. The fact remains that those who make more pay more. No, maybe not relative to income but in absolute dollar terms they do.

I have little problem with the tax system as it currently treats people. The CTB is clawed back in order to give more money to people who earn less money. That is income redistribution.

My wife and I pay taxes and don't have kids drawing tens of thousands of dollars each year from the state - it is clear that that is redistribution of our income to those who have children.

Families already get at least their fair share of benefits.

But you want to give them more.

Not only must we pay the $7,500 per kid for schooling and the thousands more for other services. No, now you want special tax breaks for you because you have decided to have children.

Yeah, that's "fair." Not only does your family extract more government expenditures but you want the government to reduce it's revenue by reducing your taxes at the expense of the "rich."

Oh, and at the same time you want to tax the "rich" (whatever that means) to the point that they would leave Canada poorer than had we let them stay.

Sure, lets tax corporations and dividends and capital gains the same as salary or interest. Then let's see just what type of opportunities your kids will have in an economy that penalizes investment and encourages double taxation at the expense of tax integration.

Oh, and don't give me that nonsense about people not having jobs and having kids to get tax transfers - a little hypocritical for you to claim that takes place to a large degree when that is exactly what you are asking people like me to do for you.

Just because you may have a job does not entitle you tax breaks and public expenditures up the yin yang.

[Pat Coghlan]

My wife and I pay taxes and don't have kids drawing tens of thousands of dollars each year from the state - it is clear that that is redistribution of our income to those who have children.

You got it.

If you live in this country and don't have kids, you are quite right to question "what the hell am I getting for my taxes"?

[Jerry J. Fortin]

Tax this, tax that, tax us to death. The government lives out of our pockets. Any reductions are a threat to their existence. Don't expect the governments to reduce their taxes. Any reduction a human sees is off set by an increase elsewhere.

If citizens want real tax reductions they need to reduce the expense of government first. What we should be asking is where can we make substantial cuts to achieve this. There is another alternative, its called a consumption tax.

[Renegade]

I guess it depends on whether having children is something that we, as a country, want to support or not.

If we don't, then it makes sense to not take family status and number of dependents into consideration, perhaps even levy a surcharge on families that have more children.

If we do, then it makes sense to recognize that the families that create the kids need to use a portion of their income to feed, clothe and shelter them - legitimate expenses in the 'business' of raising kids.

You will not get unanimity of opinion over this. Clearly those who have kids will have an incentive to have a self-serving opinion and if they have the numbers they can force others to support their kids. While it may be democracy it isn't necessarily "fair".

The reality is that MOST families can't pay for their own kids without public services and tax breaks.

Then they should be having those kids the can't pay for. IMO the solution is not to provide more incentives to have kids they can't afford.

If that means they have more kids, so be it.

If you live in this country and don't have kids, you are quite right to question "what the hell am I getting for my taxes"?

So what the hell exactly are they getting for their taxes? Why would they be inclined to support your proposal which primarily benefits the married many of whom have kids?

Edited February 11, 2008 by Renegade

[Pliny]

You will not get unanimity of opinion over this. Clearly those who have kids will have an incentive to have a self-serving opinion and if they have the numbers they can force others to support their kids. While it may be democracy it isn't necessarily "fair".

It isn't fair. Government, as the sole agency imbued by society to legally use force or designate the use of force, it

must not cloud it's vision of justice and fairness. It cannot offer privilege to one group over another. It cannot without losing a sense of justice legislate inequality in the taxation of any individual. Is there any doubt as to why politicians have no sense of justice and criminals are given consideration over the honest citizen.

I am not condemning judgment in my advocacy of equal treatment under the law. Judgment and mercy must rest with the courts and law must be interpreted and applied to every case on it's own merits but the law must be clear in it's intent of equality and fairness.

The indoctrination of the citizenry to be caring and sharing and considerate of social responsibility is not that much of a problem but the blind acceptance of that without judgment is plain foolishness. Do we remain caring and sharing in all instances. Do we never talk to strangers -ever? Where has judgment gone? Can we not assess whether caring and sharing is appropriate or must we depend upon the determination of authority to tell us who we should care about and share with or talk to even though they have similar indoctrinating principles put upon them and consequently no ability to determine or judge this anyway.

[Pliny]

Tax this, tax that, tax us to death. The government lives out of our pockets. Any reductions are a threat to their existence. Don't expect the governments to reduce their taxes. Any reduction a human sees is off set by an increase elsewhere.

If citizens want real tax reductions they need to reduce the expense of government first. What we should be asking is where can we make substantial cuts to achieve this. There is another alternative, its called a consumption tax.

A consumption tax would, in my opinion, be fairer than a graduated income tax at least.

As long as people are demanding that government do something about anything the expense of government will never be reduced. Special interest groups and lobbyists seek out government to make special consideration for their interests, especially at the Federal level. As good intentioned as those special interests may be most are personal concerns and/or are ideologically driven.

[Pat Coghlan]

So what the hell exactly are they getting for their taxes? Why would they be inclined to support your proposal which primarily benefits the married many of whom have kids?

They're not getting much. Screwed perhaps.

What aspect of my proposal (just 2 tax rates, exemptions for dependents) *would* childless couples support?

Keep in mind that except for about 5% of families, most cannot pay for their own kids without services and tax breaks and (I'm estimating) at least 80% of people have kids at some point in their lives.

What's the best that the other 20% can hope for, realistically?

[Renegade]

What aspect of my proposal (just 2 tax rates, exemptions for dependents) *would* childless couples support?

I wasn't talking about your 2 tax rate, dependant-exemption proposal. I was talking about your proposal that income-splitting for employment income be added to the existing tax structure.

It is not just childless couples support is needed from. Any taxpayer who does not have kids (such as singles), in addition to childless couples, if they looked at the implications would simply a further shift of the tax burden onto themselves, from a part of the population which is already receiving substantial support.

Keep in mind that except for about 5% of families, most cannot pay for their own kids without services and tax breaks and (I'm estimating) at least 80% of people have kids at some point in their lives.

I'd like to understand where you get these numbers (ie the 5%) and what this specificly means. Does that mean that only 5% can afford basic feeding, clothing, medical, and shelter or does it mean that what they "need" to pay for is a large house in the suburbs, one or more cars, and assorted recreation?

Somewhat what a person can afford, is a matter of standard of living they expect to live. If they lower their expectation on the standard of living, they can afford more. Really it is the unwillingness of many to accept that they should lower their expectations combined with ignorance on the true cost of having a kid, which causes many to lobby for state aid for services which they themselves should be financially responsible for.

What's the best that the other 20% can hope for, realistically?

The minority which are getting screwed and know it, should expect that any proposed changes to the tax system should not further shift the tax burden on to them and they should not support any that do. Alas I think the tax system is so complicated that most are getting screwed and don't even know it, so the simple test for whether they support a tax change lies with the answer to the question "What's in it for me?"

[Pat Coghlan]

I wasn't talking about your 2 tax rate, dependant-exemption proposal. I was talking about your proposal that income-splitting for employment income be added to the existing tax structure.

It's already added...for pensioners (pension-splitting). I expect there will be more push for this once people become familiar with the concept of all couples with the same total income having the same tax liability.

It is not just childless couples support is needed from. Any taxpayer who does not have kids (such as singles), in addition to childless couples, if they looked at the implications would simply a further shift of the tax burden onto themselves, from a part of the population which is already receiving substantial support.

In the US, the tax brackets for joint filers are 175% as wide as for singles, while they are 200% as wide in Canada for pensioners. If I were a single taxpayer in Canada, I would view the US system as being much fairer to singles.

I'd like to understand where you get these numbers (ie the 5%) and what this specificly means. Does that mean that only 5% can afford basic feeding, clothing, medical, and shelter or does it mean that what they "need" to pay for is a large house in the suburbs, one or more cars, and assorted recreation?

Well how many families do you know that could pay for daycare without a full deduction, pay school costs, clothing, food, medical bills etc. My point is that while a wage earner can cover costs for him/herself, few families foot the full bill for any of these costs for their children. You would need a six-figure income to have a hope of doing it.

Somewhat what a person can afford, is a matter of standard of living they expect to live. If they lower their expectation on the standard of living, they can afford more. Really it is the unwillingness of many to accept that they should lower their expectations combined with ignorance on the true cost of having a kid, which causes many to lobby for state aid for services which they themselves should be financially responsible for.

The minority which are getting screwed and know it, should expect that any proposed changes to the tax system should not further shift the tax burden on to them and they should not support any that do. Alas I think the tax system is so complicated that most are getting screwed and don't even know it, so the simple test for whether they support a tax change lies with the answer to the question "What's in it for me?"

I guess the real question is, are we willing to accept hard limits on services etc. that we can expect? What do you do with the class of people that have no hope of supporting themselves, yet having multiple children?

Perhaps we're the proverbial frog in a pot of water being heated.

[Renegade]

It's already added...for pensioners (pension-splitting). I expect there will be more push for this once people become familiar with the concept of all couples with the same total income having the same tax liability.

In the US, the tax brackets for joint filers are 175% as wide as for singles, while they are 200% as wide in Canada for pensioners. If I were a single taxpayer in Canada, I would view the US system as being much fairer to singles.

Right now the favouritism is only restricted to pesioners and only those who have a significantly uneven distribution of income. Why would single people want to support that inequiity to the rest of the revenue base.

If you look at incrementally, the basic cost of living for a single does not hugely increase once that single becomes a couple. They achieve efficiencies of scale. Usually their is no or little additional housing cost, some incremental food and clothing costs but nowhere near 75% addiitional of the cost a single person incurs, so why would a single person support a tax bracket or deduction which is 200% as wide or even 175% as wide?

Well how many families do you know that could pay for daycare without a full deduction, pay school costs, clothing, food, medical bills etc. My point is that while a wage earner can cover costs for him/herself, few families foot the full bill for any of these costs for their children. You would need a six-figure income to have a hope of doing it.

Very few, mostly because they don't have to. If they had to they would likely have have to give up that 3 bedroom house in the suburbs, and the SUV and vacations. Gasp, they might even have to decide to only have one kid because that is all they can afford. In essence they would be forced to make the necessary tradeoff between lifestyle and their desire to have kids.

In addition, if they were truly paying their own cost for school, food, medical bills, etc, their overally tax burden would be significantly lower so they would have greater available income to pay for those costs.

I guess the real question is, are we willing to accept hard limits on services etc. that we can expect?

We already do, it is simply done by stealth. For example long wait times in medical care is a way of rationing medical service and imposing a limit. It is just not explicitly called out. IMV it would be more honest to simply impose limits on what was spent.

What do you do with the class of people that have no hope of supporting themselves, yet having multiple children?

I suppose we can focus our efforts on how to prevent them, or disincent them from having kids. I'm not sure how heavy-handed or coercive the state would need to be to enforce this. IMV it is an injustice done to the child for a parent who is incapable of supporting their child to have one. A good question is would we want to use criminal law to enforce this? Would we want to go so far as to sterilize an individual who was having kids they couldn't support to prevent them from having more?

[Pat Coghlan]

Right now the favouritism is only restricted to pesioners and only those who have a significantly uneven distribution of income. Why would single people want to support that inequiity to the rest of the revenue base.

If you look at incrementally, the basic cost of living for a single does not hugely increase once that single becomes a couple. They achieve efficiencies of scale. Usually their is no or little additional housing cost, some incremental food and clothing costs but nowhere near 75% addiitional of the cost a single person incurs, so why would a single person support a tax bracket or deduction which is 200% as wide or even 175% as wide?

A tax system which treats everyone as a single person will never be on the table, IMHO.

If it were, would those same single who are opposed to deductions for dependents, income-splitting etc. also be opposed to allow a married person's status to be completely ignored by the tax system, including allowing stay-at-home spouses apply for welfare, a full 50% of (gasp) benefit payments based solely on his/her own income?

If my wife could apply for half the $8K-$10K in benefits that are potentially available for the number of kids that we have, she might decide to quit her part-time job and stay home. Would you be in favour of that, or do you simply want to be able to use a person's marital status to deny them benefit eligibility (i.e. treat as a unit) but not treat them as a unit for tax liability?

You can't have it both ways.

Very few, mostly because they don't have to. If they had to they would likely have have to give up that 3 bedroom house in the suburbs, and the SUV and vacations. Gasp, they might even have to decide to only have one kid because that is all they can afford. In essence they would be forced to make the necessary tradeoff between lifestyle and their desire to have kids.

If you're going to take that approach, you have to find a way to stop undesirable behaviour - like people having lots of children. You can't just take benefits away from people out there working, and offer lots of benefits to the "bums".

[Renegade]

A tax system which treats everyone as a single person will never be on the table, IMHO.

If it were, would those same single who are opposed to deductions for dependents, income-splitting etc. also be opposed to allow a married person's status to be completely ignored by the tax system, including allowing stay-at-home spouses apply for welfare, a full 50% of (gasp) benefit payments based solely on his/her own income?

If my wife could apply for half the $8K-$10K in benefits that are potentially available for the number of kids that we have, she might decide to quit her part-time job and stay home. Would you be in favour of that, or do you simply want to be able to use a person's marital status to deny them benefit eligibility (i.e. treat as a unit) but not treat them as a unit for tax liability?

You can't have it both ways.

Yes I agree, as I said before, there should be consistancy between how income is guaged when benefits are caclulated and when taxes are assessed. If that means your wife applies for benefits based upon soley her income. Fine, I'm ok to agree to that.

However I beleive that when you accept benefits from the state, you are also accepting a level of state itervention in your life. I believe it is perfectly reasonable for the state to impose restrictions on people with children the could not otherwise afford, to prevent them from having more children. If you are comfortable with state benefits, you should also be willng to accept state intervention.

There is something else you need to consider. If you want to consider that benefits are calculated the same way as for two separate parents, in the case of separate benefits the non-custodial parent is expected to provide child-support payments to the custodial parent. The payments are neither deductable by the payor nor considered income for income tax purposes by the recepient, however, support payments are factored in for welfare payments.

Further, I believe assets are also considered for the purposes of welfare and benefits payments. If you wife is considere to own 50% of the family assets, some of those assets may need to be sold to qualify for welfare payments.

If you're going to take that approach, you have to find a way to stop undesirable behaviour - like people having lots of children. You can't just take benefits away from people out there working, and offer lots of benefits to the "bums".

Yes there needs to be a way to stop undesirable behavior. People having kids they can't afford to bring up is undesirable behaviour. As far as benefits are concerned, personally I'd minimize them to everyone, working and "bums". With the tax savings, the working can buy their own "benefits".

Edited February 11, 2008 by Renegade

[Pat Coghlan]

Yes I agree, as I said before, there should be consistancy between how income is guaged when benefits are caclulated and when taxes are assessed. If that means your wife applies for benefits based upon soley her income. Fine, I'm ok to agree to that.

Seems so clear (to me) to hear someone else say this. Either treat people as part of an economic unit (family) for benefit/tax purposes, or as individuals for same.

Don't treat them as an economic unit in order to reduce benefits, and as individuals to maximize tax liability.

I think I'll put this in a letter to our good friend the finance minister.

However I beleive that when you accept benefits from the state, you are also accepting a level of state itervention in your life. I believe it is perfectly reasonable for the state to impose restrictions on people with children the could not otherwise afford, to prevent them from having more children. If you are comfortable with state benefits, you should also be willng to accept state intervention.

That's fine too, as long as the ground rules are front and center. The government should answer the question of whether we want to encourage families having children or not.

There is something else you need to consider. If you want to consider that benefits are calculated the same way as for two separate parents, in the case of separate benefits the non-custodial parent is expected to provide child-support payments to the custodial parent. The payments are neither deductable by the payor nor considered income for income tax purposes by the recepient, however, support payments are factored in for welfare payments.

By the time we get to this level of detail, the cork will have long been off the bottle on the issue. Fine with me.

Further, I believe assets are also considered for the purposes of welfare and benefits payments. If you wife is considere to own 50% of the family assets, some of those assets may need to be sold to qualify for welfare payments.

Yes there needs to be a way to stop undesirable behavior. People having kids they can't afford to bring up is undesirable behaviour. As far as benefits are concerned, personally I'd minimize them to everyone, working and "bums". With the tax savings, the working can buy their own "benefits".

See above.

I don't honestly think things would get carried to the point of one spouse collecting welfare if the other spouse is employed, but I'd be very happy to see the debate happen.

I (and probably many others) would be ecstatic to see *anything* happen. The current system is a farce.

[Jerry J. Fortin]

The government of Canada could start to reduce the level of taxation for families. They are in the greatest need, and this also serves the purpose of increasing the standard of living for the lowest income brackets and works toward eliminating childhood poverty. For openers, use the poverty line for individuals as a baseline computation for family members, and make that the basic deduction. This will not be cheap to do, but it must be done. The way to offset the reduced revenue stream is to close loopholes for upper brackets and business. The first thing to go should be entertainment expenses and political contributions for business.

If the government wants to be seen acting in the interests of citizens they could start with that.

[Hydraboss]

That's right...screw the rich and give it to the poor. What a bunch of bullshit.

Thanks Jerry "Robin Hood" Fortin

[Renegade]

The government of Canada could start to reduce the level of taxation for families.

Why? Families in general already get the some of the largest support at the cost to everyone else.

They are in the greatest need, and this also serves the purpose of increasing the standard of living for the lowest income brackets and works toward eliminating childhood poverty.

If your goal is to stop childhood poverty, the most effective way of doing so is to prevent people in poverty from having children. I think that we can agree that it woud be irresponsible for someone to get a pet they couldn't afford to feed or care for. If we would give such consideration to pets, why wouldn't we give it to kids?

BTW, IMV money is not the only consideraion for someone to be a "qualified" parent. Mental health, emotional stability, and a willingness to undertake the responsibilites of parenthood are among the other necessary qualiites for someone to be consider a responsile parent.

For openers, use the poverty line for individuals as a baseline computation for family members, and make that the basic deduction. This will not be cheap to do, but it must be done.

Which poverty line are you refering to? If you mean "Low-Income Cut-Off", that is a relative measuremnt IOW, it doesn't measure people being"poor" it measures people being poorer than the rest of the population. Such a measurement or the purposes of wealth redistribution is nonsense.

You say "it must be done.". Why? There is a much better way for the poorer to become richer without wealth redistribution: Work harder, longer, or at a more lucrative profession. I can tell you that there are many trades which suffer from a lack of labour.

The way to offset the reduced revenue stream is to close loopholes for upper brackets and business. The first thing to go should be entertainment expenses and political contributions for business.

Jerry, you have a very narrow view of what can be done. Certainly corporate welfare and loopholes can be eliminated, but those are a function of our disfunctional tax system. The more complex a system, and the more deuctions allowed, the more loopholes will exist Nothing short of a complete overhaul will be needed. Virtually all deductions, exemptions and credits for EVERYONE should be eliminated. Since you believe that the rich escape taxes through the use of loopholes, you should be a proponent of a flat tax, because it will be harder for people to use loopholes to avoid taxes.

If the government wants to be seen acting in the interests of citizens they could start with that.

Hmm, you seem to advocate that they only act for the best interest of a subset of citizens (ie those with families and low income).

[Pliny]

Either treat people as part of an economic unit (family) for benefit/tax purposes, or as individuals for same.

Don't treat them as an economic unit in order to reduce benefits, and as individuals to maximize tax liability.

I think I'll put this in a letter to our good friend the finance minister.

What's the matter, Pat? Isn't that "fair"?

Edited February 12, 2008 by Pliny

[Pat Coghlan]

What's the matter, Pat? Isn't that "fair"?

Does inconsistency = fair?

Whether they want to be fair or unfair, they at least need to be consistent.

[Jerry J. Fortin]

You need to understand that I think income taxes should be eliminated altogether. Now after having said that, the existing system of taxation could at least be made more equitable for all concerned.

Lets look at reducing loopholes for a minute. Those loopholes are not available to everyone because they are very carefully designed to be income specific. In other words the more you make the greater your deductions are. Do you agree or disagree with that statement?

Why are not the income taxes applied equally to all concerned. A business can have a car to use for work and that business gets to write off all of the expenses for it from their gross incomes. A citizen that needs a car to get to work cannot do the same thing, why is that?

A citizen can take a potential employer to lunch in an attempt to gain an employment contract, but they can't write it off their taxes. That same employer the next week can invite the potential employee to lunch to tell them he got the job and then the employer can write off the expense. Why is that?

A business can build a house to use as an office and have employees work out of that office. They can write off that office as an expense. Citizens can't write off their mortgages. Why is that?

The system is skewed toward business, any fool understands that. My point isn't that we need the rich or business sections to pay for the poor, but instead we level the playing field to make what is good for the goose good for the gander. The current approach is discrimatory to say the least.

[msj]

You need to understand that I think income taxes should be eliminated altogether. Now after having said that, the existing system of taxation could at least be made more equitable for all concerned.

Lets look at reducing loopholes for a minute. Those loopholes are not available to everyone because they are very carefully designed to be income specific. In other words the more you make the greater your deductions are. Do you agree or disagree with that statement?

Well, given that one's tax rate is higher as one's income goes up then it only makes sense that the tax saving from the deduction would be greater.

You do realize that spending money in order to earn money still leads one to be out of pocket even after the tax savings?

Why are not the income taxes applied equally to all concerned. A business can have a car to use for work and that business gets to write off all of the expenses for it from their gross incomes. A citizen that needs a car to get to work cannot do the same thing, why is that?

Business owners are constantly audited for personal usage of their vehicles.

They, too, are not allowed to deduct the usage of their vehicle when they drive it from home to the office and back home again.

Other business uses - from the office to a client for example, are deductible and, of course, if a person is an employee then he/she should get his/her employer to fill out the proper form so that he/she can deduct allowable employment expenses (which includes allowable vehicle expenses).

A citizen can take a potential employer to lunch in an attempt to gain an employment contract, but they can't write it off their taxes. That same employer the next week can invite the potential employee to lunch to tell them he got the job and then the employer can write off the expense. Why is that?

Not a good example - the employer would only be allowed to deduct 50% of the meal and the meal has to be considered "reasonable" per section 67.

Not exactly a lucrative write off.

Of course, in the real world if any potential employee offered to take me out to lunch I probably would say no and quickly strike that person off my list of potential candidates. But then, I have never liked suck ups.

A business can build a house to use as an office and have employees work out of that office. They can write off that office as an expense. Citizens can't write off their mortgages. Why is that?

Of course, when the business sells the building then it has to pay tax on any capital gain and on any recapture (recapture occurs when the business depreciates the cost of the building and then sells the building for an amount that is more than the undepreciated balance - the difference is taxed as fully taxable income).

A person's principal residence? Tax free.

A person's second home that is rented out? Well, then the building can be depreciated and the loan interest deducted since the person has purchased the home to earn income. Recapture could occur just like to the business above.

Note that land is not depreciable and, therefore, is not written off.

The system is skewed toward business, any fool understands that. My point isn't that we need the rich or business sections to pay for the poor, but instead we level the playing field to make what is good for the goose good for the gander. The current approach is discrimatory to say the least.

Businesses write off expenses they incur in order to earn business income.

As a business person I can assure you that I would rather not have the deduction (while noting that good business people incur expenses in order to earn more income rather than incurring the expense for the sake of saving taxes).

If I can earn $100 with no write offs then I am certainly better off than if I have to spend $30 (on, say, employing someone) in order to earn that $100 in the first place.

Even with a tax rate of 40% I would be better off if I wasn't forced to incur the expense:

Earn $100 with no expenditure needed = $60 net in my pocket.

Earn $100 revenue less $30 cost = $70 net income before taxes. Afrer tax this is $42.00 into my pocket.

Gee, what a deal! How can I find a way to spend more of my revenue on deductible expenses! Look, I get to save taxes by doing this! [/sarcasm]

To be fair, some business people are aggressive and get away with including personal expenses into their businesses. But that is called tax evasion.

Generally, most businesses do account for personal use and/or get audited at some point and are hammered with non-deductible penalties and interest.

Edited February 12, 2008 by msj

[Renegade]

Lets look at reducing loopholes for a minute. Those loopholes are not available to everyone because they are very carefully designed to be income specific. In other words the more you make the greater your deductions are. Do you agree or disagree with that statement?

This is simplistic at best. Many deductions depend upon the kind of income you generate (for example investment expenses are deductable against investment income). Some deductions are only available to those who are qualified. In addition, for low incomes say $10,000, even the basic exemption shelters virtually all of that income.

Why are not the income taxes applied equally to all concerned. A business can have a car to use for work and that business gets to write off all of the expenses for it from their gross incomes. A citizen that needs a car to get to work cannot do the same thing, why is that?

A citizen can take a potential employer to lunch in an attempt to gain an employment contract, but they can't write it off their taxes. That same employer the next week can invite the potential employee to lunch to tell them he got the job and then the employer can write off the expense. Why is that?

A business can build a house to use as an office and have employees work out of that office. They can write off that office as an expense. Citizens can't write off their mortgages. Why is that?

The system is skewed toward business, any fool understands that.

Here I agree with you. Business income is taxed on profit yet personal income is taxed based upon revenue. This difference allows business and self-employed to shelter much of their income. IMV they should be taxed on revenue or that same consideration to deduct expenses should be given to indivduals.

My point isn't that we need the rich or business sections to pay for the poor, but instead we level the playing field to make what is good for the goose good for the gander. The current approach is discrimatory to say the least.

All of your examples were of business discrepancies, but suddenly you slipped "rich" in the mix. Are you assuming that all rich are self-employed. Are you assuming all self-employed are rich? What of the rich who have earned their riches through employment income?

So given what you have said, I ask again, would you support a flat tax without any deductions?

Also since you want uniform rules to apply to business and individuals, would you want individuals to incur the same other obligations as with business?

Edited February 12, 2008 by Renegade