Federal Tax Reform: A Serious CTF Proposal

[Pat Coghlan]

By "social unrest" I assume you mean violence or the threat of violence. IOW, those who have earned are forced to redistribute their earnings under threat of violence. In English we call that "extortion".

Marie Antoinette probably thought so also, but you know what happened to her.

Wealth redistribution won't go away. I'm sure you're not naive enough to think that it will. The best everyone can hope for is that it's done in a fair and sustainable manner.

[Pliny]

Marie Antoinette probably thought so also, but you know what happened to her.

Wealth redistribution won't go away. I'm sure you're not naive enough to think that it will. The best everyone can hope for is that it's done in a fair and sustainable manner.

Basically, currency is getting redistributed. We all know wealth is not currency or we could all be rich by just printing up some cash. What is wealth, Pat? What are they redistributing if not wealth? Now if they were taking people's land away and giving it to someone else I would definitely call that wealth redistribution or if they took half the groceries I bought and gave them to someone else and kept part for themselves I would call that wealth redistribution.

Would that be theft, Pat? Would people feel insecure with their government doing that?

Abstractly, people don't miss a few dollars here and there or gladly give up a portion of their currency to what they believe a good cause. It doesn't represent anything to them until they wish to trade it. It is thus very easy to give up in the abstract and call it taxes. When it is actually traded for real wealth, something of value, then it is easier to see taxation is nothing more than extortion.

A five dollar bill in your pocket used to mean that the bank owed you five dollars, and not just another IOU, it owed you a certain amount of wealth, in gold or silver usually. Today, that five dollar bill is what is owed back to the Bank of Canada. They lent it out to the government who distributes it. Since by fiat you must accept it you owe the Bank of Canada everything in your wallet and your bank account. Essentially the Bank of Canada owns all the currency and since it owns all the currency it owns everything. Nice economic sleight of hand.

So, you are incorrect, as long as we have a fiat currency and all wealth essentially remains in the hands of the Bank of Canada we will have no redistribution of wealth. When people actually hold wealth instead of just owe it to the Bank then redistribution will be seen for what it actually is - theft.

The system has been this way for a long time, about eighty years.

I must qualify the above by saying it hasn't all been bad. The original intent of the economic theory accepted by governments was to produce prosperity for all and that was how it was presented. The fact that it concentrated real wealth into the hands of a few was never really presented by bankers to governments for their consideration. Governments liked the idea because it gave them economic tools to manipulate the economy.

More power and more control. Socialism was a very accepted concept at the time of this economic switch and people had trust in their national governments to do the right thing. The great depression, a result of unadmitted poor bank practices and poor government economic policies, got those banks and governments scrambling to do something to correct the bungling and disaster they had wrought. The American idea of the central bank was the solution in Canada. The solution in America was to move toward abandoning the gold standard, essentially making it illegal for Americans to own gold. All gold on deposit in America was confiscated basically. The catastrophic depression coupled with a political climate favourable to Statism and socialism made it palatable to the people and because we were, as nations, pretty much in the same boat, it seemed a plausible move by governments to restore order and prosperity.

This is probably more information than is necessary to defining wealth and understanding wealth redistribution so I won't ramble on in this direction. A lot of the things I have said will require more understanding than my words alone for them to be accepted and believed by others.

The point remains that forcibly taking wealth from someone without their consent or agreement for your own purposes is theft. Acquiring another's property by intimidation or coercion is extortion. If you call it taxation it is just another name. You can say by living here I accept and consent to part with a portion of my "wealth" so it is not theft. Well, if I can't live here without that agreement then the point is moot just like the argument that wealth is being redistributed.

[Renegade]

The best everyone can hope for is that it's done in a fair and sustainable manner.

So, Pat, you think that extortion can be done in a "fair and sustainable manner"?

[Pat Coghlan]

Basically, currency is getting redistributed. We all know wealth is not currency or we could all be rich by just printing up some cash. What is wealth, Pat? What are they redistributing if not wealth? Now if they were taking people's land away and giving it to someone else I would definitely call that wealth redistribution or if they took half the groceries I bought and gave them to someone else and kept part for themselves I would call that wealth redistribution.

Would that be theft, Pat? Would people feel insecure with their government doing that?

It might feel more like it, but then if you received you pay in cash FIRST and had the government ask you to hand over 35% of it in cash, that would also feel more like it.

Call it what you want, but it's the system we have. As I said, the best we can hope for is that it's not only the income of the middle-class that gets redistributed.

So, you are incorrect, as long as we have a fiat currency and all wealth essentially remains in the hands of the Bank of Canada we will have no redistribution of wealth. When people actually hold wealth instead of just owe it to the Bank then redistribution will be seen for what it actually is - theft.

You don't "owe" the bills to anyone. They are supposed to represent a measure of economic value (labour, goods etc.). You can trade them any time for some precious metals or other real goods.

The problem - especially in the US - is that those dollars don't represent very much any more.

The point remains that forcibly taking wealth from someone without their consent or agreement for your own purposes is theft. Acquiring another's property by intimidation or coercion is extortion. If you call it taxation it is just another name. You can say by living here I accept and consent to part with a portion of my "wealth" so it is not theft. Well, if I can't live here without that agreement then the point is moot just like the argument that wealth is being redistributed.

Again, the "system" isn't going to go away, but if they're going to confiscate income/wealth they should not collect it just from the middle class.

Under Bob Rae tax rates on income reached 56% in Ontario. Care to wager a guess what the top tax rate on dividends and capital gains was?

This is the battle I'm fighting (middle-class bearing the brunt of taxation), not the fact that we have taxation. We are ALWAYS going to have taxation.

[Pat Coghlan]

So, Pat, you think that extortion can be done in a "fair and sustainable manner"?

Yes. Similar rates of tax on ALL forms of income. Just 2 income tax brackets so people can more readily see how much of the next dollar they keep. Use family income as the base for taxation, just as it is used as the base for benefit eligibility.

I recall a manager I had years ago who was well-educated and very intelligent, who commented on his T4 how tax rates are quite reasonable, as only about 35% of his income went to taxes. He had no clue that 56% of the last dollar he earned went to taxes. This is what happens with a myriad of tax brackets, deductions, credits etc.

As per the title of this thread, we need to reform the system so it's more in-the-face of taxpayers. For me, this is the battleground. Make it easier to stand with objectives that are logical and fair.

[Hydraboss]

Yes. Similar rates of tax on ALL forms of income. Just 2 income tax brackets so people can more readily see how much of the next dollar they keep. Use family income as the base for taxation, just as it is used as the base for benefit eligibility.

If your only requirement was two tax brackets, I could see there being some hope of reconciliation between us. Say, for example, 40% of the first $100,000 (with a non-taxable exemption of $20,000) and 30% of the balance of your income (all income, including investments, etc). No deductions for anything. Not for non-working spouse, not for kids, not for being ugly, retired, retarded...nothing.

Then, and only then, could I see it working to the satisfaction of all involved.

Whatcha think, Pat?

[capricorn]

As per the title of this thread, we need to reform the system so it's more in-the-face of taxpayers. For me, this is the battleground. Make it easier to stand with objectives that are logical and fair.

Excellent point. The problem with our present taxation system is that taxes are deducted from income at source. If every taxpayer had to write one cheque per year for federal and provincial taxes, the s*it would hit the fan. It's easier to accept paying $1,000 per month out of your paycheque than paying $12,000 in a lump sum annually. Many self employed Canadians do just that, pay one large amount once a year. It must be infuriating. It's all about perception and in the eyes of the taxpayer.

[Hydraboss]

You've got that one right! My wife and I pay in excess of $70,000 in taxes each and every year, and if I had to write one cheque for that amount I'd be pissed. Wait a minute...I am pissed.

This would probably explain why we are actively applying to the US for visa's. I'm tired of paying for Pat's kids and all the lowlife's that "can't afford food and shelter" but can buy brand name smokes and Canadian beer. The minute we're approved (and we will be), Canada will lose a professional manager and a pediatric intensive care nurse. Not that anyone will care.

Anyone wonder why the best and the brightest (read: the most able to earn good livings) go to the States? Taxes. Plain and simple, taxes.

[capricorn]

The minute we're approved (and we will be), Canada will lose a professional manager and a pediatric intensive care nurse. Not that anyone will care.

I would care, big time.

[Hydraboss]

Well, Cap, thanks for that. You're the first (and only) to say it.

My leaving will not leave a very big hole in society. It may take ten to fifteen years, but someone will be trained (eventually) to replace me.

My wife, however, is a different story. She is a nurse specialist in pediatric cardiology, NICU (neonatal intensive care), PICU (pediatric intensive care), and is currently AHN for an emergency unit. Most of our (her) close nursing friends (most have similar credentials) have already gone to the States. Pheonix and Dallas/Ft. Worth. The hard part for us is explaining to our kids (10 and 11) why they will have to leave their friends and schools.

So for those of you that think our tax system has no serious bearing on people's lives, and that we should just shut up and bear it, think about it the next time you take your kid into emerg and you get some new-grad nurse that couldn't find her ass with both hands. Ask your nurse how long she has had her license. When you start talking loudly in the waiting room about how the staff is useless and six hours is too long to wait "when I think about the amount of taxes I pay!", try to figure out why there are few qualified staff in that emergency room. It'll come to you eventually.

Even though the government of the day keeps repeating the mantra "there is no brain-drain to the US", I find it hard to buy when we are in the group that is leaving. Most of the couples we hung out with are gone.

Sorry to ramble on about our specific situation, as I know it has little to do with the topic. The fact is, the tax system in Canada is scaring off those of us that pay far more than our share so Pat can have kids. The point is this: If you want to have kids, they're your responsibility to pay for. I have no problem helping out as I see fit (and our donations to the Stollery Children's Hospital prove that), but I take offense at the mandatory theft of money we earned being given to those that have not earned it. Until the tax system is brought to some semblance of sense for those of us that earn our keep, Canada will continue to lose upper wage earners.

[capricorn]

The hard part for us is explaining to our kids (10 and 11) why they will have to leave their friends and schools.

IMO it would be even harder if they were further into their teens like 14 or 15. At 10-11 children are more adaptable to life changes. In addition, relocation to different countries adds to children's education. I think your kids will be just fine.

[Hydraboss]

That's what we're hoping.

On the other hand, there are going to be a bunch of families wondering why their welfare cheque didn't clear. Oh well, no one's perfect.

[Pliny]

That's what we're hoping.

On the other hand, there are going to be a bunch of families wondering why their welfare cheque didn't clear. Oh well, no one's perfect.

Better wait until after the next election to move. I don't know if you have heard speeches from Clinton and Obama but they sound much like Jack Layton. Pretty Scary. I think that McCain will end up POTUS to the consternation of both Democrats and Republicans.

[Hydraboss]

We're watching really carefully. The destination of choice is Pheonix, AZ, but that could change depending on Democrat policy. Even with their most left wing ideas though, they're not even close to socialist Canada. If we were really concerned, we could just move to Texas (ughh!) and pretty much ignore federal policies. God, I hope I don't have to move to Texas.

Edit:

McCain will probably be hiding his own Easter eggs by the time the election rolls around. Romney should have stayed. Damn.

Edited February 10, 2008 by Hydraboss

[capricorn]

I think that McCain will end up POTUS to the consternation of both Democrats and Republicans.

Pliny I hope you're right. McCain would be the best choice, in terms of Canada's interests.

[capricorn]

Edit:

McCain will probably be hiding his own Easter eggs by the time the election rolls around. Romney should have stayed. Damn.

I disagree. I think Romney would be a great VEEP. I'm wishing for a McCain/Romney ticket.

[Pliny]

Call it what you want, but it's the system we have. As I said, the best we can hope for is that it's not only the income of the middle-class that gets redistributed.

Okay. Then I wiall call it economic slavery.

You don't "owe" the bills to anyone. They are supposed to represent a measure of economic value (labour, goods etc.). You can trade them any time for some precious metals or other real goods.

The "bills" are owed to the Bank of Canada. They are "bills". They used to be owed by the bank to the depositor and now they are owed to the Central Bank as they are the only depositor.

You can trade those "bills" for anything you like and at any time as long as you continue to pay taxes and pay those bills back. When you don't pay those bills back they start taking your precious metals and other real goods and it is then that you realize they are breaching the security of your person and property.

I will not argue this point any further. It is a futile exercise so I have to argue it from a different point of view other than one that is totally incomprehensible to you and most people only because they refuse to look up the words like money, fiat currency, bill, currency, dollar, bond, contract, money substitutes, tokens, legal tender, etc.

Again, the "system" isn't going to go away, but if they're going to confiscate income/wealth they should not collect it just from the middle class.

Under Bob Rae tax rates on income reached 56% in Ontario. Care to wager a guess what the top tax rate on dividends and capital gains was?

This is the battle I'm fighting (middle-class bearing the brunt of taxation), not the fact that we have taxation. We are ALWAYS going to have taxation.

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.

[Pat Coghlan]

If your only requirement was two tax brackets, I could see there being some hope of reconciliation between us. Say, for example, 40% of the first $100,000 (with a non-taxable exemption of $20,000) and 30% of the balance of your income (all income, including investments, etc). No deductions for anything. Not for non-working spouse, not for kids, not for being ugly, retired, retarded...nothing.

Then, and only then, could I see it working to the satisfaction of all involved.

Whatcha think, Pat?

Something like that, except you have the tax rates reversed. The lower rate applies to the first portion (what I call non-discretionary income) and the higher rate applies to the rest (what I call the luxury portion).

I think the rates would be more like 15% and 30%, respectively.

[Pat Coghlan]

You've got that one right! My wife and I pay in excess of $70,000 in taxes each and every year, and if I had to write one cheque for that amount I'd be pissed. Wait a minute...I am pissed.

This would probably explain why we are actively applying to the US for visa's. I'm tired of paying for Pat's kids and all the lowlife's that "can't afford food and shelter" but can buy brand name smokes and Canadian beer. The minute we're approved (and we will be), Canada will lose a professional manager and a pediatric intensive care nurse. Not that anyone will care.

Anyone wonder why the best and the brightest (read: the most able to earn good livings) go to the States? Taxes. Plain and simple, taxes.

Careful though. There is going to be a democratic president. The Bush tax cuts are ending and the US dollar is going to plunge in value.

You will definitely benefit from a joint tax return and nominally will pay less in taxes ($10K less, maybe more).

However, you will also have to purchase a $1M home in a nice neighbourhood to get away from the crime and the guns.

You couldn't have picked a worse time to be setting up shop in the US.

[Renegade]

Yes. Similar rates of tax on ALL forms of income. Just 2 income tax brackets so people can more readily see how much of the next dollar they keep. Use family income as the base for taxation, just as it is used as the base for benefit eligibility.

I recall a manager I had years ago who was well-educated and very intelligent, who commented on his T4 how tax rates are quite reasonable, as only about 35% of his income went to taxes. He had no clue that 56% of the last dollar he earned went to taxes. This is what happens with a myriad of tax brackets, deductions, credits etc.

As per the title of this thread, we need to reform the system so it's more in-the-face of taxpayers. For me, this is the battleground. Make it easier to stand with objectives that are logical and fair.

Pat, I think we can agree on the objectives. I think where you and others (including myself) diverge is in the interpretation of the objectives. The fact that you think that extortion can ever be "fair" shows how much we diverge in our definition of "fair".

[Pat Coghlan]

Sorry to ramble on about our specific situation, as I know it has little to do with the topic. The fact is, the tax system in Canada is scaring off those of us that pay far more than our share so Pat can have kids. The point is this: If you want to have kids, they're your responsibility to pay for. I have no problem helping out as I see fit (and our donations to the Stollery Children's Hospital prove that), but I take offense at the mandatory theft of money we earned being given to those that have not earned it. Until the tax system is brought to some semblance of sense for those of us that earn our keep, Canada will continue to lose upper wage earners.

Your problem is, your income is in the form of wages. If you're paying $70K in taxes, your family income is in the neighbourhood of $150K. That puts you in the top 5% of income earners. I was in a similar situation prior to 2000 (one high income, stay-at-home wife). I too lamented how much better off we would be tax-wise in the US. The US is a great place for high income earners. Canada is a great place for REALLY high income earners...if that income comes in the form of dividends and capital gains. It's also a pretty fair place for families with two equivalent incomes.

I will tell you what I consider a very wise person told me: "learn to use Canada's tax rules to your advantage".

Slowly, this is what I am doing. My income came down (not by choice), my wife's income went up (entered the workforce). We have tax-free inheritances coming (more than $1, less than $1M). In other words, will will be doing more what rich people do - rely less on just salary income. Those in the middle class that have only their wages to rely on are going to continue to suffer. THEY (and I include myself in that group right now) had better push for a more equitable tax system because they're the ones whose pockets the government will pick.

[Pat Coghlan]

We're watching really carefully. The destination of choice is Pheonix, AZ, but that could change depending on Democrat policy. Even with their most left wing ideas though, they're not even close to socialist Canada. If we were really concerned, we could just move to Texas (ughh!) and pretty much ignore federal policies. God, I hope I don't have to move to Texas.

Have a listen to the following for info on trends in the US economic situation:

http://www.europac.net/radioshow_archives.asp

http://www.financialsense.com/fsn/main.html

On tap in US tax policy include things like:

• Removal of caps on social security
  
• Income tax increases
  
• Estate tax increases
  

When you add up the various taxes (fed/state/municipal), social security, health insurance etc. you may find that marginal rates are not that far off those found in Canada. However, for upper-income earners, I expect that the joint tax return and "real" exemptions for dependents will put thousands more in your pocket each year.

Things could get very ugly, though, for the US economy.

[msj]

Your problem is, your income is in the form of wages. If you're paying $70K in taxes, your family income is in the neighbourhood of $150K.

If you are in Ontario and single then you would pay $70,042 in taxes on $190,000 of gross wage income (just regular tax credits, no deductions).

If one was married and had a stay at home spouse then we are looking at ~$195,000 of gross wages to get to ~$70,000 of income tax.

Of course, if we are looking at two married people working and they each made $114,000 (total of $228,000 for the couple) then they would pay ~$70,000 in income tax.

These numbers are for 2007 which are more relevant to any present discussion on taxes than numbers from prior years.

Pat, you really need to update yourself on just what the latest marginal tax rates and tax brackets are because you are always off by a margin that may not be significant but is certainly material.

Edited February 10, 2008 by msj

[Pat Coghlan]

I will not argue this point any further. It is a futile exercise so I have to argue it from a different point of view other than one that is totally incomprehensible to you and most people only because they refuse to look up the words like money, fiat currency, bill, currency, dollar, bond, contract, money substitutes, tokens, legal tender, etc.

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.

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.

The wealthy get their income from capital gains and dividends. As a percentage of their income, they pay less than wage earners. An acquaintance of mine started a small company and sold it a few years later for a $30M profit, of which less than 25% of that went to taxes. In Canada, you have to have a very low salary to pay only 25% of it in taxes.

[Pat Coghlan]

If you are in Ontario and single then you would pay $70,042 in taxes on $190,000 of gross wage income (just regular tax credits, no deductions).

Pat, you really need to update yourself on just what the latest marginal tax rates and tax brackets are because you are always off by a margin that may not be significant but is certainly material.

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.