Which tax would you eliminate?

[Michael Hardner]

Where in anything I wrote does it say anything about cutting transfer payments to Ontario?

Well what exactly are you cutting ?

[Winnipegger]

Well what exactly are you cutting ?

All the spending increases since the Conservatives were elected. Would you like to help me create that list?

[Michael Hardner]

All the spending increases since the Conservatives were elected. Would you like to help me create that list?

I see. Then you would eliminate the GST once the debt is paid down ?

[KeyStone]

I would want to eliminate property tax.

Obviously, this would mean a shift in taxation incomes from federal and provincial to municipal.

I simply feel that once you have saved up and bought a home, you shouldn't have to worry about coming up with enough money to stay living there. That should be your home. Period. This exemption would only apply to the primary residence though.

Unfortunately, debt repayment isn't a big winner at the polls. Lots of people like it, but few will vote for it. What they will vote for is people spending money on programs or infrastructure that helps them directly, and cutting taxes.

[August1991]

Exports would be taxed based on type of export - in mind of the commercial value to keep the product within the country vs. exporting the product.

Imports would be tariffed based on disruption to local industry at 50% the profit margin

with an anti dumping level to to a surcharge = to the lowest sale value already in the country

- 1% value.

That would be insane.

This is the sort of response I usually get initially: fantasy land. It isn't fantasy land. I got the federal interest payment for 2005 from the federal budget, plugged in the figures to a mortgage payment function in an excel spread sheet. The result was 16 years to pay off the debt, if we started in January 2006.

And what interest rate did you use to make this calculation? A typical mortgage interest rate available now (say, 4.5%) or the rate that the federal government currently pays on its debt (say, 1.5%).

IOW, who should borrow: you and me individually, or the federal government?

-----

Winnipegger, while your idea to reduce the deficit is laudatory, the problem should not become a single-minded obsession, and government debt is nothing like homeowner. Government finance is part of macroeconomic policies that have broad effects on society.

Edited February 12, 2010 by August1991

[Winnipegger]

And what interest rate did you use to make this calculation? A typical mortgage interest rate available now (say, 4.5%) or the rate that the federal government currently pays on its debt (say, 1.5%).

IOW, who should borrow: you and me individually, or the federal government?

-----

Winnipegger, while your idea to reduce the deficit is laudatory, the problem should not become a single-minded obsession, and government debt is nothing like homeowner. Government finance is part of macroeconomic policies that have broad effects on society.

Interest rate was calculated by taking the federal debt and dividing by interest paid that year. The debt has many parts, each with a different interest rate and the government does not release those details to the public. This calculation gives the average that they do pay. By the way, it worked out to 7.082%. Considering mortgage interest today is lower, they must have some long-term debt from the Mulroney years when interest rates were much higher.

Last night I saw a panel on CPAC about finance. John Manley said one advantage they had in the 1990s was interest rates were falling while they were cutting government jobs, so the private sector could create jobs to higher the people they laid-off. He pointed out interest rates will go up from here, cutting government jobs while interest rates are rising will shrink the economy. If this does happen we will see a spiral like we saw in the 1980s. I also remember hearing an announcement by the US guy in charge of the reserve, he said he set the prime lending rate to less than 1%, I think it was 0.25%, so interest rates could not go any lower. He was trying to stimulate the economy by dropping interest rates, but you can't go below zero. So John Manley is right, interest rates will go up, they can't go down.

The economic problems in the U.S. are a prime example of what not to do. Most people don't realize where the problem started, because those to blame are covering it up. The US Congress altered banking laws to loosen up restrictions, specifically so US banks could lend more money to the US government. This was to fund the US federal debt. There was a concern that foreign concerns were holding too much of the US debt, giving them leverage to control the US. And since they had an insane deficit, they just needed more money. You saw the results, the junk mortgage crisis and the banking melt-down. There is also the problem that the economy just doesn't have enough money to lend to business, the US government has sucked too much up for it's government debt. In a free market economy lack of money would be offset by rising interest rates and shrinking economy, but the US government has been controlling interest rates to both stimulate the economy and keep interest they have to pay down. Adam Smith market laws don't apply when the US federal government artificially alters the rules for its own benefit.

Today Canada has a problem of foreigners buying up our companies. But we need investment capital; foreign investors are permitted to buy our companies so the Canadian economy can get their capital. But foreign owners will take profits to whatever country they live in, so ultimately this is self-defeating. Dumping huge quantities of capital into the banking system will free Canadian investment capital for free enterprise, reducing our dependency on foreign investment. The laws of supply and demand will also drive interest rates down; important because interest rates are ready to rise again. Interest rates at the level of the 1980s would be crushing for our economy. It would also crush government finance as long as the government has a large debt load. The government can just print money, but that drives the value of the dollar down. In fact, the total wealth of the country does not increase at all when you print more money, it just reduces the value of the dollar so it becomes a hidden tax. For example, you print so much money that to total amount of money in circulation increases 10%, then the value of the dollar will drop by roughly 10%. That means the value of all money in circulation after printing money drops so the total wealth of the nation does not change. However, paying off government debt increases money available for business investment without dropping the value of the dollar at all.

So you see paying off the debt also stimulates the economy. And it reduces dependence on foreign investment, permitting more Canadian ownership of our own economy. Eliminating income tax would also make all of Canada a tax-free zone, so highly paid knowledge workers such as scientists, engineers, architects, and business executives would move to our country. My sister called it a tax shelter, but that term assumes taxes are justified in the first place. We could expect companies to relocate their offices with high salary employees to our country, making Canada the knowledge focus for the entire planet. Don't we want good, highly paid jobs? I also have an education plan that would make our post-secondary education system the best in the world, increasing quality of education while making it more affordable without costing tax dollars; but that's a discussion for another thread. But the point is it meshes with this plan to make Canada a tax-free zone, bring highly paid knowledge based jobs here.

So yes, it is complex; and yes, macroeconomic policies do have broad effects on society. This post is already way too long.

Edited February 12, 2010 by Winnipegger

[Jerry J. Fortin]

A lot of bother to clean up the federal act without doing very damned much for the nation itself. Why not just eliminate fractional reserve banking and enforce central banking as designed. We own the Bank of Canada, and we can turn the tables in a heartbeat. The debt would disappear overnight. The Bank of Canada would be making billions of dollars a quarter and no bank failure could ever adversely impact a depositor.

[Argus]

Payroll taxes. They discourage employment. Getting rid of them will boost employment and thus revenue.

[ToadBrother]

Payroll taxes. They discourage employment. Getting rid of them will boost employment and thus revenue.

How do you propose to fund EI and CPP?

[Argus]

How do you propose to fund EI and CPP?

I'm talking about the employers' contributions, not the employees payments. A general increase in business taxes which would be revenue neutral, and based on profits, not number of employees, would not serve to discourage hiring workers the way the current payroll taxes do.

[Topaz]

I think its kinda funny putting up corporate tax because that's the only tax that is downing down in rates. Personal taxes will never go away because it bring in most of the revenue the government spends. I would like to see the education tax and property for seniors gone, its tough for them just to make ends meet. The only way to avoid probate tax is give everything away to your relatives before you die and any bank accounts put one of them on your account and then they can divide the account with the others and of course, TRUST is the main item when doing this.

[ToadBrother]

I'm talking about the employers' contributions, not the employees payments. A general increase in business taxes which would be revenue neutral, and based on profits, not number of employees, would not serve to discourage hiring workers the way the current payroll taxes do.

Ah, gotcha.

I'm personally still in favor of a general large-scale reduction in actual income taxes; personal, business or corporate, and raising of consumption taxes. I think reducing the GST was the wrong way to go. I think upping it to, say, 12% or 13%, but a radical reduction in income taxes is much much better, and a lot of economists seem to feel this as well. Such a tax would be much less likely to drag down the economy during recessions, would much better match economic growth, and would have other desirable side effects, most particularly in that it encourages savings.

There's a reason that Chretien broke his promise to kill the GST, and that's because Martin and government economists very likely said "This is a good tax."

[Argus]

Ah, gotcha.

I'm personally still in favor of a general large-scale reduction in actual income taxes; personal, business or corporate, and raising of consumption taxes. I think reducing the GST was the wrong way to go.

Logically, perhaps, but a general consumption tax would be considered by most to favour the rich, who have a lot more disposable income. Thus there would be so many exceptions (you can't tax baby/children/health/education stuff!) and refunds(we don't make foreigners pay) and compensatory rebates(ie the GST rebate) that it would cost a fortune to administer.

Now personally I like the idea, but would put the GST on EVERYTHING. I don't care if it's baby food or not. Slap it on anything that people buy, then refine your other tax programs to properly account for it with parents, health care providors, etc.

Still, I'm aware that personal income taxes came in as a result of war pressures in 1917. Prior to that the government got its revenue through other soures, primarily taxes on business and trade. Was the changeover equitable? Should business pay more - bearing in mind that many larger entities can simply leave Canada to avoid high taxes, leaving local competitors at a distinct disadvantage?

[William Ashley]

Payroll taxes. They discourage employment. Getting rid of them will boost employment and thus revenue.

This argument makes no sense. You can employ as many people as you have money after expenses, but you needto have a market and intake for this. While reduced taxes can free up money for people to spend - there are only certain markets people can spend on more than they already are.

It is taxes on the level-

Low Income people do have financial hardship and at times may have malnurished children due to difficulty buying a quantity of higher priced nutritious foods.

What low income people need is affordable housing, affordable food, and affordable clothes. They also need

access to health and dental and eyecare. Social assistance handles this.

What do people with money buy --- the only big purchase items may be vehicles and technology.

Others may spend on service industry and arts and culture.

The problem is we don't need more vehicles - we need less vehicles because vehicles are not only very environmentally daaging both by production and use, but leave waste material - and the faster this turnover is the more waste material is left..

What we need is vehicles which arn't damaging and will actually last - but not everyone honestly needs a vehicle.

It would be beneficial if people lived close to their place of employment. Only very few commuters actually require vehicles as there are many public transit options available. Fact is though people use their cars this is embedded in the culture.

The issue with technology is that many people over consume technology that they don't need, also a lot of cheper technology is crap that breaks down and gos to the garbage heap. We need better products that serve the function and last.

99.9% of people don't need powerful computers, or 10 or 20 appliances. People over consume already -

the result of expecting increased demand from more money supply is eroneous. If demand doesn't increase than

employment levels wont because profits won't.

In this same respect cutting corporate taxes CAN generate employment but only if demand increases. That is the catch. Once you have reached a maximum threshhold you no longer have wealth generation you have waste generation.

There are some areas that can be beneficial to stockpile or overproduce however technology and cars are two things that you don't want to overproduce. Then you need to look at what is left to consume and if it will create positive growth.

I'd say the vast majority of potential economic growth is not being geared to positive development, in terms of better public services. Positive growth is a better food supply and a better water supply, it is safer housing.

The government ought to be responsible to insure the basic needs of its citizens are met - beyond protection of the environmetn

very little else will be positive, and will largely be based on waste generation and creation of inefficiency.

Of course that is culture I suppose, but the government really ought to have no place in enhancing it - that is a real that the private citizens should be concerned not government.

The main point is that there are only certain types of development and it would be much easier to tax people down to basic needs spending to create efficiency - this won't happen - it isn't about how much you pay your employees it is about how much money you make from them. Taxes can be seen the same way - the only issue is that people ought to not be forced to work for someone they don't want to.

You can only move so much product - there are only so many people - population in many respects represents the maximum extent of demand.

It is a bottleneck situation - if you want to stimulate or build the economy you need to increase resource usage or stockpile. Wealth is weird in that it is a culturally created notion. People need very little.

Wealth is only really like saying - I have access to these things and I can give them to you.

Money is useless if you have nothing to buy with it - re shortages... make more stuff = more wealth --- wealth with out a use is waste ---- especially if the energy to generate the product is wasted because the product losses beneficial use before aquired in an exchange.

So you would need to prepare resources for use - but many resources are time sensitive so your extraction needs to be matched with the level of use within the lifespan of the product.

The stuff manages itself. You want more make more - it is that simple.

The Needs would quickly turn to wants -- and you must ask - what do people want? Which is the whole economy factor. Economy beyond needs production is little more than psychology and marketting. IF its good right... it doesn't matter.

Then it turns into a question of why give your competition for luxury goods the ability to consume them, if you want them, as they are valued?

Only rare items will hold value - eg. precious metals where demand always outstrips supply.

There are thresholds for all markets.. people really don't look at how much more can be consumed, but what can be supplied. If people accumulate wealth what advantage do they have to be productive? Then you loose productivity.

To increase basic needs supplies you need to increase demand by increasing population - the catch is though is that there is a maximum extent of some basic needs supplies - and the domestic market often overproduces these then exports them - still growth is very low.. so the potential for economic growth is low.

China on the other hand has a very large populaton where not all basic needs are met sufficiently so they have an increased capacity for growth.. but they are also exporting "luxury goods".

In countries such as India and China there is a very large segment of low income people... giving them more money will not create a stronger economy it will create shortages that are unable to be met. Because they are over their population threshold for their ability to meet demands. Although no as serious as some countries in famine or squalour, but you need to build an economy mindful of needs and demands.. just giving people money won't do anything but create lowered productivity. You'd simply have to inflate the value of the currency if this were the case.

You might ask.. why not lower productivity and live in luxury - this is a good argument - what is left though is what type of productivity is being lost... and how will it effect the rest of the economy or basic needs.

If you look at the rich - they usually perform skilled tasks that are in demand (at times perhaps by providing luxury service) ---

basic question what is the money going to be spent on?

IF you won the Lotto how would you spend the money --- is there enough to go around.. or enough people to provide those services? If not why? Where does the buck stop.

That is all it is.

Edited February 13, 2010 by William Ashley

[August1991]

Interest rate was calculated by taking the federal debt and dividing by interest paid that year. The debt has many parts, each with a different interest rate and the government does not release those details to the public. This calculation gives the average that they do pay. By the way, it worked out to 7.082%.

So, did you average what a homeowner has paid on a mortgage over the past, say, 25 years?

For borrowing now, what matters is the interest rate now - if you can lock in the terms. There again, the Canadian government can issue 30 year bonds (try getting a 30 year mortgage on your house).

Winnipegger, I do not mean that we should collectively have the government borrow or negotiate our mortgages on our behalf (since the government can obviously get lower rates and longer fixed terms).

Rather, I meant first that government budget deficits and government debt is not a bad thing. The State borrows at far better rates/terms than any individual.

Second, government budgets and debt have broader effects and so wise advice to an individual (live within your means) does not apply to governments. To give a concrete example, good parents happily give (lend) to their children when they are young. The children are in debt.

Payroll taxes. They discourage employment. Getting rid of them will boost employment and thus revenue.

Absolutely. I entirely agree.

EI, CPP (RRQ in Quebec) are job-killers. They should be abolished. The CPP/RRQ amounts to a 10% tax on income that stops at about $40,000. It is not a flat tax, it is a regressive tax.

(For those working at lower income, look at your payslip and see how much you pay in federal income tax, provincial income tax and CPP/EI "contributions". As msj once noted here, when do your CPP/EI contributions fall to zero? What a scam.)

As Finance minister, Paul Martin raised the CPP/RRQ contribution because in Canada's bizarro politically correct Liberal world, it was "good". (Martin made our pensions safe.) The BQ correctly called him out on the EI scam.

EI and CPP/RRQ contributions are bad taxes because they only apply to low income workers. They tax the working poor.

I have several reasons to dislike the federal Liberal Party, Canada's left and socialists in general. But I reserve a special place for the hypocrisy of the federal Liberals. The EI and CPP/RRQ "contribution" scheme looks good, but hurts ordinary people.

[Winnipegger]

So, did you average what a homeowner has paid on a mortgage over the past, say, 25 years?

Huh? The current mortgage rate is 4.65% for a 6 month convertable mortgate, 3.40% for 1 year fixed term, progressing up to 5.20% for a 7 year term (increasing after Feb 28), 6.80% for a 10 year term, or 8.05% for a 25 year term. These numbers are from the Royal Bank web site, as of today. But as I said, the interest rate I calculated in December 2005 for the Federal government's debt was 7.082%. You would expect the government to do better because of the clout they get from borrowing so much, but they really aren't.

government budget deficits and government debt is not a bad thing.

As long as the government carries debt, they have to pay debt service payments. The government doesn't have any money, it just plays with taxpayer money. So that means we have to pay those payments as tax. As long as the debt is close to the level it is now, taxes will remain what they are now. Governments may be able to drop GST or income tax one or two percent, but they'll never be able to make substantial changes; and as soon as the economy does poorly taxes will have to raise back up. Today there are MPs already calling for increased taxes to deal with the deficit.

During World War 1 Canada went into debt to pay for the war effort. We didn't have either personal nor corporate income tax either; income tax was introduced as a "Temporary War Income Tax". The finance minister at the time wrote a plea to future finance ministers to abolish the income tax once war expenses were over. Today the government has a lot more expenses than it did then, we can't afford to abolish both, but once we pay off the debt we can afford to get rid of one. After World War 1, income tax was not abolished right away due to the large debt, then the stock market crash of 1929 followed by the Great Depression. Despite all this, the Canadian federal government did pay off the debt prior to World War 2. Unfortunately the second war put us back in debt. Our politicians haven't even tried to pay off the debt since, a portion of today's federal debt is still war expenses from World War 2, so we are stuck with high taxes.

I have equally short patience for anyone of any political party who is irresponsible with taxpayer's money. The government has to live within its means, because we the taxpayers have to pay the bill.

Edited February 14, 2010 by Winnipegger

[August1991]

The current mortgage rate is 4.65% for a 6 month convertable mortgate, 3.40% for 1 year fixed term, progressing up to 5.20% for a 7 year term (increasing after Feb 28), 6.80% for a 10 year term, or 8.05% for a 25 year term.

Please compare comparables.

A 25 year term mortgage at 8.05% signed now is above the average term of 7.082% for all federal government debt.

As long as the government carries debt, they have to pay debt service payments. The government doesn't have any money, it just plays with taxpayer money. So that means we have to pay those payments as tax. As long as the debt is close to the level it is now, taxes will remain what they are now. Governments may be able to drop GST or income tax one or two percent, but they'll never be able to make substantial changes; and as soon as the economy does poorly taxes will have to raise back up. Today there are MPs already calling for increased taxes to deal with the deficit.

And yet Winnipegger, governments borrow at lower interest rates than individuals do.

Does it not make more sense to let the State borrow on our behalf, give the money to us and have government budget deficits?

----

Winnipegger, I admire your argument against larger government budgets but your argument should not depend on government debt. That's a false argument. If I follow your logic to its conclusion, governments should borrow on our behalf. Government is good because bigger makes things cheaper.

But you fail to understand why governments (or Hydro-Québec) can borrow at such low interest rates. (Hint: You go to jail if you don't pay your taxes, and Hydro-Quebec has access to the money of Canadian taxpayers.)

Edited February 14, 2010 by August1991

[Winnipegger]

If I follow your logic to its conclusion, governments should borrow on our behalf.

And how would that work? Would government give everyone a free house? A free car? How would they "borrow on our behalf"? I worked hard to pay off the mortgage of my house, so now I have no mortgage at all. But income tax is still there. And when I did have a mortgage, income tax was greater than my mortgage payment. So where is the benefit?

Edited February 14, 2010 by Winnipegger

[msj]

(For those working at lower income, look at your payslip and see how much you pay in federal income tax, provincial income tax and CPP/EI "contributions". As msj once noted here, when do your CPP/EI contributions fall to zero? What a scam.)

Never quote me without providing a link you dishonest jerk.

A person can choose to NOT pay into CPP and EI by becoming self-employed (sole proprietors and partners are automatically exempt), incorporating a company (owning 40%+ of the shares makes one automatically EI exempt), and either paying out dividends (for which no CPP or EI is paid) or setting up a proper employment profit sharing plan (for which CPP is not paid per rules set up to exempt these payments from CPP).

As a self-employed person I choose to pay CPP by taking wages from my corporation because, after figuring out the math between income tax for myself, my company and CPP for myself and my company, it is only a small cost to me now in CPP premiums which will ensure that I receive the maximum pension when I'm 65.

I'm willing to pay that cost because I treat this "investment" as part of the conservative portion of my retirement plan.

Having said this, there are certain people who, due to their particular circumstances, should not pay into CPP.

The most obvious example is the 58-60 year old person who has maxed out CPP all of their working life and is going to retire in 5 - 7 years. If this person is self-employed then they should set up the employment profit sharing plan from their company so that they don't pay into CPP.

Why? Because it will not reduce their CPP pension at all since CPP already drops out 15% of your earning years - so why pay more CPP premiums than you have too?

There are many although examples where it makes sense to either pay or not into CPP but they involve details that are beyond the scope of a forum such as this.

So, simply stated, your EI contributions fall to zero when you become self-employed (although the self-employed can now apply to pay into EI in order to receive special benefits - maternity leave, parental leave, sick leave, and/or compassionate care leave).

Your CPP contributions can fall to zero should you choose to do this by arranging your life to become self-employed using a corporate structure.

Yes, I know that only successful people can use such a structure effectively and efficiently and others will whine about why they can't avoid CPP taxes too - and that's the point - become successful if it's so important to you to avoid paying into the CPP.

Edited February 14, 2010 by msj

[Jerry J. Fortin]

Never quote me without providing a link you dishonest jerk.

A person can choose to NOT pay into CPP and EI by becoming self-employed (sole proprietors and partners are automatically exempt), incorporating a company (owning 40%+ of the shares makes one automatically EI exempt), and either paying out dividends (for which no CPP or EI is paid) or setting up a proper employment profit sharing plan (for which CPP is not paid per rules set up to exempt these payments from CPP).

As a self-employed person I choose to pay CPP by taking wages from my corporation because, after figuring out the math between income tax for myself, my company and CPP for myself and my company, it is only a small cost to me now in CPP premiums which will ensure that I receive the maximum pension when I'm 65.

I'm willing to pay that cost because I treat this "investment" as part of the conservative portion of my retirement plan.

Having said this, there are certain people who, due to their particular circumstances, should not pay into CPP.

The most obvious example is the 58-60 year old person who has maxed out CPP all of their working life and is going to retire in 5 - 7 years. If this person is self-employed then they should set up the employment profit sharing plan from their company so that they don't pay into CPP.

Why? Because it will not reduce their CPP pension at all since CPP already drops out 15% of your earning years - so why pay more CPP premiums than you have too?

There are many although examples where it makes sense to either pay or not into CPP but they involve details that are beyond the scope of a forum such as this.

So, simply stated, your EI contributions fall to zero when you become self-employed (although the self-employed can now apply to pay into EI in order to receive special benefits - maternity leave, parental leave, sick leave, and/or compassionate care leave).

Your CPP contributions can fall to zero should you choose to do this by arranging your life to become self-employed using a corporate structure.

Yes, I know that only successful people can use such a structure effectively and efficiently and others will whine about why they can't avoid CPP taxes too - and that's the point - become successful if it's so important to you to avoid paying into the CPP.

At least you seem to suggest that the tax system favours those with sufficient incomes to exploit the loopholes. Unfortunately those loopholes are what I see as part of the problem.

[msj]

At least you seem to suggest that the tax system favours those with sufficient incomes to exploit the loopholes. Unfortunately those loopholes are what I see as part of the problem.

As usual, those who fail to understand make up nonsense.

Paying into CPP, for most people, is a good thing since for many people, this is their only form of savings for retirement for a far too large portion of their working lives.

CPP is such a good deal when one considers the alternatives (paying out dividends or the costs of running an employee profit sharing plan) that for most self-employed people, the choice to pay into CPP or not usually favours paying into the system for many years.

If people weren't "forced" into saving something for their retirement through CPP we would end up with many more poor seniors living off OAS, GIS and welfare and that would cost all of society to pay more in income taxes anyway.

I doubt the opponents of CPP factor that kind of reality into their considerations.

In fact, I think the reason why there are so few opponents of the CPP system is because most of us do recognize good policy when we see it and will prefer the practical application of policy to deal with reality rather than the theoretical application of policy for the sake of theory.

IOW, the average Joe is better off in practice with the CPP than the alternative where there are no CPP premiums, income tax rates are higher, and far too many Joe's can look forward to living off of welfare (which is funded from an ever shrinking base of taxpayers) rather than CPP which has been funded through prudent planning and investing.

[fellowtraveller]

Huh? The current mortgage rate is 4.65% for a 6 month convertable mortgate, 3.40% for 1 year fixed term, progressing up to 5.20% for a 7 year term (increasing after Feb 28), 6.80% for a 10 year term, or 8.05% for a 25 year term. These numbers are from the Royal Bank web site, as of today. But as I said, the interest rate I calculated in December 2005 for the Federal government's debt was 7.082%. You would expect the government to do better because of the clout they get from borrowing so much, but they really aren't.

That is not an apt comparator because the actual mortgage rates are quite a bit less than that. You have quoted the posted rates. Note also that very few people take 7 or 10 year rates. New buyers would rarely qualify for 7 or 10 year rates too.

Do you have a link to 25 year term rates for residential properties(they are common in commercial property)? I have not seen these in my lifteime, though they were common in my parents era.

[Winnipegger]

That is not an apt comparator because the actual mortgage rates are quite a bit less than that. You have quoted the posted rates. Note also that very few people take 7 or 10 year rates. New buyers would rarely qualify for 7 or 10 year rates too.

When I bought my house in 1990, I took out a mortgage with a 10% down payment, 25 year amortization, and 1 year fixed term. The mortgage also had the option of doubling-up a payment any month, and lump sum payment once per year at renewal time of 10% of the remaining balance. Each double-up payment would let you miss a payment later, consider it pre-paying, but you could just continue in order to pay down the mortgage more quickly. I doubled-up payments whenever I could, and when I got a high paying job in 1999/2000 I doubled every payment as well as applying the maximum lump sum payment at renewal time. The result was my mortgage was paid in year 2000. That was 9 years and 8 months from purchase to mortgage free. The last couple years my income has not been so good, I wouldn't have been able to pay a mortgage, utility bills, and all other living expenses with what I'm making right now. By eliminating my mortgage, I have much lower living expenses so can afford to remain in my house.

::Edit:: I checked my old mortgage documents (they're from 1990). I had assumed the mortgage of the previous owner. The remaining amortization at the time I took possession was 20 years and 9 months. If I hadn't paid it off early, I would still have a mortgage today. ::end of edit::

This is my real life experience, but it is also a metaphor for the country. Pay down debt aggressively when financial times are good, so we can survive when times are bad. The current batch of Liberal MPs have been saying we have to stimulate the economy due to the recession; well in general that's a good idea, but the Canadian economy is not that bad. It's time to "shut off the taps" as Jim Flaherty has said. That may sound like I'm supporting the Conservatives, but I'm still critical of the Conservatives for increasing spending and reducing debt repayment in years 2006, 2007, and 2008. The "stimulus package" for 2009 was far too much; we needed something but what we got was overkill. Perhaps all this has taught the Conservatives the need to pay down the debt fast when times are good.

Do you have a link to 25 year term rates for residential properties(they are common in commercial property)? I have not seen these in my lifteime, though they were common in my parents era.

Residential Mortgage Rates by RBC Royal Bank

Edited February 16, 2010 by Winnipegger

[August1991]

That is not an apt comparator because the actual mortgage rates are quite a bit less than that. You have quoted the posted rates. Note also that very few people take 7 or 10 year rates. New buyers would rarely qualify for 7 or 10 year rates too.

Do you have a link to 25 year term rates for residential properties(they are common in commercial property)? I have not seen these in my lifteime, though they were common in my parents era.

Fellowtraveller, the essential point here is that the federal government borrows at a lower interest rate with better terms than you or I do. No available mortgage today matches the terms at which the federal government borrows today.

And how would that work? Would government give everyone a free house? A free car? How would they "borrow on our behalf"? I worked hard to pay off the mortgage of my house, so now I have no mortgage at all. But income tax is still there. And when I did have a mortgage, income tax was greater than my mortgage payment. So where is the benefit?

How would the government "borrow on our behalf"? Well, it is doing it now. More exactly, the government could cut income tax, let you keep the money (to lower your mortgage for example) and replace the lost tax revenue by borrowing. Since the government would borrow at a lower interest rate than your mortgage, Canada as a whole would be better off.

Winnipegger, I explain this to you because at first glance, this might seem like a good idea. But it's not a good idea, and the reason is that it is unwise to use government in such a manner. For starters, the low interest rate of government bonds is due to the government's power to tax. Imagine what that means.

A person can choose to NOT pay into CPP and EI by becoming self-employed (sole proprietors and partners are automatically exempt), incorporating a company (owning 40%+ of the shares makes one automatically EI exempt), and either paying out dividends (for which no CPP or EI is paid) or setting up a proper employment profit sharing plan (for which CPP is not paid per rules set up to exempt these payments from CPP).

msj, who can exploit this loophole? As it is, I think you're pushing the envelope.

Never quote me without providing a link you dishonest jerk.

Did I misrepresent your viewpoint? If so, I apologize.

IOW, the average Joe is better off in practice with the CPP than the alternative where there are no CPP premiums, income tax rates are higher, and far too many Joe's can look forward to living off of welfare (which is funded from an ever shrinking base of taxpayers) rather than CPP which has been funded through prudent planning and investing.

That's an interesting idea.

Most social welfare schemes amount to helping people who make bad decisions in life. And without a doubt, some people are incapable of planning and preparing for the future. For them, the CPP/RRQ/OAP/GAINS is a Godsend. Without it, they would be impoverished and have to rely on, well, what? Some other social welfare scheme, no doubt.

And that's the question, msj. Would this "other social welfare scheme" be less costly to society than what we have now?

At present, we force people who make good decisions and can manage their affairs into a scheme designed to help people who cannot. I think society is better served when we let people, capable of deciding for themselves, decide what is best.

Your post above (even your description of me as a "jerk") makes my point better than I can.

[William Ashley]

One thing I have noticed is A LOT more for sale signs going up... and this is February...