Do public sector employees contribute to tax revenue?

[msj]

Wouldn't it be more efficient and easier on the CRA if public sector employees got paid their net salary with zero govt deductions since their pay comes from those various pots in which govts spend their money?

No.

Think about it: we have a system of employers/government remitting payroll deductions to the government already in place. It's consistent, simple, works just fine and everyone knows how to use it (well, everyone who does payroll does).

Now you want us to have two types of infrastructure in place: one set for the private sector and another set for the public sector.

Why?

Why would we want to set up two different ways to remit tax deductions to the government when our current system already works just fine and is understood by employers/government and by employees (whether public or private)?

[Wilber]

The salary still comes out of tax revenue. If a public employee gets $1000, and his taxes on that are $300 , he didn't add $300 to the tax pool, he removed $700 out of it.

So what, if the state hires a private company to do a job, the money still comes out of the tax pool. You can argue whether having a public employee do it is more cost effective than hiring a private company, or whether you need the service at all but if you do decide you need it, the money will come from the tax pool regardless of who does it.

[Wilber]

Wouldn't it be more efficient and easier on the CRA if public sector employees got paid their net salary with zero govt deductions since their pay comes from those various pots in which govts spend their money?

Anyone who has taxes deducted at source does that.

[blueblood]

No.

Think about it: we have a system of employers/government remitting payroll deductions to the government already in place. It's consistent, simple, works just fine and everyone knows how to use it (well, everyone who does payroll does).

Now you want us to have two types of infrastructure in place: one set for the private sector and another set for the public sector.

Why?

Why would we want to set up two different ways to remit tax deductions to the government when our current system already works just fine and is understood by employers/government and by employees (whether public or private)?

The reason I'd want it is if (and that's a big if) it is more efficient (cutting amt of employees processing returns). Look at it this way, there are lots of public employees which means lots of returns to be processed, all I'm saying why not cut some fat? The current system which is in use amounts to a shell game for public employees. I'm pretty sure it would be easier if a public employee just got a simple paycheck (although for less). No deductions or complicatedness, a perk of being a public sector employee.

If it is more efficient than why not have at it. You have to admit it is strange getting paid by the govt, yet you see on the check all those deductions.

[WWWTT]

Chicken or egg. Private sector generates the wealth but needs the infrastructure to do it.

Bingo!

Another thing I have noticed with similar threads is that there is a distinct isolation of the public sector.

When this term "public sector" is used it is almost assumed(and I don't know why)that we are strictly talking about certain unionized public workers.And not the police,firemen,military,politicians,health care and maybe two or three others.

Beyond that I have nothing more to contribute to this thread.

WWWTT

[Wilber]

The reason I'd want it is if (and that's a big if) it is more efficient (cutting amt of employees processing returns). Look at it this way, there are lots of public employees which means lots of returns to be processed, all I'm saying why not cut some fat? The current system which is in use amounts to a shell game for public employees. I'm pretty sure it would be easier if a public employee just got a simple paycheck (although for less). No deductions or complicatedness, a perk of being a public sector employee.

If it is more efficient than why not have at it. You have to admit it is strange getting paid by the govt, yet you see on the check all those deductions.

So CRA employees work under a flat tax system and the rest of us don't? You can deduct things like your extra medical expenses and kid's college tuition and but a CRA employee can't?

[blueblood]

So CRA employees work under a flat tax system and the rest of us don't? You can deduct things like your extra medical expenses and kid's college tuition and but a CRA employee can't?

Only if it cuts down on gnomes in ottawa. Public sector employees get paid with tax dollars so they're already different than the rest of us.

[ToadBrother]

Only if it cuts down on gnomes in ottawa. Public sector employees get paid with tax dollars so they're already different than the rest of us.

I know plenty of companies that are government suppliers via contract. Are the owners, managers and employees also different than the rest of us?

[msj]

The reason I'd want it is if (and that's a big if) it is more efficient (cutting amt of employees processing returns). Look at it this way, there are lots of public employees which means lots of returns to be processed, all I'm saying why not cut some fat? The current system which is in use amounts to a shell game for public employees. I'm pretty sure it would be easier if a public employee just got a simple paycheck (although for less). No deductions or complicatedness, a perk of being a public sector employee.

If it is more efficient than why not have at it. You have to admit it is strange getting paid by the govt, yet you see on the check all those deductions.

This makes absolutely no sense.

Why have a parallel system in place when the current one works just fine?

You know nothing about the tax returns of public sector employees.

I happen to do a few and these people do have businesses on the side, non-registered investment income, medical expenses, etc...

These people are just like anyone else.

Yes, some people (public and private sector) just get a T4 slip and maybe have a RRSP deduction.

But most people have all types of things to go on their tax return.

Of course, the irony here is that Harper/Flaherty have brought in so many "boutique" tax credits in the past five years: fitness amount, first time home buyers credit, textbook credit, employee credit, child amount, home renovation tax credit (for 2009 only) etc....

So, a more complicated tax system means even a public employee with just a T4 needs to file a tax return to claim all of those credits.

[blueblood]

I know plenty of companies that are government suppliers via contract. Are the owners, managers and employees also different than the rest of us?

Good point.

Contractors I think are under a different tax scheme than regular employees. Being as the income is diversified, it obviously couldn't go.

At the end of the day, if the bureaucracy can be cut by simplifying employee pay, then I don't see a problem with it. However, if the status quo is the most efficient, then so be it and I get to have my mind boggled by government paying someone, then taking their money back.

[ToadBrother]

Good point.

Contractors I think are under a different tax scheme than regular employees. Being as the income is diversified, it obviously couldn't go.

Companies that hold government contracts have to pay business taxes, remit payroll taxes, pay sales taxes, etc. There are contractors out there that have a large portion of their business with government (even big guys like Dell and HP basically have divisions dedicated to government sales). I know of a number of for-profit concerns in my area that probably receive well in excess of 90% of their revenue via contracts with various levels of government. In a lot of cases, these particular contractors came into being because governments "downsized", which translated into contracting out.

Probably 20% of my earnings last year will have come from direct contract work with the government.

At the end of the day, if the bureaucracy can be cut by simplifying employee pay, then I don't see a problem with it. However, if the status quo is the most efficient, then so be it and I get to have my mind boggled by government paying someone, then taking their money back.

What you suggest wouldn't simplify, it would create parallel systems, which is more complex. Better to have all employees, regardless of employer, working under the same regime.

Edited April 1, 2011 by ToadBrother

[blueblood]

Companies that hold government contracts have to pay business taxes, remit payroll taxes, pay sales taxes, etc. There are contractors out there that have a large portion of their business with government (even big guys like Dell and HP basically have divisions dedicated to government sales). I know of a number of for-profit concerns in my area that probably receive well in excess of 90% of their revenue via contracts with various levels of government. In a lot of cases, these particular contractors came into being because governments "downsized", which translated into contracting out.

Probably 20% of my earnings last year will have come from direct contract work with the government.

What you suggest wouldn't simplify, it would create parallel systems, which is more complex. Better to have all employees, regardless of employer, working under the same regime.

If it doesn't simplify it, then screw it. Can't win them all.

[Wild Bill]

I think part of the confusion in this thread is coming from different definitions of "work".

Over the years a lot of folks have been indoctrinated with the old socialist definition that states that all work is the same and is of equal value. In other words, it doesn't matter where the sweat comes from - sweat should be paid!

This has given rise to all the arguments about "equal pay for equal work" and innumerable committees trying to equate the hourly wage between a male truck driver and a female secretary.

In actual fact, the real definition of work in the private sector is much more clear. Pay is something you give to acquire a product or service. Work is what is involved in making it possible for you to buy that product or service and is irrelevant to the buyer, except for the fact that if there are high costs involved there will be a minimum price that he won't be able to buy below, unless he can find a seller stupid enough to sell under cost.

So to a socialist, paying someone to dig a hole to put the dirt from the last hole he had to dig makes perfect sense, even if no one wants the holes! This can happen in government all the time. The government may pay workers to do a task that actually few if any taxpayers would really want, especially if they knew everything about it. Those workers might sweat a LOT in doing that job but in the final analysis, the work is worthless if no one wants the product or service.

So if you define a public sector worker's contribution to the tax revenue by how much he sweats at his job that's one thing. If your definition involves if his work results in something that anybody actually WANTS that's quite another!

All work is obviously not of equal value. If anybody thinks otherwise, just tell them to pay ME for being their cook!

[msj]

Businesses that perform services or supply goods to the government are going to file their taxes the way any business would when they deal with regular customers: if it's a proprietorship or partnership the revenue less expenses go on a personal tax return (T1) and if it's a corporation then the revenue and expenses are reported on a corporate tax return (T2).

There have been some differences when dealing with the government but even those are starting to be treated in the same way as one would conduct business with any other private business (changes related to HST implementation in BC/ON being one example - yes, the government is being charged and is paying HST on a regular basis).

[Shady]

The answer is easy. No, they don't contribute to net tax revenue. It's impossible for them to, since the money they're paid with is tax money to begin with.

[ToadBrother]

The answer is easy. No, they don't contribute to net tax revenue. It's impossible for them to, since the money they're paid with is tax money to begin with.

You don't make evaluations on economic value or production based solely on financial remuneration.

[Shady]

You don't make evaluations on economic value or production based solely on financial remuneration.

I'm not making any value judgements, I'm simply stating facts. But I agree that lumping all public employees together isn't very accurate.

[ToadBrother]

I'm not making any value judgements, I'm simply stating facts. But I agree that lumping all public employees together isn't very accurate.

I didn't say value judgements, I said economic value.

[Shady]

I didn't say value judgements, I said economic value.

They don't directly contribute to tax revenue. In some cases they contribute indirectly. Private sector jobs contribute both directly and indirectly.

[ToadBrother]

They don't directly contribute to tax revenue. In some cases they contribute indirectly. Private sector jobs contribute both directly and indirectly.

And if you're one of the contractors I mentioned earlier that sell services and products to the government?

I just earned about $100 this morning replacing an IC in a fuel pumping computer belonging to my local government. Could you fill me in as to whether I was contributing or not?

[Shady]

And if you're one of the contractors I mentioned earlier that sell services and products to the government?

Selling services and products to the government paid for with already collected tax money.

I just earned about $100 this morning replacing an IC in a fuel pumping computer belonging to my local government. Could you fill me in as to whether I was contributing or not?

They paid you with already existing tax revenue.

Edited April 1, 2011 by Shady

[Bonam]

I think there's a clear distinction to be made here.

One is that of whetherer they directly pay a net amount of taxes into the system or not. The answer to that is obviously no, and that is the sense in which I interpreted the OP. More tax money is used to pay public employees than is collected back from them as taxes from their pay cheques.

Second, the work that they do (that is, the products and services that they provide) has some value. This value has an effect on our economy. As someone mentioned, infrastructure such as roads is planned and provided by government. Such infrastructure enables other sectors (i.e. the private sector) of the economy, which do pay a net positive amount of taxes into the system, to function. Also true, some of the services provided by government employees may actually work to stifle the private economy, as in cases of over-regulation of certain industries, or competition from/replacement by government agencies. Despite this, the net effect is very likely positive since the government does provide critical infrastructure without which much of our economy would simply not function.

Edited April 1, 2011 by Bonam

[Wilber]

Public employees provide a service. When you buy a service from the private sector do you expect to be refunded what you paid for it? The whole premis of this thread is infantile.

[Shwa]

So here it is.

Private sector employees and private businesses pay taxes. That is where the tax pool that governments do their spending comes from. That is where the salaries for public sector employees come from too. Public sector employees do not contribute to the pool, they only withdraw from it. When these people "pay their taxes", they are not contributing to the tax revenue, all they are doing is returning a small portion of what they took out. The result is still a net negative to the tax pool. If you are a public sector employee, "your taxes" don't pay for anything, because you don't actually contribute to the tax pool. The net effect is, you don't really pay taxes at all, you just spend them.

Is that clear enough?

Clear, no. Simple? Absolutely. Therein lies the problem.

For starters, all public sector employees - government workers, soldiers, firefighters, etc. "actually" pay taxes because they have T4 slips and on those T4's there is a little box that tells them how much as been deducted.

Secondly, your premise is based on payments made to public sector employees being based solely on income to the government received in the form of taxation. Well, you got that wrong didn't you?

So now it is incumbent for you to show the method whereby the payments to public sector employees ONLY come from taxation revenue - the mystical "tax pool." As TB already nailed you on your lack of data, it is easy to see how you could make such absurd assumptions with a simplistic understanding of how governments are funded in Canada.

However IF you have the data to PROVE that the payments to public sector employees ONLY come from tax generated revenue THEN I would be inclided to revise my understanding. So please, show us the data.

Scotty and others have sufficiently already nailed you on the labour side so there is no need to re-emphasize that what public sector employees do is provide work for payment. Not to mention they take their earned money and also pay taxes on good and services, EI contributions and the like.

So there is no vociferous argument at all because your premise is based on an incorrect assumption of public sector employees being paid solely out of this mythical "tax pool" you talk of. What is proven is that you really don't understand how governments are funded.

Therefore public sector employees do contribute to the economy and actually pay taxes. Like practically everyone else.

[WWWTT]

Wow this thread has become completely ridiculous!

Ok I have glansed over a bunch of the comments here and first I want to add that Shwa you are right about everyone haveing to pay taxes except I believe politicians salaries are tax free or only a portion of their wages are taxable(I would like to see Harpers pay stub!)

It seems many people here feel that the private sector is the goose that lays the golden egg.And without them our society would collapse.

Well the industrial revolution only started around the mid 1800's so that would make it around 160yrs old.No argument there.

Did democracies,police,health care,firefighters,roads,courts,international trade,military, start before or after this?I don't think there is any argument there either.

So why the confusion about what is essential?

The Roman empire built some of the best roads and bridges in Europe,not the private sector.Tested true over centuries.

We have become very dependant on the private sector and I think it is very healthy to once and a while be reminded of what actually came first.

WWWTT