Walkom: "These high-income docs want the rich to pay"

[jacee]

http://www.thestar.com/iphone/news/canada/politics/article/1149981--walkom-these-high-income-docs-want-the-rich-to-pay

Here’s a novel idea. A new organization of well-paid doctors thinks that they — and other high-income earners — should pay more in taxes.

“Who knows?” physician Michael Rachlis one of the founders of Doctors for Fair Taxation, told me Wednesday. “Maybe we’l start a trend. Maybe we’ll see a Lawyers for Fair Taxation start up.”

I’m not going to hold my breath. Still, it’s refreshing to see someone stand up for a more progressive tax system.

The conventional wisdom these days is that progressivity in taxation — the notion that people should pay proportionally more as their incomes rise — is counterproductive.

Most governments don’t have the nerve to scrap progressive taxation entirely. So they’ve been doing it gradually by reducing the number of income-tax brackets and by raising more money through user fees and consumption levies like the HST.

They’ve have been aided and abetted in this by mainstream economists who argue, usually without any proof, that taxes on ncome discourage people from working.

The upshot of this, as a recent study from the Canadian Centre for Policy Alternatives demonstrates, is that the poor in Canada now pay a greater share of their income to government in the form of taxes than do the ultra rich.

Which is the antithesis of the bargain made when governments first began to evy income taxes almost 100 years ago.

Doctors for Fair Taxation argues that a more progressive tax system would be good for human health. First there’s the obvious point. Governments almost invariably deal with their fiscal problems by cutting back spending on health care. Both Prime Minister Stephen Harper’s federal Conservatives and Ontario Premier Dalton McGuinty’s Liberals are heading down this path.

The second point, well-known since the 1970s, is that poverty breeds poor health. The uber-rich may not like sharing their money with the very poor. But doing so ncreases the overall health of Canadian society and, in the end, is both cheaper and more efficient than allowing an underclass to fester.

The third point, demonstrated by history s that society as a whole does better when there are fewer income extremes. Such stolidly middle-class societies tend to be more stable, less violent and more productive.

The suggestions by Doctors for Fair Taxation are modest. The group recommends that the federal and provincial governments create four new tax brackets for those earning more than $100,000. Someone with a taxable income of $170,000 would pay an extra $1,400. But someone earning $7 million would pay an extra $787,400.

Rachlis figures the scheme would net

Ottawa an extra $3.5 billion a year and Ontario an additional $1.7 billion. That’s not enough to wipe out the deficit for either level of government. But it would go partway along the path.

More to the point, it would preclude the need for drastic spending cuts.

I'm for that!

'Cutbacks' in social, health and educational services cause widespread hardship, and the primary victims are children, youth and seniors.

I don't think politicians will take on their wealthy benefactors to address fairer taxation without extreme pressure and support from the grassroots, and this endorsement by doctors is very welcome.

Edited March 23, 2012 by jacee

[TimG]

The 'soak the rich' mob forgets that most continuously rich people can arrange their income to minimize the tax hit so the actual revenues generated by such increases will be much less than claimed by advocates.

[August1991]

The 'soak the rich' mob forgets that most continuously rich people can arrange their income to minimize the tax hit so the actual revenues generated by such increases will be much less than claimed by advocates.

More precisely, the very rich understand this as a question of control.

Bill Gates can spend the money on the charities that he chooses, or he can give the money to Clinton/Bush Jnr/Obama to let them spend his money.

If you were Gates, what would you do?

From Walkom's article:

The suggestions by Doctors for Fair Taxation are modest. The group recommends that the federal and provincial governments create four new tax brackets for those earning more than $100,000. Someone with a taxable income of $170,000 would pay an extra $1,400. But someone earning $7 million would pay an extra $787,400.

Rachlis figures the scheme would net Ottawa an extra $3.5 billion a year and Ontario an additional $1.7 billion.

The federal budget is around $120 billion. An extra $3.5 billion would make a difference.

-----

If I were Harper, I would look at ways to fleece certain well-endowed sheep. He should do it in a way that the sheep come back for fleecing next year, and these sheep view the fleecing as a public sign of the luxury of their wool.

That's how income tax was first introduced early in the 20th century.

Edited March 23, 2012 by August1991

[jacee]

The 'soak the rich' mob forgets that most continuously rich people can arrange their income to minimize the tax hit so the actual revenues generated by such increases will be much less than claimed by advocates.

You mean illegally move it 'offshore'?

Illegally claim more 'business' expenses, like their boats, ski condos, etc?

You raise a good issue though, that any increase in taxation of the wealthiest must be accompanied by increased vigilance for any cheaters. Harsh penalties will be important. Maybe some of them will even get to enjoy the accommodations their taxes pay for ... the ones with the steel bars!

Edited March 23, 2012 by jacee

[TimG]

Illegally claim more 'business' expenses, like their boats, ski condos, etc?

I am talking purely legal means. i.e. a rich person with a company does not need to take any money out of the company. They can leave it there instead of taking the income. If you have a property you can choose not to sell it because of the capital gains implications. There are endless ways of adjusting your cash flow to minimize tax consequences that are all 100% legal and ethical. These are means that majority of people will use and the net result is you can never calculate the revenue from tax increases by looking at the current income levels nor can you make up the gap by 'increased vigilance' against cheaters. Edited March 23, 2012 by TimG

[August1991]

You raise a good issue though, that any increase in taxation of the wealthiest must be accompanied by increased vigilance for any cheaters. Harsh penalties will be important. Maybe some of them will even get to enjoy the accommodations their taxes pay for ... the ones with the steel bars!

I strongly disagree.

jacee, you would put behind bars people such as Thomas Edison, Steve Jobs, James Cameron, Guy Laliberté simply because they became very, very rich?

I think that a sustainable society provides correct incentives for individuals - even a select few - to succeed. Everyone is richer.

For example, because of the Liebnitz/Newton discovery of calculus in the 17th century, the wing shape of the 747 exists - and people in the 21st century can travel cheaply.

Edited March 23, 2012 by August1991

[CPCFTW]

Thanks doctors!! Here's another idea... how about you start billing taxpayers less?

[jacee]

I strongly disagree.

jacee, you would put behind bars people such as Thomas Edison, Steve Jobs, James Cameron, Guy Laliberté simply because they became very, very rich?

Because they are rich? No.

If they cheat on taxes and imprisonment is warranted? Yes.

[jacee]

I am talking purely legal means. i.e. a rich person with a company does not need to take any money out of the company. They can leave it there instead of taking the income. If you have a property you can choose not to sell it because of the capital gains implications. There are endless ways of adjusting your cash flow to minimize tax consequences that are all 100% legal and ethical. These are means that majority of people will use and the net result is you can never calculate the revenue from tax increases by looking at the current income levels nor can you make up the gap by 'increased vigilance' against cheaters.

Foregoing the income is legitimate but maybe temporary and probably not of great effect.

I can't comment on whether Dr. Rachlis' estimates took tax avoidance into account as the article didn't detail the methodology, nor do they on their website, but the tax calculator might be of interest to people:

http://doctorsforfairtaxation.ca/calculator/

I'm really enjoying listening to Kevin O'Frothes-at-the-mouth spluttering about this topic.

Apparently the doctors are getting a lot of support from high income earners all across the country (and a lot of media attention too!) They're challenging lawyers, CEO's and hedge fund managers to join them.

I guess we could call it Doccupy!

[August1991]

Because they are rich? No.

So jacee, according to you, individuals trump the State - if they are poor.

You would imprison Einstein because he didn't pay his taxes, respect the State?

If they cheat on taxes and imprisonment is warranted? Yes.

Who decides that? Edited March 23, 2012 by August1991

[jacee]

So jacee, according to you, individuals trump the State - if they are poor.

You would imprison Einstein because he didn't pay his taxes, respect the State?

Who decides that?

I'm really not sure what you're getting at, but to recap ...

The doctors say the rich should be taxed more.

I agree.

TimG says it's useless to try because they'll just avoid those taxes somehow.

I said if they do it illegally - ie, cheat on taxes - they should go to jail where warranted.

You said I'm blindly supporting the government.

Now you said I'm supporting the individual ... poor ones ... over the state.

Hunh?

As for "who decides", I believe it's Revenue Canada, the RCMP and the courts that that address the issue of tax cheating.

Are you opposed to raising taxes on the wealthy?

Edited March 23, 2012 by jacee

[Wild Bill]

This argument about the rich not paying their fair share is an old one. It is also totally bogus!

It perfectly illustrates the difference between "head" people and "heart" people or maybe more accurately those who use intuition as a guide rather than cold hard math.

Here's an example with the easiest math in the world, so easy that even arts and poli-sci majors should be able to follow it! It does presuppose you can set up a spreadsheet but the math is just "back of an envelope" level.

Take a guess at the number of working people in Canada. Don't bother looking it up! As I said, the math is so easy that your guesses are good enough!

Now, take a guess at how many of those people make over half a million dollars a year. That's the point where we'll call them rich! Once again, it doesn't matter if you're accurate. When you get to the end you will see why.

Take the number of "rich" folks away from the total and you are left with all the working "non-rich" taxpayers. Let's assume the government dinks them for 25% of their income. We all know it's much more than that, with all the user fees and hidden taxes but to keep things simple, let's go with paying a quarter of your income to the government.

This should give you a number that represents the tax "take" from the "non-rich" folks. Note that it's a BIG number!

Now look at that number you had of all the "rich" Canadians. Figure out how much is 25% of their income.

Get the picture?

THE AMOUNT OF TAX MONEY YOU CAN GET FROM THE NON-RICH WORKERS IS FAR, FAR, FAR GREATER THAN YOU CAN TAKE FROM THE RICH!

I don't care how accurate your guesses were. The enormity of the difference swamps out any arguments. You could take ALL the money from the rich and it still wouldn't matter!

Most working folks are not rich but their combined income is so large that they are the target for the government to skim. The income of the rich is just a drop in the bucket!

To a math-challenged, intuitive thinking person, it is emotionally satisfying to think that the problem is someone is skinning out of paying their fair share. It's easy to think that all our problems would be solved if we could just make the rich pay!

Yeah, and I can regularly fill an inside straight too! The Math doesn't lie! The tax potential of the rich is irrelevant.

Some might want to include the wealth of corporations but that too is irrelevant. Their money eventually comes out as income for all a corporation's workers and to salaries for its managers, plus share dividends to all the old ladies and teachers who rely on their portfolio for their old age income. It winds up included in my original example.

One would be naive to think that every politician doesn't know this. When people mob a politician, crying that they are being squeezed too hard with taxes, all he has to do is point in another direction and say "Hey! There goes a rich guy! You paid more because he didn't pay his share!"

Every time the mob's attention will be diverted towards the rich guy, while the politician saunters away whistling - and laughing!

[madmax]

This argument about the rich not paying their fair share is an old one. It is also totally bogus!

You will have pay more WB.. cause someones gotta Pay for our government.

[CPCFTW]

The irony of this is that doctors are price fixers who bill the taxpayer. Health care is also our largest govt expenditure. If these doctors want to balance the budget so badly they could just bill the taxpayer for less.

What's next? Teachers for fair taxation? Policeman for fair taxation? Ttc token collectors for fair taxation?

[madmax]

The irony of this is that doctors are price fixers who bill the taxpayer.

I was of the impression that Each Provincial Government is responsible for the pricing of medical services.

[Wild Bill]

You will have pay more WB.. cause someones gotta Pay for our government.

You're right, Max! I happen to be poor. Very poor! I barely get by. I drive a 13 year old minivan and live in the cheapest part of town.

However, when any level of government decides it needs more money, I'm guaranteed to be on the list to have their taxes raised!

[CPCFTW]

I was of the impression that Each Provincial Government is responsible for the pricing of medical services.

How about Doctors for Lower Medical Services Prices? I guess it doesn't have the same ring.

[cybercoma]

It's a pretty simple concept. The impact of taxation should be the same between a low income earner and a high income earner. There's a base level of finances that one needs to maintain themselves and live a normal life. People need to pay for a home, vehicle, clothing, food, utilities, and insurances as a bare minimum to live a normal life. When someone making $45,000 per year has to give the government $10,000 in income taxes being left with $35,000 has a considerably larger impact on that person's life than someone making $450,000 per year paying $100,000 and being left with $350,000.

Contrary to the greedy types, who believe what's theirs is theirs and everyone else can piss off, no one's suggesting that everyone should be left with the same amount of money. Of course there should be variability in income. Those who work more and get paid more should have more. However, this notion that my money is mine and that's that is completely myopic. A successful person in Canada is only successful because the society they live in allows them to be successful. That society costs money to maintain. Police, fire, health, education, roads, utilities, free-trade agreements, regulators, federal banking, all of these things allow people to be successful; these things allow employers to have a safe business, as well as a healthy and educated workforce. To be quite honest, they owe, at least in part, their success to the State that enforces contracts and maintains the society that allows them to be successful.

[eyeball]

The 'soak the rich' mob forgets that most continuously rich people can arrange their income to minimize the tax hit so the actual revenues generated by such increases will be much less than claimed by advocates.

No, it's people in power who arrange things for the rich.

One of these days the mob that is saying screw the rich will join the few who are saying it's actually the powerful that need to be hammered.

[CPCFTW]

It's a pretty simple concept. The impact of taxation should be the same between a low income earner and a high income earner. There's a base level of finances that one needs to maintain themselves and live a normal life. People need to pay for a home, vehicle, clothing, food, utilities, and insurances as a bare minimum to live a normal life. When someone making $45,000 per year has to give the government $10,000 in income taxes being left with $35,000 has a considerably larger impact on that person's life than someone making $450,000 per year paying $100,000 and being left with $350,000.

It's a pretty simple concept that people disagree with.

Also, a home, vehicle, and many insurances are luxuries. Clothing should be a minor expense, you don't need new clothes every week or month. You can make 15k and pay for food, rent, utilities, and a bus pass.

Contrary to the greedy types, who believe what's theirs is theirs and everyone else can piss off, no one's suggesting that everyone should be left with the same amount of money. Of course there should be variability in income. Those who work more and get paid more should have more. However, this notion that my money is mine and that's that is completely myopic. A successful person in Canada is only successful because the society they live in allows them to be successful. That society costs money to maintain. Police, fire, health, education, roads, utilities, free-trade agreements, regulators, federal banking, all of these things allow people to be successful; these things allow employers to have a safe business, as well as a healthy and educated workforce. To be quite honest, they owe, at least in part, their success to the State that enforces contracts and maintains the society that allows them to be successful.

I don't think it's greedy to want to keep the money you earn instead of giving it to overpaid doctors, nurses, policemen, teachers, politicians, and bureaucrats (many of whom who hide their total compensation behind defined benefit pension plans).

Edited March 23, 2012 by CPCFTW

[cybercoma]

Until the middle-class realizes that their ambitions of making it to the upper-class are never going to happen under the current model, they'll continue to support policies that take money out of their pockets and gives it to the rich because they imagine that they'll be the rich someday. When they stop living in that fantasy world this will fall apart for the New Right. And I call it the New Right because the Old Right had a hell of a lot more sense and ethics than the New Right that cannot seem to comprehend the fact that they live in a society, that it's not every person for his/herself.

[jacee]

@WB re

THE AMOUNT OF TAX MONEY YOU CAN GET FROM THE NON-RICH WORKERS IS FAR, FAR, FAR GREATER THAN YOU CAN TAKE FROM THE RICH!

Irrelevant.

The nonrich are tapped out.

The rich are not.

We need to collect more tax money to pay for public services.

The rich need to pay more.

Simple math.

[cybercoma]

@WB re

THE AMOUNT OF TAX MONEY YOU CAN GET FROM THE NON-RICH WORKERS IS FAR, FAR, FAR GREATER THAN YOU CAN TAKE FROM THE RICH!

Irrelevant.

The nonrich are tapped out.

The rich are not.

We need to collect more tax money to pay for public services.

The rich need to pay more.

Simple math.

Not only irrelevant, but no one is suggesting the rich should be taxed more to fund a tax cut for the poor.

[Michael Hardner]

This argument about the rich not paying their fair share is an old one. It is also totally bogus!

It perfectly illustrates the difference between "head" people and "heart" people or maybe more accurately those who use intuition as a guide rather than cold hard math.

The first place everybody should look is in the mirror, including you. You seem to think you're a completely rational being but are you more rational than the rest of us ? There are certain emotional topics (patriotism, as a possible example) that you will swallow with the best of them.

Some might want to include the wealth of corporations but that too is irrelevant. Their money eventually comes out as income for all a corporation's workers and to salaries for its managers, plus share dividends to all the old ladies and teachers who rely on their portfolio for their old age income. It winds up included in my original example.

While I concur with your logic for the most part, there is also corporate profit which doesn't go to shareholders.

Every time the mob's attention will be diverted towards the rich guy, while the politician saunters away whistling - and laughing!

The question, to my mind, is how much as a % are they paying now and how much have they paid in the past ? It seems that the middle class pays more while the highest earners pay less.

[TimG]

While I concur with your logic for the most part, there is also corporate profit which doesn't go to shareholders.

It sits in the company bank account until it is paid out to a shareholder or employee. Every cent of corporate profits is taxed when it leaves the company.

The question, to my mind, is how much as a % are they paying now and how much have they paid in the past ? It seems that the middle class pays more while the highest earners pay less.

The other question you need to ask is whether the number of high income earners has increased as a result of lower tax rates and how those numbers would decrease if taxes were raised.

You also have to look at the source of income. e.g. a middle class retiree with $40K/year dividend income will pay 0 tax. A retiree with $200K/year in dividend income will pay more but less than an employee with $200K is salary. It is wrong to compare the tax rates of different groups without considering their source of income.

Edited March 23, 2012 by TimG