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

[Guest Derek L]

I may not need to practise empathy here since to an extent, I'm living the '(hopefully) initial struggle' part of this (after more than a decade years of post-secondary education). (Caveat: I have had help. Many have it worse. I realize this.)

Fair enough, but that light at the end of the tunnel is (or did for us) help you mentally stick it out……..Prior to my wife obtaining re-accreditation through the CDA we were defiantly on struggle street numerous times……moved in with my parents, my wife even did several stints with MSF…………But as our ducks got aligned , life certainly improved………

The thing is: no one wants high income earners to give up the majority of their income. I do think e.g. doctors should live well. But I've seen them and they do. I'm not sure it would be that harsh to ask them to only keep, say, 68% of the portion of their income that is over 300K instead of 71%.

As for giving up a small percentage of our income to Government, well it’s not so much the money, but more the principle……….3% next year, another 3% the year after, 7% after that etc………Where does it stop?

[Guest Derek L]

What are you talking about?

I don't know enough details about whatever imagined situation you are making up for these forums to provide you any kind of tax advice.

If you want tax advice then find a real live person you can pay for it.

I’m not looking for advice, we already have an accountant……..You stated you’re a tax professional, I asked a question……..Or are you just “grandstanding”?

Clearly a tax expert at the local shopping mall would know the inherent benefits of running a business from ones own home coupled with minimizing overhead.

[msj]

My opinion is marginal rates should never exceed 50% and that marginal rates in some provinces already exceed that.

I largely agree with you here.

Keep in mind that if these doctors suggestion were to go through then the top marginal tax rate for capital gains would still be 35% (half of 70%).

My preference would be to take top marginal tax rates to no more than 49% for regular income (wages/interest/etc) and find a way so that capital gains tax rate goes up too.

So instead of a person with $2 million in taxable income paying a marginal tax rate of 24.5% on any capital gain, he pays something closer to 37% (75% of capital gain being taxed).

Better yet, increase the capital gain inclusion rate back to 75% for everyone and be done with it - between RRSP's and TFSA's no one going forward should be paying tax on a capital gain unless they truly are well off (either before realizing the gain or after realizing the gain).

Also, lets end the $750,000 tax free (except for AMT) gain on the sale of QSB shares and certain qualified farm/fishing businesses too.

[msj]

I’m not looking for advice, we already have an accountant……..You stated you’re a tax professional, I asked a question……..Or are you just “grandstanding”?

If you go back to post #64 you will see that I was commenting on your claim about reducing your income by $60,000 and you hardly missing that income.

It is at post #67 where you then claimed the reason you hardly missed the income was moreso to do with dramatic cuts in various expenses (personal or otherwise).

Of course you will have hardly missed that income if you dramatically cut your expenses. Like duh.

And, of course, if you could continue to make that higher income while reducing your expenses (personal or business) then you would be even more better off (financially at least) even while paying higher marginal tax rates.

Your story sounds exaggerated, to say the least.

You sound like one of those guys who gets caught claiming "I'll just earn less money and pay less tax and be better off..."

When it is pointed out to you that, no, you still get to keep $5,600 of that $10,000 you earned you come up with the "oh, well, you see, I learned to live on less because I had a maid, a nanny, and a chauffeur and now I've got back to basics" excuse.

Hence my call of BS.

Edited March 24, 2012 by msj

[msj]

Clearly a tax expert at the local shopping mall would know the inherent benefits of running a business from ones own home coupled with minimizing overhead.

Probably not.

Be careful with running a business from your own home - there are some technicalities where business use of home expenses are denied completely.

[msj]

I wonder why we are talking only about increasing the marginal tax rates.

Per their website it appears that they also want to see an estate tax:

And, Canada is the only wealthy country without some sort of estate tax. For example, an American style estate tax, exempting from taxation the first five million in estate value would raise approximately $1.5 Billion. We can’t think of any reason why we wouldn’t tax and in fact heavily tax large estates. It is not as if the inheritors actually did anything for their income. And, a $5,000,000 deduction would exempt over 99% of estates. It clearly wouldn’t affect parents passing on the cottage and a very nice boat.

Word Doc from their site

[Guest Derek L]

If you go back to post #64 you will see that I was commenting on your claim about reducing your income by $60,000 and you hardly missing that income.

It is at post #67 where you then claimed the reason you hardly missed the income was moreso to do with dramatic cuts in various expenses (personal or otherwise).

Of course you will have hardly missed that income if you dramatically cut your expenses. Like duh.

And, of course, if you could continue to make that higher income while reducing your expenses (personal or business) then you would be even more better off (financially at least) even while paying higher marginal tax rates.

Your story sounds exaggerated, to say the least.

You sound like one of those guys who gets caught claiming "I'll just earn less money and pay less tax and be better off..."

When it is pointed out to you that, no, you still get to keep $5,600 of that $10,000 you earned you come up with the "oh, well, you see, I learned to live on less because I had a maid, a nanny, and a chauffeur and now I've got back to basics" excuse.

Hence my call of BS.

As I stated in a later post, yes, we certainly cut expenses, though that usually draws an imagine of a decrease in quality of life, which was not the case. Like I said, any “loss” in earned income was clearly beneficial to my family in other ways and that income wasn’t missed……….You can’t take it with you.

As for exaggeration………You don’t think many Canadians pay for childcare or lawn maintenance, just as working professionals having “overhead” ? Clearly a BS proposition……….

[Guest Derek L]

I wonder why we are talking only about increasing the marginal tax rates.

Per their website it appears that they also want to see an estate tax:

Word Doc from their site

And, Canada is the only wealthy country without some sort of estate tax. For example, an American style estate tax, exempting from taxation the first five million in estate value would raise approximately $1.5 Billion. We can’t think of any reason why we wouldn’t tax and in fact heavily tax large estates. It is not as if the inheritors actually did anything for their income. And, a $5,000,000 deduction would exempt over 99% of estates. It clearly wouldn’t affect parents passing on the cottage and a very nice boat.

Though hardly catastrophic in appearance, again I ask, once in place, that exemption can be lowered further and where does it eventually terminate?

Edited March 24, 2012 by Derek L

[msj]

As for exaggeration………You don’t think many Canadians pay for childcare or lawn maintenance, just as working professionals having “overhead” ? Clearly a BS proposition……….

I know many Canadians pay for this. I have several clients who run daycares and maintenance companies.

I don't pay for such things because I arrange my life not to - no kids, no lawn, no costs, more money for travel.

I know my parents didn't bother to pay for this when we grew up - my mom managed to work part-time and then full time and my sister and I managed to cut the lawn/clean the house/start dinner/make our own lunches when we were old enough (starting around 7 for making own lunches and around 11 for mowing the lawn).

For some reason parents seem to spoil their kids now days and don't seem to understand the benefits of children comes from using them as chore slaves.

Not sure why society has changed this way.

[msj]

Though hardly catastrophic in appearance, again I ask, once in place, that exemption can be lowered further and where does it eventually terminate?

Of course it can.

That's the thing about politics and democracy - if you can convince enough people to do something, or not, then it will happen, or not.

I'm okay with that limit being $1 million because I'm not counting on getting any inheritance in the first place and I don't care if my estate pays any tax when I die because I'm dead and the nieces and nephews can make their own way in this world after the head start they get for being lucky enough to be born in Canada and having an uncle/aunt willing to contribute to their RESP funds.

[cybercoma]

Though hardly catastrophic in appearance, again I ask, once in place, that exemption can be lowered further and where does it eventually terminate?

That's no reason not to support this plan, but it is a reason to resist lowering the limit.

[Guest Derek L]

I know many Canadians pay for this. I have several clients who run daycares and maintenance companies.

I don't pay for such things because I arrange my life not to - no kids, no lawn, no costs, more money for travel.

I know my parents didn't bother to pay for this when we grew up - my mom managed to work part-time and then full time and my sister and I managed to cut the lawn/clean the house/start dinner/make our own lunches when we were old enough (starting around 7 for making own lunches and around 11 for mowing the lawn).

For some reason parents seem to spoil their kids now days and don't seem to understand the benefits of children comes from using them as chore slaves.

Not sure why society has changed this way.

I have no problem playing Mr Mom in my household………My wife is an orthodontists, a profession that comes with a licence to print money……….And I have no complaints with working from home, when we bought our place it came with a legal basement suite that we rented to university students, that happened to double as decent nannies……….After they moved out, our kids grew up and we had several bad experiences with tenants, we found a new accountant that demonstrated some of the benefits of working from home……..

Clearly being able to deduct a portion of you’re your household expenses is a net benefit………As for child slavery, though my wife and I run an Absolute Monarchy and looked at that option, we prefer to employ our children as maids, gardeners and kitchen help………Even the fierce guard dogs play their part……As for the cat, he’s looking at getting excommunicated for all the talk about unions.

[Guest Derek L]

Of course it can.

That's the thing about politics and democracy - if you can convince enough people to do something, or not, then it will happen, or not.

I'm okay with that limit being $1 million because I'm not counting on getting any inheritance in the first place and I don't care if my estate pays any tax when I die because I'm dead and the nieces and nephews can make their own way in this world after the head start they get for being lucky enough to be born in Canada and having an uncle/aunt willing to contribute to their RESP funds.

I’d think if something akin to that came into play, we’d have to sell our properties to our children for a price considerably less than market valve.

[Guest Derek L]

That's no reason not to support this plan, but it is a reason to resist lowering the limit.

That’s exactly my point though……..If “higher income earners” don’t entrench and are willing to cross the proverbial line in the sand, they very well could be next when those not opposed to lowering the exemption have such a notion.

[TimG]

Though hardly catastrophic in appearance, again I ask, once in place, that exemption can be lowered further and where does it eventually terminate?

People who inherit already have to pay capital gains on property (which covers most of the value of large estates). Adding an estate tax is ridiculously punitive double tax no matter what the limit.

[Guest Derek L]

People who inherit already have to pay capital gains on property (which covers most of the value of large estates). Adding an estate tax is ridiculously punitive double tax no matter what the limit.

I’m opposed to it for numerous reasons, don’t get me wrong.

[msj]

I’d think if something akin to that came into play, we’d have to sell our properties to our children for a price considerably less than market valve.

Contra section 69 on the income tax act:

69. (1) Except as expressly otherwise provided in this Act,

(a) where a taxpayer has acquired anything from a person with whom the taxpayer was not dealing at arm’s length at an amount in excess of the fair market value thereof at the time the taxpayer so acquired it, the taxpayer shall be deemed to have acquired it at that fair market value;

( where a taxpayer has disposed of anything

(i) to a person with whom the taxpayer was not dealing at arm’s length for no proceeds or for proceeds less than the fair market value thereof at the time the taxpayer so disposed of it,

(ii) to any person by way of gift inter vivos, or

(iii) to a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property; and

the taxpayer shall be deemed to have received proceeds of disposition therefor equal to that fair market value; and

© where a taxpayer acquires a property by way of gift, bequest or inheritance or because of a disposition that does not result in a change in the beneficial ownership of the property, the taxpayer is deemed to acquire the property at its fair market value.

Edited March 24, 2012 by msj

[msj]

Clearly being able to deduct a portion of you’re your household expenses is a net benefit………As for child slavery, though my wife and I run an Absolute Monarchy and looked at that option, we prefer to employ our children as maids, gardeners and kitchen help………Even the fierce guard dogs play their part……As for the cat, he’s looking at getting excommunicated for all the talk about unions.

Hope you are keeping their hours and actually writing pay cheques to them.

CRA are starting to get wise to the "payment" of wages to children.

Oh, and the guard dog expenses - if you get audited they will get denied.

It's been to court a long time ago.

[Guest Derek L]

Contra section 69 on the income tax act:

Unless:

http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-91.html#docCont

Rights or things transferred to beneficiaries

(3) Where before the time for making an election under subsection 70(2) has expired, a right or thing to which that subsection would otherwise apply has been transferred or distributed to beneficiaries or other persons beneficially interested in the estate or trust,

(a) subsection 70(2) is not applicable to that right or thing; and

( an amount received by one of the beneficiaries or persons on the realization or disposition of the right or thing shall be included in computing the income of the beneficiary or person for the taxation year in which the beneficiary or person received it.

[MACKER]

Higher taxes are not the answer. Better deployment of tax dollars and a recreation of the funding system in Canada is needed.

1. First eliminating the public debt must be a #1 Priority this can be done by applying income taxes to what they were originally introduced for paying off the debt.

2. Second fiscal management must be responsible - this means no deficit spending, it isn't fair to spend other peoples money without their permission, we are not socialist.

3. Once the public debt is eliminated, taxes can be eliminated. It is vital that all non essential services such as law and order and defence and other areas of constitutional federal responsibility are handed over to the provinces or the people or converted into self funding crown corporations.

4. The government also need run all non essesential programs as fundraised initiatives.

5. Canada does not need higher taxes it needs better taxation, that actually addresses Canada's needs instead of partisan pet projects and vote buying.

The best way tax dollars can be used is giving them back to the taxed, but we must pay down the debt first.

All government programs can be funded by well managed legacy funds and public donations instead of extortion.

Canada controls the value/quantity of the currency there is no need to tax.

Our social safety net should be founded on employment, not handouts.

Edited March 24, 2012 by MACKER

[Guest Derek L]

Hope you are keeping their hours and actually writing pay cheques to them.

CRA are starting to get wise to the "payment" of wages to children.

Oh, and the guard dog expenses - if you get audited they will get denied.

It's been to court a long time ago.

You bet we do…….2 hours a day, per kid and 4 hours every second weekend......The food of the guard dogs? When their diet comprises ground beef, lamb, tuna and rice....

[msj]

Unless:

http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-91.html#docCont

Yes, as section 69 already stated: "except...."

All the more reason to bring in an estate tax and raise the income inclusion on capital gains to 100% when dealing with non-arm's length parties.

Then the government can get their pound of flesh and then some.

[Argus]

. 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.

That's a valid argument but not as cut and dried as you make it out to be. How much do rich people need all of the above in order to thrive? Rich people thrived a hundred years ago, when there was little in the way of public welfare, public education, hospitals, etc. They made their money and they kept it. And it didn't matter that most of society was poor and downtrodden and had lousy housing and lousy or non-existent education and health care. Today, rich people still thrive in chaotic parts of the world, or places with gross inequality.

[Argus]

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.

Well, I am not rich, but I'm upper-upper middle class, I guess, and various levels of government are already taking more than half my gross income in taxes. I agree that the 'rich' should be paying more as a percentage of their gross income. But I also think the poor are getting off lightly. You're a member of this society, and yet you contribute absolutely nothing in taxes? How is that fair? You draw the benefits, likely far more than someone who is upper middle class, but pay no taxes. You get to vote and have all the prerogatives of citizenship but pay nothing.

There are a lot more poorer people than rich people. We need to look at how much we subsidize them, too, and why. I certainly don't want anyone starving in the streets, nor going without education or health care. On the other hand, to take one example, I understand that the OAS, which was in much discussion some time back, helped to ensure elderly people didn't live in poverty. The cut-off for income, I believe was in the $60,000 range. That is ridiculous. Let me put it another way. If you are not too poor to own and drive a car then you are not poor. If you can afford to pay for cablevision, a big-screen TV, a DVD player, an X-box, and other 'luxuries' you are not poor.

[Argus]

Well its not just wealthy people... you gotta tax GDP wherever its at. The bottom 50% income earners control almost none of the economy... you cant get much from them at all. So you have to go after the top 50% that controls almost the entire economy.

Not quite true. If you think of our population in terms of a pyramid, you have a small number of rich at the very top. Then at the bottom, a very large number of poorer people. You would probably get considerably more money by taxing those poorer people a little bit than by taxing the few rich people a lot. Nearly half the population of this country doesn't pay income tax. Are they really poor people? I don't think so. When you exempt half the population from income taxes its not surprising the rest have to pay more than their share.