So what would an NDP government do?

Evening Star · June 21, 2015

Maybe you're not listening closely enough. Lefties have been suggesting for years now that we replace income taxes with consumption taxes. Amongst the other reasons why is that doing so will help restrain profligate consumption thereby lessening environmental impacts.

I'm hoping this will also inspire people to demand better quality things that don't break down or wear out as fast.

Unless you're talking about the Green Party or maybe Stéphane Dion, neither of whom I've ever considered poverty activists, I'm not sure who you could be referring to here. Cite?

[Edited for grammar]

Edited June 21, 2015 by Evening Star

PrimeNumber · June 21, 2015

We should be doing away with income taxes and bringing in a national alcohol tax, sugar tax, aspertame tax, leaglizing marijuana and taxing it, possibly even prositution. Heck we should be taxing anything that relates to having a burdern on the healthcare system. As well as a national severance tax on all resources.

Evening Star · June 21, 2015

I don't really see how those taxes could replace income taxes altogether unless they were oppressively steep. Taxing sugar seems insane to me: it is a nutrient that our bodies need (in moderation) and is present in all sorts of healthy fruits and vegetables, for starters.

PrimeNumber · June 21, 2015

A sugar tax isn't meant to target natural sugars in fruits and vegetables. Moslty candy and soft drinks among a few other things. Some estimates put a Marijuana tax in the billions, alcohol surely would be, tobacco is around $700 mill a year, a severance tax would bring in the majority share though. Would it all be enough to replace income tax? Maybe not. But it would be interesting to see the contrasting figures.

Evening Star · June 21, 2015

We already tax the crap out of alcohol and tobacco. How would a national severance tax apply in Canada, where resources are mostly publicly owned and under provincial jurisdiction? Provincial governments already seem to charge royalties.

PrimeNumber · June 22, 2015

We already tax the crap out of alcohol and tobacco. How would a national severance tax apply in Canada, where resources are mostly publicly owned and under provincial jurisdiction? Provincial governments already seem to charge royalties.

Having them publicly owned is even easier. The companies come in and are taxed a royalty to remove a resource. Oil, Uranium, Potash, Natural Gas, Gold, Silver, virtually anything. You can even lower corprate taxes with the money made. Though the Constitution allows the Province to control how they remove a resource, the Federal Government has the power to tax in any way they please.

A Federal severance tax would be in the 100's of billions no doubt.

The next step would be some eco taxes, a Carbon tax is without a doubt one of the most effective ways to raise revenue.

Evening Star · June 22, 2015

My concern with using carbon taxes as a principal revenue source is that if the tax actually works like it 'should' and discourages people from using CO2-emitting fuels, government revenues will suffer. If this does not happen, we are basically admitting that the tax's environmental benefit is marginal. We can't have it both ways. This basically applies to all sin taxes: revenue depends on how much people sin. This is not to say that sin taxes are a bad idea per se but it does seem like a bad idea for them to become a principal revenue stream. What is wrong with progressive income tax? It is clear and simple and relatively stable, takes money from people who can afford it, and is not nearly as dependent on consumption trends.

On Guard for Thee · June 22, 2015

My concern with using carbon taxes as a principal revenue source is that if the tax actually works like it 'should' and discourages people from using CO2-emitting fuels, government revenues will suffer. If this does not happen, we are basically admitting that the tax's environmental benefit is marginal. We can't have it both ways. This basically applies to all sin taxes: revenue depends on how much people sin. This is not to say that sin taxes are a bad idea per se but it does seem like a bad idea for them to become a principal revenue stream. What is wrong with progressive income tax? It is clear and simple and relatively stable, takes money from people who can afford it, and is not nearly as dependent on consumption trends.

I dont think a tax on CO2 is a so called sin tax in the same way as say on tobacco. We all know that smoking will either kill you or at least cause you to be more of a burden on the healthcare system. The best outcome of that tax would be if everyone quit smoking and led healthier lives. Of course the tax revenues would dry up. Tax on CO2 could and is being used to fund renewable energy sources. Yes they need more work but hey, I need electricity to be able to tap this message and I fully expect to pay for it. I reckon we would be much better off if everyone was paying those fees to maintain a windmill or a solar panel rather than a coal mine.

PrimeNumber · June 22, 2015

Nothing is wrong with income taxation but with excise, severance and eco taxation we can lower the progressive income tax scale, as well as corporate taxation. We know that Carbon taxing works and we know this stream of revenue is not going anywhere for a few decades at least.I'll be the first to admit that it really shouldn't be used as a tax for change, more like a tax of change that can be taken advantage of. Alcohol, tobacco, marijuana, sugar.. these are things that will continue to be used regardless of taxation. They also burden the healthcare system. So we tax those who lead healthy, clean lifestyles less and those who refuse to change more.

eyeball · June 22, 2015

Unless you're talking about the Green Party or maybe Stéphane Dion, neither of whom I've ever considered poverty activists, I'm not sure who you could be referring to here. Cite?

[Edited for grammar]

Nope, no cite. It likely was a Green I heard and I'm a lefty or so I'm told. I think income taxes should be eliminated for ordinary working people and replaced with a GST, with rebates or for low income earners. What I'd really like to see are tax credits for volunteer labour, to the extent that some income tax returns are more like an invoice.

As for the filthy rich I'd still tax the living snot every which way it's possible out of them.

TimG · June 22, 2015

What is wrong with progressive income tax? It is clear and simple and relatively stable, takes money from people who can afford it, and is not nearly as dependent on consumption trends.

Nearly all economists prefer a VAT/GST which is progressive since poor spend less than the rich and it is very stable. It is bad to rely on income taxes because once the reach a certain level people will find ways to reduce their nominal income (including simply not working). It also breaks the accountability loop because a lot of people don't pay income tax and there is something inherently wrong with a system where a large percentage of voters demand that taxes be raised that they do not have to pay.

Evening Star · June 22, 2015

Nearly all economists prefer a VAT/GST

Again, I'm being told that there is consensus among economists. Yet, when I gave an example above of a famous economist who advocates for both consumption taxes as well as higher income taxes, there was an admission that there is in fact a very wide range of opinion among economists.

It is bad to rely on income taxes because once the reach a certain level people will find ways to reduce their nominal income (including simply not working).

I don't deny this but I don't see how we could be close to this point at our current tax rates. From what I've read, many economists peg the Laffer Curve around the 65-70% mark. (Some peg it much lower, yes.) Every economist surveyed here disagreed that a cut in the US's income tax rates would result in an increase in revenue.

I'm not against consumption taxes per se but if we had something like a 25-30% GST (which doesn't seem unrealistic if it has to replace income taxes), I think a lot of people would just shop across the border or online. In fact, this seems more believable to me than the idea that people would just stop working or investing if a higher income tax bracket were introduced.

Edited June 22, 2015 by Evening Star

Evening Star · June 22, 2015

I dont think a tax on CO2 is a so called sin tax in the same way as say on tobacco. We all know that smoking will either kill you or at least cause you to be more of a burden on the healthcare system. The best outcome of that tax would be if everyone quit smoking and led healthier lives. Of course the tax revenues would dry up. Tax on CO2 could and is being used to fund renewable energy sources. Yes they need more work but hey, I need electricity to be able to tap this message and I fully expect to pay for it. I reckon we would be much better off if everyone was paying those fees to maintain a windmill or a solar panel rather than a coal mine.

But if CO2-producing energy sources are still a thing that everyone needs to use, then this is basically a regressive tax on a necessity.

I'm not against modest CO2 taxes. I would not be opposed to bringing the GST back up to at least 7%. (I actually agree that the NDP will probably need to charge more taxes than they say they will in order to fund their proposals.) I just don't agree that these should replace income taxes as a primary revenue stream.

Edited June 22, 2015 by Evening Star

-1=e^ipi · June 22, 2015

We should be doing away with income taxes and bringing in a national alcohol tax, sugar tax, aspertame tax, leaglizing marijuana and taxing it, possibly even prositution.

As much as I am in favour of pigouvian taxes, I don't think the revenue from these taxes alone (provided they are taxes appropriately, i.e. at the marginal external social cost) will be sufficient to replace income taxes alone.

The next step would be some eco taxes, a Carbon tax is without a doubt one of the most effective ways to raise revenue.

1. Call it a CO2 emission tax please; that is more accurate.

2. With respect to a CO2 emission tax, there is the complicating aspect of game theory. Unlike the previous examples, the majority of the effect of CO2 emissions is going to be outside of Canada (given that Canada is ~2% of global GDP, let's say that 98% of the 'benefit' is outside Canada). If Canada were to implement a CO2 tax that were in its national best interest then it would be only 2% the tax level that would be in the global best interest (all assuming that CO2 emissions have a negative externality). If Canada were to unanimously do that tax level that is in the global best interest, then that doesn't incentivize other countries from doing the same, where as doing some sort of tit-for-tat approach (refusing to implement the globally optimal level until a global agreement on reducing CO2 emissions) would be more effective at incentivizing other countries from doing the same.

3. You say there is no doubt that a CO2 emission tax is one of the most effective ways to raise revenue. Well I have doubts. Can you please demonstrate to me that the marginal external social cost of CO2 emissions is negative?

What is wrong with progressive income tax? It is clear and simple and relatively stable, takes money from people who can afford it

A few things:

- Income tax doesn't incentivize savings as much as a consumption tax, so doesn't result in an as high long run GDP per capita.

- Our current system isn't as simple as you make it seem. All the tax brackets and exceptions make it far more complicated than it needs to be. Personally, I would argue that tax as a function of income should at the very least be a c-infinity function rather than this arbitrary mess we have now.

- A progressive income tax creates a much higher disincentive to work than a flat income tax per revenue earned.

- Progressive tax system leads to unfair distribution of taxes in some cases (example: two families that earn the same amount may pay significantly different levels of taxes based upon distribution of income within the family; income splitting helps somewhat, but then it causes discrimination against unmarried couples and people that don't agree with the institution of marriage).

-1=e^ipi · June 22, 2015

Again, I'm being told that there is consensus among economists. Yet, when I gave an example above of a famous economist who advocates for both consumption taxes as well as higher income taxes, there was an admission that there is in fact a very wide range of opinion among economists.

Those two positions aren't necessarily in conflict. Most economists would probably agree that a small marginal increase in consumption taxes and a corresponding decrease in income taxes would be beneficial for the economy in the long run (at least for places like Canada, USA, etc.). However, when it comes to very large changes in the tax structure, things become more complicated. Using only consumption taxes may result in more tax evasion than using a combination of income and consumption taxes. But more importantly, there is such a thing as too much savings (some argue Japan might be at this level); the simple Solow model suggests that there is a level of saving that maximizes long run economic consumption; after which long run economic consumption decreases. So a combination of consumption and income taxes may be preferable to consumption taxes alone.

I'm not against consumption taxes per se but if we had something like a 25-30% GST

25% is also nice because it is easily invertible. 1/1.25 = 0.8.

-1=e^ipi · June 22, 2015

But if CO2-producing energy sources are still a thing that everyone needs to use, then this is basically a regressive tax on a necessity.

There is more to a tax structure than just how 'progressive' it is. There is also how it changes incentives (particularly the incentive to work and the incentive to perform activities that have negative externalities such as pollution). Trying to justify a CO2 emission tax on its 'progressiveness' just misses the entire point of the tax.

TimG · June 22, 2015

From what I've read, many economists peg the Laffer Curve around the 65-70% mark. (Some peg it much lower, yes.)

50% is maximum ethically justifiable tax rate. Anything higher and you are going to encourage rampant tax evasion because people object in principle to giving the government more than they get to keep for themselves. Frankly, there is nothing to discuss if you believe marginal rates should exceed 50%. Even Tom Muclair is on the record stating that is limit. Edited June 22, 2015 by TimG

Argus · June 22, 2015

My concern with using carbon taxes as a principal revenue source is that if the tax actually works like it 'should' and discourages people from using CO2-emitting fuels, government revenues will suffer. If this does not happen, we are basically admitting that the tax's environmental benefit is marginal.

Not to mention it can seem to be working if high emissions companies shut down and move to Mexico. Hey, our emissions went down! Woohoo! Look at us save the planet!

Except, of course, it's not making any damn difference since they're just emitting from somewhere else. While no longer providing jobs or taxes here.

Argus · June 22, 2015

Nothing is wrong with income taxation but with excise, severance and eco taxation we can lower the progressive income tax scale, as well as corporate taxation. We know that Carbon taxing works

Works for what? Works to drive companies out of the country?

Argus · June 22, 2015

As for the filthy rich I'd still tax the living snot every which way it's possible out of them.

Then they'd simply leave, and invest somewhere else.

dre · June 22, 2015

Nearly all economists prefer a VAT/GST which is progressive since poor spend less than the rich and it is very stable. It is bad to rely on income taxes because once the reach a certain level people will find ways to reduce their nominal income (including simply not working). It also breaks the accountability loop because a lot of people don't pay income tax and there is something inherently wrong with a system where a large percentage of voters demand that taxes be raised that they do not have to pay.

Actually sales taxes are inherently regressive unless you exempt commonly needed stuff like food, clothes, fuel, rent, etc.

PrimeNumber · June 22, 2015

Works for what? Works to drive companies out of the country?

Well once we lower the corporate tax rate, it works to attract clean companies from all over the World. For clean companies we would have one of the lowest corprate tax rates on the planet.

Argus · June 22, 2015

Actually sales taxes are inherently regressive unless you exempt commonly needed stuff like food, clothes, fuel, rent, etc.

Generally the basics are exempt, but as for the rest.... A person buys an economy car for 13,000 and pays $1300 in taxes if the rate is 10%. A rich man buys a BMW for $80,000 and pays $8,000 in taxes. A very rich man buys a Lambourghini for $300,000 and pays $30,000 in taxes.

It costs a lot more to fuel a yacht than a dinghy. The taxes paid on the fuel will be adjusted accordingly. A shirt at Wal-mart is $12. A shirt at Harry Rosen $300. Any way you look at it rich people will be paying a lot more than poor people unless they simply invest their money, which still helps grow the economy if it's invested in Canadian companies.

Argus · June 22, 2015

Well once we lower the corporate tax rate, it works to attract clean companies from all over the World. For clean companies we would have one of the lowest corprate tax rates on the planet.

That's a nice theory. I wonder why no one has tried it before? Oh, wait, they have. http://ep.probeinternational.org/2014/03/21/ontario-to-follow-germany-in-renewable-failure/

dre · June 22, 2015

Generally the basics are exempt, but as for the rest.... A person buys an economy car for 13,000 and pays $1300 in taxes if the rate is 10%. A rich man buys a BMW for $80,000 and pays $8,000 in taxes. A very rich man buys a Lambourghini for $300,000 and pays $30,000 in taxes.

It costs a lot more to fuel a yacht than a dinghy. The taxes paid on the fuel will be adjusted accordingly. A shirt at Wal-mart is $12. A shirt at Harry Rosen $300. Any way you look at it rich people will be paying a lot more than poor people unless they simply invest their money, which still helps grow the economy if it's invested in Canadian companies.

The problem is people in lower income backets spend virtually all of their money on personal and family consumption. Wealthy people do not, and often only spend a fraction of it. Thats not to say consumption taxes cant be usefull, but they are regressive compared to a graduated tax on income.