So what would an NDP government do?

Keepitsimple · June 24, 2015

So your counter argument is that our system is good enough, so it doesn't matter?

Why wouldn't you want the best tax system possible?

I listed a fairness property that all tiered tax systems violate, but which a flat tax + lump sum transfer does not. What advantage does the tiered tax system have over the flat tax + lump sum transfer?

You're getting a little too granular for me. I'm dealing with concepts - not trying to plan out the exact solution. My objectives were:

1) No tax for the poor

2) No Tax Credits

3) All income is taxed at the same rate

4) The more you make, the more you pay

5) No loopholes

6) More efficient - so less tax for everyone

To answer your question - if I understand correctly.....you'll tax everyone at the same rate (or a tiered rate) and then transfer money back to people. That means that poor people would have to first pay taxes - money that they can't afford......and then they get some back in a lump sum. That's a double whammy - because that lump sum will often not be spent on monthly bills to keep their heads above water.

PrimeNumber · June 24, 2015

I think in terms of a Basic Guaranteed Income a lump sum transfer is really really bad. A monthly, bi-weekly or weekly direct deposit is without a doubt a better idea.

Evening Star · June 24, 2015

You should give it to everyone; because otherwise there is little incentive for people below the guaranteed income level to work.

Ah, I thought you were advocating for Friedman's negative income tax. My arguments about the disincentive to work (and my suspicion on the long-term motive) were based on this assumption. My apologies. You are then advocating for the universal demogrant sort of GAI described here?: http://www.canadiansocialresearch.net/ssrgai.htm#Whatis

I haven't come across this idea much before. I'll think about it.

-1=e^ipi · June 24, 2015

The ability to opt out of the basic income should also be allowed, as some at the top of the income scale may opt out for the sake of being good people.

Can't they just donate to charity? Anyway, if people want to pay effectively more tax than they have to, I have no opposition to that.

Though do we only have a flat tax + GI, or is this coupled with many other excise taxes?

It would probably still make sense to have a consumption tax and pigouvian taxes.

How do you manage that? I know people who live in barebone one/two bedroom apartments whose rent alone is higher than $10,000/year not to mention food, clothing, transportation and utilities.

Depends where you live I guess. My rent + utilities is $500 per month. Food doesn't have to be expensive if you know where to shop. For transportation, you can always try to carpool, walk/bike or use public transportation.

Furthermore having any disposable income for entertainment, leisure and relaxation purposes.

I have internet access. This counts for all 3.

-1=e^ipi · June 24, 2015

1) No tax for the poor

3) All income is taxed at the same rate

1 and 3 are in direct conflict, unless you advocate no taxes. Having a flat tax with a lump sum transfer satisfies 3, while effectively satisfying 1.

That means that poor people would have to first pay taxes - money that they can't afford......and then they get some back in a lump sum.

They can afford it because the tax rate would be somewhere between 0% and 100%. And if you make it revenue neutral, the lump sum transfer will be larger than what poor people pay in taxes.

-1=e^ipi · June 24, 2015

I think in terms of a Basic Guaranteed Income a lump sum transfer is really really bad. A monthly, bi-weekly or weekly direct deposit is without a doubt a better idea.

I wasn't trying to emphasize the timing, but given that some people are bad at saving money, it would probably make sense to just give everyone weekly direct deposits from the government.

PrimeNumber · June 24, 2015

Can't they just donate to charity? Anyway, if people want to pay effectively more tax than they have to, I have no opposition to that.

It would probably still make sense to have a consumption tax and pigouvian taxes.

Depends where you live I guess. My rent + utilities is $500 per month. Food doesn't have to be expensive if you know where to shop. For transportation, you can always try to carpool, walk/bike or use public transportation.

I have internet access. This counts for all 3.

Wow $500 a month all utilities included is incredibly cheap in this country. I don't think there is a city over 35,000 people in Western Canada that has $500/month rent. but that's still $6000/year just for rent. Leaving you with ~ $4,000 for the year. I probably spend $3000 alone on groceries in a year, not including eating out. That's incredible.

Heck my utility payments alone between a BC property and a SK rental are over $5000/year

-1=e^ipi · June 24, 2015

You are then advocating for the universal demogrant sort of GAI described here?

Yes.

-1=e^ipi · June 24, 2015

Wow $500 a month all utilities included is incredibly cheap in this country. I don't think there is a city over 35,000 people in Western Canada that has $500/month rent. but that's still $6000/year just for rent. Leaving you with ~ $4,000 for the year. I probably spend $3000 alone on groceries in a year, not including eating out. That's incredible.

Actually, I think it's closer to $11,000 per year for me. And I eat a lot of eggs (cheap source of protein). It would be nice if we got rid of supply management though.

cybercoma · June 24, 2015

Wow cyber. I like how you continue to refuse to provide an adequate definition of a progressive tax system. I guess it is whatever you subjectively feel.

Claiming that a flat tax disproportionately affects the poor, when the proportion of tax is the same for anything doesn't make sense. Perhaps you should have said that is undesirable.

You also ignored my comment about flat tax + lump sum transfer. You think that a flat tax on it's own is inadequate? Well I agree with you, which is why you should combine it with a lump sum transfer.

For example, give every Canadian an annual lump sum transfer to help them obtain the essentials, and tax what people make at a flat tax. For example, if the transfer were $20,000 and the flat tax were 30% then a person's annual disposable income would be $20,000 + 0.7*I, where I is their annual income. This would greatly simplify the tax system and you can get rid of all the loopholes, tax credits, welfare, minimum wage, etc.

I provided a perfectly adequate explanation. You just don't care to hear it.

Also, for someone who would likely argue that people need incentive to work, you want to suddenly transfer everyone $20-24k? Don't you and your ilk whine that handouts like this make people lazy and refuse to work? :rolleyes:

PrimeNumber · June 24, 2015

Actually, I think it's closer to $11,000 per year for me. And I eat a lot of eggs (cheap source of protein). It would be nice if we got rid of supply management though.

Yeah I think it's a silly way of helping the Farmers. We should just have direct subsidies to all agricultural sectors. Our product should learn to compete on the open international market on it's own.

-1=e^ipi · June 24, 2015

Also, for someone who would likely argue that people need incentive to work

And people would still have an incentive to work provided the tax rate is less than 100%.

Don't you and your ilk whine that handouts like this make people lazy and refuse to work?

Me and my ilk? Who are these ilk exactly? Please find me one example where I was complaining that 'handouts make people lazy and refuse to work'.

We should just have direct subsidies to all agricultural sectors.

Maybe, but are direct subsidies justified? What is the reason for market intervention in the case of the agricultural sector? Externalities? Lack of information in the market? Public goods? Common goods? I guess you could argue that there are positive externalities associated with nutrition and having a country have an ability to feed it's people has national security value (public good), but still the justification seems pretty flimsy.

Keepitsimple · June 24, 2015

1 and 3 are in direct conflict, unless you advocate no taxes. Having a flat tax with a lump sum transfer satisfies 3, while effectively satisfying 1.

That's what I suggested - no tax on the first $24K - for example. All other income is taxable.

They can afford it because the tax rate would be somewhere between 0% and 100%. And if you make it revenue neutral, the lump sum transfer will be larger than what poor people pay in taxes

See above - the poor pay no taxes. This is an important distinction - if you tax them, you're taking away disposable income at source. Giving it back in a lump sum at tax time doesn't pay rent or put food on the table each week..

Listen - my suggestion is not an ideology that I'm chained to - I just tend to lean towards a straight forward approach. The truth is if we wiped the slate clean, governments of all stripes would just start to bribe us with our own money again - and the tax system would start down the same old path of various tax credits and other abominations. But hey, it's fun to come up with ideas.

PrimeNumber · June 24, 2015

Maybe, but are direct subsidies justified? What is the reason for market intervention in the case of the agricultural sector? Externalities? Lack of information in the market? Public goods? Common goods? I guess you could argue that there are positive externalities associated with nutrition and having a country have an ability to feed it's people has national security value (public good), but still the justification seems pretty flimsy.

Mostly to stay competative both domestically and abroad. Other countries in a given year may have better climate or lower wages resulting in what may be a cheaper product. Some food would without a doubt be cheaper to the consumer but at the cost of our own Agricultural sector. Most countries have some form of agricultural sbsidies as well, making our product even weaker without them.

Edited June 24, 2015 by PrimeNumber

-1=e^ipi · June 24, 2015

That's what I suggested - no tax on the first $24K - for example. All other income is taxable.

I mean you would have to get rid of all taxes, not just on poor people, for the property of a single tax rate to be satisfied. Unless you meant something different by single tax rate than what I would take that to mean.

See above - the poor pay no taxes. This is an important distinction - if you tax them, you're taking away disposable income at source. Giving it back in a lump sum at tax time doesn't pay rent or put food on the table each week..

Why can't you use the lump sum transfer to pay rent or buy food? I don't get it.

Mostly to stay competative both domestically and abroad. Other countries in a given year may have better climate or lower wages resulting in what may be a cheaper product. Some food would without a doubt be cheaper to the consumer but at the cost of our own Agricultural sector. Most countries have some form of agricultural sbsidies as well, making our product even weaker without them.

I'm not really sure if 'cause other countries do it' is a good justification. If all other countries implement a bad policy, it will still be bad even if Canada implements it. If you implement subsidies, you have to tax other industries to pay for it. So you have to see if the overall result is beneficial to Canada or not. Without some sort of justification such as externalities or common/public goods I don't see how implementing agricultural subsidies makes sense.

PrimeNumber · June 24, 2015

I'm not really sure if 'cause other countries do it' is a good justification. If all other countries implement a bad policy, it will still be bad even if Canada implements it. If you implement subsidies, you have to tax other industries to pay for it. So you have to see if the overall result is beneficial to Canada or not. Without some sort of justification such as externalities or common/public goods I don't see how implementing agricultural subsidies makes sense.

This is how many billions of dollars go into direct subsidies for each agricultural sector worldwide. I think the only reasonable reason to do it is because other countries do it. Canada just can't compete without it. Otherwise we have less profits, less profits means they can be less competative and eventually our agricultural industry fizzles out.

Meat_Atlas_2014_subsidies_animal_product

-1=e^ipi · June 24, 2015

Canada just can't compete without it.

We actually have quite a few advantages based on our geography, population density, technology, etc. We can be agricultural exporters without subsidies. Also, given that this discussion started with the mention of supply management, I'll point out that supply management only affects a few agricultural industries such as eggs, milk and poultry.

Otherwise we have less profits, less profits means they can be less competative and eventually our agricultural industry fizzles out.

Maybe less profits in the agricultural sector, but lower taxes elsewhere, which means more profits elsewhere to offset it. Unless there are positive externalities associated with having an agricultural sector, the costs exceed the benefits.

PrimeNumber · June 24, 2015

We actually have quite a few advantages based on our geography, population density, technology, etc. We can be agricultural exporters without subsidies. Also, given that this discussion started with the mention of supply management, I'll point out that supply management only affects a few agricultural industries such as eggs, milk and poultry.

Maybe less profits in the agricultural sector, but lower taxes elsewhere, which means more profits elsewhere to offset it. Unless there are positive externalities associated with having an agricultural sector, the costs exceed the benefits.

We do have many advantages based on geography and population density. But countries with far less land and higher population density regularly out preform us in the Agricultural indisutry even with our subsidies.. this list includes China, the US, India, Indonesia, Brazil and Nigeria.

In fact without our subsidies we would probably fall from our $100 billion mark. Russia which has low population and more prime geographical locations is in the $50 billion range. They also have far less agricultural subsidies than us and a declining agricultural industry. Though their entire agricultural industry had to shift its focus after the fall of the soviet union in 1990.

-1=e^ipi · June 24, 2015

We do have many advantages based on geography and population density. But countries with far less land and higher population density regularly out preform us in the Agricultural indisutry even with our subsidies.. this list includes China, the US, India, Indonesia, Brazil and Nigeria.

Not on a percapita basis. https://www.fcc-fac.ca/en/about-fcc/media-newsroom/news-releases/2014/fcc-report-shows-canada-is-worlds-top-per-capita-ag-trader.html

PrimeNumber · June 24, 2015

Not on a percapita basis. https://www.fcc-fac.ca/en/about-fcc/media-newsroom/news-releases/2014/fcc-report-shows-canada-is-worlds-top-per-capita-ag-trader.html

That may be true but that number will fall when subsidies are removed.

Keepitsimple · June 24, 2015

I mean you would have to get rid of all taxes, not just on poor people, for the property of a single tax rate to be satisfied. Unless you meant something different by single tax rate than what I would take that to mean.

That's what I mean at the personal level (PST, HST, etc. still remain) - no special rates for capital gains or bank interest - it's all "income" and taxed at the flat rate (tiered flat rate)

Why can't you use the lump sum transfer to pay rent or buy food? I don't get it.

If you are taxing poor people on their paycheques - albeit at a lower rate - you're taking away disposable income when compared to not taxing up to $24K (that was an example). Unless you are giving them back a lump sum every pay period, that would inhibit their ability to pay rent or buy food. I don't get that you don't get it - what am I missing?

Evening Star · June 24, 2015

I guess so. I should have specified the monetary incentive to work. Obviously there are other factors in determining if a person decides to work or not.

People in general, yes. Teachers specifically? That's harder to say given that it has a government employer and is heavily unionized.

Participation rate is not the same thing as how many hours per week people decide to work (or if they decide to work more stressful jobs).

I'm not clear on what your argument is here. Do you think it is always a good thing if people put in more hours and take on more stressful jobs and that we need to develop a tax system to promote this? Below, when you were responding to cyber, you seemed to think that is just important that people have *some* incentive to work, which is more where I was coming from.

I tried running the numbers wrt your example of the two fishermen. I know it's slightly more complicated but I just assumed that neither would pay any tax on the first $11 138 that they make (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/300-eng.html). Then using these marginal rates, I concluded that Fisherman 1, who makes $100K each year, would pay a total of $35 248.38 in two years, and Fisherman 2, who made $50K in Year 1 and $150K in Year 2, would pay a total of $33 936.82. I'm OK with this slight difference, honestly, given that Fisherman 2's situation seems more volatile and he had a pretty rough Year 1, where it seems like he could have used more of a break. If he continued to make $150K for the next few years, his total tax bill would quickly overtake Fisherman 1's, as it should.

Evening Star · June 24, 2015

KIS, a flat tax is not tiered by definition: "flat tax" means that everyone pays the same tax rate regardless of their income level, as is the case in AB at the provincial level. You are describing progressive marginal rates, which are what we have now. The difference is that you want to also tax capital gains, savings accounts, interest, inheritance, etc at the same level as earned income, which puts you to the left of the NDP. I lean towards agreeing with you on this, though.

eyeball · June 24, 2015

Yeah, that will have investors flocking to our shores.

You guys sound like the English Department of Finance and Bad Ideas, circa 1963.

What we need is a global tax system to match our global economy. In fact we should have put the former in place before we started on the latter.

Evening Star · June 24, 2015

I'm not clear on what your argument is here. Do you think it is always a good thing if people put in more hours and take on more stressful jobs and that we need to develop a tax system to promote this? Below, when you were responding to cyber, you seemed to think that is just important that people have *some* incentive to work, which is more where I was coming from.

I tried running the numbers wrt your example of the two fishermen. I know it's slightly more complicated but I just assumed that neither would pay any tax on the first $11 138 that they make (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/300-eng.html). Then using these marginal rates, I concluded that Fisherman 1, who makes $100K each year, would pay a total of $35 248.38 in two years, and Fisherman 2, who made $50K in Year 1 and $150K in Year 2, would pay a total of $33 936.82. I'm OK with this slight difference, honestly, given that Fisherman 2's situation seems more volatile and he had a pretty rough Year 1, where it seems like he could have used more of a break. If he continued to make $150K for the next few years, his total tax bill would quickly overtake Fisherman 1's, as it should.

OK, I tried running the numbers at a $25000 GAI and a 22% flat rate on income above $25K and I'm starting to see your point: both fishermen end up paying the same amount but Fisher 2 pays less in his rough year than he would under the current system. I'll think about this idea some more.