So what would an NDP government do?

[dre]

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

But they want access to the massive consumer base in western countries... so if they leave over tax rates just dont let them sell stuff here. Other companies will gladly take their place.

[PrimeNumber]

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/

German's corprate tax rate is still at 15% plus CO2 taxes. Ours would be much lower after we add the severance tax too. The difference between us and Germany is the natural resourcrs at our disposal. If a large company won't extract them at current rates, smaller local companies and investors will. It still makes money.

[-1=e^ipi]

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

For the sake of clarity of conversation, could you please define 'regressive tax'?

Thats not to say consumption taxes cant be usefull, but they are regressive compared to a graduated tax on income.

Is the basis of your claim that sales taxes are 'regressive' based upon a comparative statement?

[cybercoma]

For the sake of clarity of conversation, could you please define 'regressive tax'?

One that puts a disproportionate financial burden on lower income earners.

[-1=e^ipi]

One that puts a disproportionate financial burden on lower income earners.

And can you give me a mathematical definition of how you determine what is 'disproportional' or not?

[Evening Star]

- 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.

I agree that the system is more complicated than it needs to be. (I wasn't necessarily arguing for the status quo, although I prefer it to some of the alternatives that people are suggesting here.) The first thing I would do would be to scrap all the goofy tax credits that have been introduced over the last decade or so. I have no real problem with a system based on marginal rates but the idea of basing the tax code on a c-infinity function warms my nerdy heart.

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

I find it hard to believe that this effect is significant (unless marginal rates become much higher than they are now), mainly for the reasons given in these:

http://modeledbehavior.com/2011/05/18/do-taxes-decrease-the-incentive-to-work/

http://www.bloombergview.com/articles/2014-12-24/do-higher-taxes-make-us-work-less

- 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).

I'm not sure that this is unfair, given that people work, earn money, vote, etc as individuals. I don't see why they shouldn't be taxed as individuals rather than as families or couples. (A tax deduction for dependents does make sense to me.)

[TimG]

I'm not sure that this is unfair, given that people work, earn money, vote, etc as individuals. I don't see why they shouldn't be taxed as individuals rather than as families or couples. (A tax deduction for dependents does make sense to me.)

One's eligibility for government benefits depends on family income therefore it is unfair to tax families as individuals.

[Argus]

But they want access to the massive consumer base in western countries... so if they leave over tax rates just dont let them sell stuff here. Other companies will gladly take their place.

They don't need to be here to have access. And trade agreements don't allow us to ban stuff from other countries. Why do you think so many millionaires live in Bermuda? Or so many corporations locate their spurious head offices in other countries?

[Argus]

And can you give me a mathematical definition of how you determine what is 'disproportional' or not?

Given that the lower third of Canadians pay no income taxes, I'm not sure how anyone can suggest they get taxed disproportionately. The top 20% of income earners pay 75% of all income taxes.

[Argus]

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.

What they don't spend they invest, which still helps the country. Eventually, they either spend it or it's useless to have it.

And if basic necessities aren't taxed then lower income brackets should do fine.

[cybercoma]

And can you give me a mathematical definition of how you determine what is 'disproportional' or not?

Why do you want a mathematical definition?

[cybercoma]

Given that the lower third of Canadians pay no income taxes, I'm not sure how anyone can suggest they get taxed disproportionately. The top 20% of income earners pay 75% of all income taxes.

Nobody is. Euler's Formula asked what a regressive tax is, so I gave him a definition. Now he wants mathematical proof of something that's pretty self explanatory and isn't strictly a math problem.

Edited June 23, 2015 by cybercoma

[-1=e^ipi]

I find it hard to believe that this effect is significant (unless marginal rates become much higher than they are now), mainly for the reasons given in these:

Let's go with the definition that a tax is progressive if the proportion of income a person pays as tax is an strictly increasing function of income (though I suspect many in this thread may have different definitions).

Let's take an individual earning $80,000 per year in Ontario. Here are the relevant tax rates:

Ontario:

5.05% on the first $40,922 of taxable income, +

9.15% on the next $40,925, +

National:

15% on the first $44,701 of taxable income, +

22% on the next $44,700 of taxable income (on the portion of taxable income over $44,701 up to $89,401), +

The individual pays 25.14% of their tax as income but their marginal tax rate is 31.15%. So the individual's incentive to work is (1-0.2514)/(1-0.3115) -1 = 8.7% higher under a flat tax system that taxed this individual at the same rate compared to the progressive system.

I'm not sure that this is unfair, given that people work, earn money, vote, etc as individuals. I don't see why they shouldn't be taxed as individuals rather than as families or couples. (A tax deduction for dependents does make sense to me.)

Okay, I'll give you another example. Let's say you have two otherwise identical fishermen who live next door. The fishermen both earn $200,000 dollars in two years. One fisherman earns $100,000 each year and the other fisherman earns $50,000 in one year and $150,000 in the following year. Under the progressive tax system, the second fisherman has to pay more in taxes than the first, even though they both have earned the same amount of money. How is that fair?

[-1=e^ipi]

Nobody is. Euler's Formula asked what a regressive tax is, so I gave him a definition. Now he wants mathematical proof of something that's pretty self explanatory and isn't strictly a math problem.

Your definition is vague. So my guess is that for you and Dre, a 'progressive' tax is whatever you feel is 'progressive'.

Anyway, the use of the words 'progressive' and 'regressive' to describe different tax structures seems very Orwellian. Rather than justify a specific tax structure, you simply play an Orwellian word association game to associate progress with the tax structure you advocate and regress with the tax structure you oppose. When asked to give a precise definition of 'progressive' you refuse. So as far as I can tell, progressive means the a tax system that you approve of, and you approve of a tax system because it's 'progressive'. That is circular reasoning.

[TimG]

Why do you want a mathematical definition?

Because without a mathematical way to define "progressive" you are spouting nonsense if you claim that some tax is progressive but another is not. If we go with the literal definition progressive taxation then the GST is progressive because the rich spend a larger portion of their income on taxable goods and services because of exempt items like rent/food and add low income GST credit which offsets nearly 100% of the average GST paid by people earning less than 30K/year. Edited June 23, 2015 by TimG

[-1=e^ipi]

Because without a mathematical way to define "progressive" you are spouting nonsense if you claim that some tax is progressive but another is not. If we go with the literal definition progressive taxation then the GST is progressive because the rich spend a larger portion of their income on taxable goods and services because of exempt items like rent/food and add low income GST credit which offsets nearly 100% of the average GST paid by people earning less than 30K/year.

Yes, this is the definition that is the most accepted.

Progressive means that the proportion of income paid as tax as a function of income is an increasing function.

Regressive means that proportion of income paid as tax as a function of income is a decreasing function.

Flat tax = neither progressive, nor regressive. It is neutral.

Sales tax with exemptions on essentials is effectively progressive.

Flat tax + guaranteed income (via lump sum transfer) is effectively progressive.

Edited June 23, 2015 by -1=e^ipi

[cybercoma]

You guys are lost. There's a minimum standard that people need to survive. They need food, clothing, shelter, utilities, and transportation. After those basic standards are covered, lower income people have less money left over. If you want a math formula, then you look at how much people earn beyond a livable income and see what proportion of taxes paid are to that "disposable" income. You guys want to play silly little games twisting things up when it's as simple as those with the ability to pay more do. We have a progressive tax system already, so there isn't even an argument to be made. A flat tax is regressive because it disproportionately affects lower income earners after accounting for a basic standard of living. You want to talk about what's "fair" but you never consider what people need to survive before accounting for your cocked up tax schemes. That's precisely why no government, not even a Conservative government, seriously humours these stupid ideas.

Edited June 23, 2015 by cybercoma

[Keepitsimple]

A flat tax is regressive because it disproportionately affects lower income earners after accounting for a basic standard of living. You want to talk about what's "fair" but you never consider what people need to survive before accounting for your cocked up tax schemes. That's precisely why no government, not even a Conservative government, seriously humours these stupid ideas.

It's not regressive if you don't pay ANY tax on the first $24,000, for example. I love the idea of a flat tax - don't care if it's 15%, 20% or whatever - all income is taxed. Problem is - it would put thousands upon thousands of accountants and government employees out of work and for that reason alone, it won't fly.....but it's certainly not "stupid".

[PrimeNumber]

It's not regressive if you don't pay ANY tax on the first $24,000, for example. I love the idea of a flat tax - don't care if it's 15%, 20% or whatever - all income is taxed. Problem is - it would put thousands upon thousands of accountants and government employees out of work and for that reason alone, it won't fly.....but it's certainly not "stupid".

It's stupid for the person making $24,001. Sure they could go get a better job, but in a Capitalist system you absolutely need there to be someone on the bottom, so someone has to make bare minimun for society to function. Unless of course you want to bring in a higher minimum wage with a flat tax. Anyone making $24,001 that has to pay a flat tax, might as well just be jobless and feed of the system because that what it will encourage.

[-1=e^ipi]

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.

[-1=e^ipi]

Flat tax + lump sum transfer also satisfies this fairness property (the two fishermen would have the same disposable income after 2 years):

Okay, I'll give you another example. Let's say you have two otherwise identical fishermen who live next door. The fishermen both earn $200,000 dollars in two years. One fisherman earns $100,000 each year and the other fisherman earns $50,000 in one year and $150,000 in the following year. Under the progressive tax system, the second fisherman has to pay more in taxes than the first, even though they both have earned the same amount of money. How is that fair?

Where as the overly complicated tiered progressive tax system we have does not.

[Keepitsimple]

It's stupid for the person making $24,001. Sure they could go get a better job, but in a Capitalist system you absolutely need there to be someone on the bottom, so someone has to make bare minimun for society to function. Unless of course you want to bring in a higher minimum wage with a flat tax. Anyone making $24,001 that has to pay a flat tax, might as well just be jobless and feed of the system because that what it will encourage.

Yes - that would be stupid but that's not what I said/meant. Similar to the personal exemptions that we all have today - you wouldn't pay any tax on the first $24,000.....so earning $24,001 you'd only pay tax on $1.

[PrimeNumber]

Flat tax + lump sum transfer also satisfies this fairness property (the two fishermen would have the same disposable income after 2 years):

Where as the overly complicated tiered progressive tax system we have does not.

How much less complicated would it be to provide lump sums back to everyone? If you're aim is to cut beurocracy I have doubts a flat tax would do so.

You're fisherman example can't just stop after two years. Was the second fisherman given a raise or a promotion? Will he continue to make $150,000 for his 3rd year and so on? You're not really accounting for the fact that the 2nd fisherman may now be in the higher tax bracket for the remainder of each of their careers. Are they being paid based on how many fish they catch? Then your example still falls apart. Because fisherman 2 may have caught less fish in his second year, which means fisherman 1 caught more. Leading him to be taxed more on the fish he caught. If fisherman 1 had two average years and fisherman 2 had one great and one bad year, then the progressive tax system can work. If they're both charged a lump sum than whomever has a bad year, effectively has an even worse year after taxes.

Edited June 23, 2015 by PrimeNumber

[PrimeNumber]

Yes - that would be stupid but that's not what I said/meant. Similar to the personal exemptions that we all have today - you wouldn't pay any tax on the first $24,000.....so earning $24,001 you'd only pay tax on $1.

Which basically puts more money in the pockets of those already at the top anyways as they still don't pay taxes on their initial $24,000 either?

Edited June 23, 2015 by PrimeNumber

[-1=e^ipi]

You're fisherman example can't just stop after two years. Was the second fisherman given a raise or a promotion?

You can imagine that they both retire after the 2 years if it helps. And the second fisherman didn't receive a promotion; he was just unlucky in the first year and lucky in the second year.

You can easily extend my fisherman scenario to a scenario of any finite length of time. Let's say the two fishermen earn the same amount of money over their entire lifetimes, but one fisherman has more variation in annual income than the other fisherman. The fisherman with more variation in annual income pays more tax in a 'progressive' tax system.

If fisherman 1 had two average years and fisherman 2 had one great and one bad year, then the progressive tax system can work.

Except it can't... Do you want me to provide a mathematical proof?

If they're both charged a lump sum than whomever has a bad year, effectively has an even worse year after taxes.

Who is advocating charging the fishermen a lump sum?

Which basically puts more money in the pockets of those already at the top anyways as they still don't pay taxes on their initial $24,000 either?

Yes, but you can simultaneously increase the tax rate such that the end result is revenue neutral.