Harper's tax credits..good or bad?

[-1=e^ipi]

What is hard is to compute taxable income.

I never claimed it was. Keep pretending otherwise if you want.

What you don't understand is that it is not hard to take $100,000 of taxable income and apply the rates and thresholds to it. That is basic substraction, multiplication and addition skills.

To be fair, it does make the calculation of the social welfare optimizing tax system far more complicated, especially when the set of progressive tax systems is infinitely dimensional. Though as justified by the links I provided earlier, the optimal level of taxation can be very well approximated by a flat tax + guaranteed income.

How to deal with dividends to reduce the effects of double taxation is a real issue that requires "complicated" solutions.

How to maintain corporate surpluses so that they are taxed properly as capital gains or as dividends, especially when family members are involved, are real issues that create extremely complicated sections of the Income Tax Act.

Eliminate tax on capital gains and corporate taxes. Only have a 25% VAT, a flat income tax, and some pigouvian taxes on things with negative externalities. Maybe property taxes as well for municipal purposes. Problem solved.

Edited August 27, 2015 by -1=e^ipi

[msj]

Eliminate tax on capital gains and corporate taxes. Only have a 25% VAT, a flat income tax, and some pigouvian taxes on things with negative externalities. Maybe property taxes as well for municipal purposes. Problem solved.

Sure, if you want to make the tax system easy then eliminate income taxes period.

In the real world, the government needs revenue to fund programs that voters want.

That means taxation has to meet certain goals - one of them being sufficiency of revenue.

Voters also would never accept a 25% VAT so lets drop that idea right now as being nothing but theoretical nonsense proposed by economists who have probably never heard of behavioural finance before.

Also, why should capital gains not be taxed?

An economic gain is an economic gain and should be taxed as such.

As for corporations not paying income taxes - you have no idea the can of worms that would open.

I would love it since I have a corporation.

But I also understand the time value of money and, fortunately, so does the government so they know that 0% tax rates for corporations is not going to work despite the promises made by politicians who don't understand such concepts.

[-1=e^ipi]

Sure, if you want to make the tax system easy then eliminate income taxes period.

In the real world, the government needs revenue to fund programs that voters want.

That means taxation has to meet certain goals - one of them being sufficiency of revenue.

Yes, which is why I don't advocate the elimination of income taxes.

Voters also would never accept a 25% VAT so lets drop that idea right now as being nothing but theoretical nonsense proposed by economists who have probably never heard of behavioural finance before.

They did in most of Europe. Look at Norway. 25% VAT.

This nonsense of 'it's conventional wisdom that voters will never accept X, so don't try' is self fulfilling.

Also, why should capital gains not be taxed?

Economic reasons. It distorts the value of saving and is one of the most costly forms of taxation on economic output. Go read the Harvard link.

As for corporations not paying income taxes - you have no idea the can of worms that would open.

Sure I do. It's unpopular. It doesn't mean people can't be convinced over time that it is desirable. People used to not accept gay marriage and trans rights, now they do (for the most part).

[msj]

They did in most of Europe. Look at Norway. 25% VAT.

Economic reasons. It distorts the value of saving and is one of the most costly forms of taxation on economic output. Go read the Harvard link.

Sure I do. It's unpopular. It doesn't mean people can't be convinced over time that it is desirable. People used to not accept gay marriage and trans rights, now they do (for the most part).

1) This is not Europe. It makes no sense to have a 25% VAT when 70% of your population is within an hour of the US.

2) Taxing consumption distorts the value of consumption. Taxing work distorts the value of work etc....

You are parroting absurd economic nonsense.

3) No, I don't think you have any comprehension for the time value of money and what 0% corporate tax rates would do.

[-1=e^ipi]

1) This is not Europe. It makes no sense to have a 25% VAT when 70% of your population is within an hour of the US.

There are ways to deal with this, such as convincing the USA to also have a 25% VAT, or charging people for cross-border shopping.

2) Taxing consumption distorts the value of consumption.

Yes, and it is desirable to get the savings rate up to about 33% in order to maximize long run consumption.

https://en.wikipedia.org/wiki/Golden_Rule_savings_rate

3) No, I don't think you have any comprehension for the time value of money and what 0% corporate tax rates would do.

How does a 0% corporate tax rate implies a zero time value of money?

[msj]

There are ways to deal with this, such as convincing the USA to also have a 25% VAT, or charging people for cross-border shopping.

Yes, and it is desirable to get the savings rate up to about 33% in order to maximize long run consumption.

https://en.wikipedia.org/wiki/Golden_Rule_savings_rate

How does a 0% corporate tax rate implies a zero time value of money?

1) The USA doesn't give a fig about us so good luck. I live in the real world.

2) Sure, good luck with that too. I live in the real world.

3) It doesn't. But if my corporate tax rate were 0% the government would be getting less revenue from me as I would simply keep as much income (and invest the surpluses to earn more income) in the company. Over many years the corporation would be like a TFSA/RRSP hybrid (income earned within it would be tax free until withdrawn as dividends/wages when it would be taxed).

This would hurt government revenues big time. Which goes back to another reality: the government needs a tax base to provide sufficient revenue to meet their spending.

Which goes to another reality: politics.

It is political suicide to propose a 25% VAT while giving fat cats 0% tax rates on their capital gains and their corporations. Once again, I live in the real world.

Now, there are serious and practical ways to simplify the tax system that would work but that it a topic for another thread.

[-1=e^ipi]

1) The USA doesn't give a fig about us so good luck. I live in the real world.

Politicians in the USA have been discussing implementing a consumption tax for decades.

2) Sure, good luck with that too. I live in the real world.

More like the world of eternal status quo.

3) It doesn't. But if my corporate tax rate were 0% the government would be getting less revenue from me as I would simply keep as much income (and invest the surpluses to earn more income) in the company. Over many years the corporation would be like a TFSA/RRSP hybrid (income earned within it would be tax free until withdrawn as dividends/wages when it would be taxed).

If the money belongs to the corporation, you can't use it to finance your consumption. The moment you move it from the corporation to you, it's taxed as income. Whether or not the government gets more revenue depends on the tax rates.

This would hurt government revenues big time.

You can make it revenue neutral. Vary the income tax rate as needed to obtain revenue neutrality.

Which goes back to another reality: the government needs a tax base to provide sufficient revenue to meet their spending.

Yes, income taxes + consumption taxes + pigouvian taxes.

It is political suicide to propose a 25% VAT while giving fat cats 0% tax rates on their capital gains and their corporations.

No, it's political pundits' 'conventional wisdom' that it's suicide. Much like they think it's suicide to get rid of supply management, get rid of the Catholic school system, etc.

If no one challenges the status quo, you have no way to test if its political suicide or not.

Furthermore, these 'fat cats' have to pay income and consumption taxes if they want to benefit from any money in savings or in corporations. Money only makes your life better when you use it to buy things.

[msj]

Politicians in the USA have been discussing implementing a consumption tax for decades.

Yes, and it is still being discussed..... my point proven.

Furthermore, these 'fat cats' have to pay income and consumption taxes if they want to benefit from any money in savings or in corporations. Money only makes your life better when you use it to buy things.

That is funny.

Tell that to my wife. When I came home earlier this week thrilled that I finally bought some Diageo stock.

More thrilled than if I bought a bottle of Johnny Walker or a pint of Guinness.

I collect investments now like I collected comic books when I was a kid.

And that's the problem - there are lots of people willing to hold onto investments and see those numbers go up and up.

They actually don't do the economy much good (my purchase did not go to Diageo to invest - it likely went to some guy who panicked and took a loss - which is amusing to me for some reason).

And what incentive is there to pull the money out of savings and spend it? You will then just have to pay a Vat.

Now, I suppose I would be ok with this since I love to travel so I would be better off.

I would save thousands in corporate taxes, tens of thousands in personal income taxes too.

Then I would leave the country on my vacations to Vietnam or Ecuador or Myanmar and get enjoyment without paying the Vat.

What a brilliant idea!

Hey, I think I will vote for you.

[-1=e^ipi]

And what incentive is there to pull the money out of savings and spend it? You will then just have to pay a Vat.

That's sort of the point. You want the savings rate to increase so that there is an increase in the physical capital stock, which increases the amount of goods and services people produce.

[bush_cheney2004]

Politicians in the USA have been discussing implementing a consumption tax for decades.

This is not going to happen. As indicated above, it would be political suicide in the USA.

Any plan you propose for Canada should not be dependent on changing U.S. tax code.

[On Guard for Thee]

This is not going to happen. As indicated above, it would be political suicide in the USA.

Any plan you propose for Canada should not be dependent on changing U.S. tax code.

Heaven forbid!

[-1=e^ipi]

This is not going to happen.

You say that with such certainty. Sometimes conventional wisdom is wrong and the only way to find out is to challenge it.

Any plan you propose for Canada should not be dependent on changing U.S. tax code.

The discussion of what is the optimal tax system for a country isn't that different for the USA, Canada, France, Japan or other developed countries. If the Canadian government introduced a very large VAT, discussion on it would spill over to the US.

Besides the idea that politics should cross national boundaries is outdated. Perhaps we need international political parties.

[bush_cheney2004]

You say that with such certainty. Sometimes conventional wisdom is wrong and the only way to find out is to challenge it.

That's because I am very certain.

The discussion of what is the optimal tax system for a country isn't that different for the USA, Canada, France, Japan or other developed countries. If the Canadian government introduced a very large VAT, discussion on it would spill over to the US.

Discussion is cheap...VAT tax has already been "discussed" and rejected in the USA.

Besides the idea that politics should cross national boundaries is outdated. Perhaps we need international political parties.

Go for it, but please leave the USA out of your plans for reforming Canada. Depending on changes in the U.S. to get things done in Canada is not an efficient way to change Canada's tax code.

[-1=e^ipi]

Discussion is cheap...VAT tax has already been "discussed" and rejected in the USA.

This is silly. Lots of things have been discussed and rejected before eventually being accepted. Be it slavery abolition, a carbon tax, gay marriage, low inflation monetary policy, etc.

[bush_cheney2004]

This is silly. Lots of things have been discussed and rejected before eventually being accepted. Be it slavery abolition, a carbon tax, gay marriage, low inflation monetary policy, etc.

OK...let me know when Canada accepts a 25% VAT. What happens in the U.S. is irrelevant to Harper tax initiatives.

Edited August 28, 2015 by bush_cheney2004

[socialist]

The Conservatives DID NOT take 57 billion out of EI.

There was only 'one' 57 billion EI surplus that was posted between the Martin/Chretien and Harper governments.

The Conservatives never saw 54 billion of that money from EI because the 54 billion that was accumulated by the Liberal Party was spent by Martin/Chretien to pay down the debt.

That 54 billion was 'only on paper' as debt that was owed to EI from the Martin/Chretien government.

The money went into general revenue and Martin used the money but left it on paper as a debt.

The Harper Conservatives 'wrote off the debt'.

[WIP]

A flat tax would be even simpler. The progressive taxation can come in the form of exemptions and refunds on the VAT.

The flat tax BS started in the US with trust fund baby - Steve Forbes. Back in the 80's it was more acceptable, because we didn't realize that the rich would keep getting richer and the poor getting poorer for the next 30 years!

Flat tax would be fine and dandy if we were all earning about the same income....but we're not! And someone who's earning minimum wage or living close to the poverty line is not going to have any discretionary income after they've paid for rent, food and a few necessities, while the superrich are parking their money and trying to get better returns on investment because you can only buy so many big houses and fancy cars....and maybe a yacht...but the rest goes back in and earning bigger returns and increasing the wealth gap.

[-1=e^ipi]

The flat tax BS started in the US with trust fund baby - Steve Forbes. Back in the 80's it was more acceptable

Nice guilt by association attempt.

we didn't realize that the rich would keep getting richer and the poor getting poorer for the next 30 years!

Silly cliche that isn't supported by empirical evidence. Both rich people are people are on average richer than 30 years ago.

And someone who's earning minimum wage or living close to the poverty line is not going to have any discretionary income after they've paid for rent, food and a few necessities, while the superrich are parking their money and trying to get better returns on investment because you can only buy so many big houses and fancy cars....and maybe a yacht...but the rest goes back in and earning bigger returns and increasing the wealth gap.

Clearly someone can't comprehend what a guaranteed income is.

You could have a flat tax rate of 100% and redistribute that to everyone equally in the form of a guaranteed income.

This would be effectively communism.

Is communism not 'progressive' enough?

[WIP]

Nice guilt by association attempt.

Facts are what they are!

Silly cliche that isn't supported by empirical evidence. Both rich people are people are on average richer than 30 years ago.

How much richer? From the American experience, this chart...based on Congressional Budget Office data, shows the highest 20% doing well, but that 1% is the group that really got richer over a 32 year period. If they narrowed the focus down to the richest .1%, the results would be even more dramatic:

Clearly someone can't comprehend what a guaranteed income is.

You could have a flat tax rate of 100% and redistribute that to everyone equally in the form of a guaranteed income.

This would be effectively communism.

Is communism not 'progressive' enough?

So, who was talking about communism? The debate was comparing flat vs. progressive taxation.

[Bonam]

The chart clearly shows that people in ALL quintiles got richer. Yes, the richer got richer by more, but the poor still also got richer. This is in direct contradiction to your claim of the "rich getting richer and the poor getting poorer".

[cybercoma]

The chart clearly shows that people in ALL quintiles got richer. Yes, the richer got richer by more, but the poor still also got richer. This is in direct contradiction to your claim of the "rich getting richer and the poor getting poorer".

It shows the gap between the rich and the poor widening. Are you aware of the effects of growing inequality on health and welfare metrics?

Edited August 29, 2015 by cybercoma

[Bonam]

It shows the gap between the rich and the poor widening. Are you aware of the effects of growing inequality on health and welfare metrics?

That's tangential to the issue at hand. I was commenting solely on the incorrectness of WIP's statement.

He claimed the rich are getting richer and the poor are getting poorer, and tried to support it with that chart. The chart in fact shows everyone getting richer, though at different rates. The poor may not be getting richer as fast as the rich are, but they are getting richer nonetheless.

[Bonam]

Not to mention the chart is US data anyway in a thread about "Harper's tax credits". All the data I've ever seen shows that the rate of divergence in incomes between upper and lower income earners in Canada is significantly slower than it is in the US.

[cybercoma]

That's tangential to the issue at hand. I was commenting solely on the incorrectness of WIP's statement.

He claimed the rich are getting richer and the poor are getting poorer, and tried to support it with that chart. The chart in fact shows everyone getting richer, though at different rates. The poor may not be getting richer as fast as the rich are, but they are getting richer nonetheless.

You're discussing semantics instead of the issue. The poor are getting poorer relative to the rich.

[Bonam]

You're discussing semantics instead of the issue. The poor are getting poorer relative to the rich.

Everyone's getting poorer relative to someone. I for one am happy as long as my own (inflation-adjusted) income is growing over time, even if someone else's might be growing faster.