Harper's tax credits..good or bad?

[-1=e^ipi]

It is not hard to apply progressive tax rates - it is simple math.

It is all the various rules that deal with what is deductible (eg, section 18 and then look to section 67 with respect to disallowing golf green fees and memberships, for example), then look to sections 85/98 with respect to tax deferred rollovers (and section 55 for butterfly transactions) etc etc.

Those are the complicated parts and they will remain complicated even with a flat tax rate.

The flat tax rate does little to nothing for simplifying the tax system.

Or you could have a flat tax combined with a guaranteed income.

It's not just the simplicity of the flat tax that makes it desirable, but also the fewer perverse incentives it has on economic output.

There are other reasons, such as a flat tax + guaranteed income being very close to optimizing social welfare:

http://www.vanderbilt.edu/econ/conference/taxation-theory/documents/Henriet-Pinuts-Trannoy.pdf

http://dash.harvard.edu/bitstream/handle/1/4263739/Mankiw_OptimalTaxationTheory.pdf?sequence=2

Arguably it is in some cases, for example when income density has a linear likelihood ratio and consumption utility is logarithmic.

[cybercoma]

Harper uses them to throw a bone to his support base. Not unlike any other party.

Very much unlike every other party. The CPC have created more tax credits than any government in history.

[cybercoma]

how would this make anything simpler with respect to the varying tax brackets?

Brackets aren't the problem. The encyclopaedia full of niche credits are.

[kraychik]

Very much unlike every other party. The CPC have created more tax credits than any government in history.

Even if I accept that premise, the left purchases loyalty by erecting bureaucracies filled with left-wing operatives who vote for left-wing parties in order to perpetuate their wasteful jobs. The same is true for expansion of "welfare programs".

[socialist]

What I want to know is why the lame stream media is not examing more of the NDP and Liberal policies? Instead they seem to be worried about pictures of salmon or whatever. Trudeau just wrote a 4 page letter to the premier of Quebec, promising to give that province freedom without interference in areas of joint jurisdiction (in other words a freehand with federal funding) and Mulcair is campaigning with a team of closet separatists and challenging the Clarity Act. When is the press going to do its job and give Canadians a real examination of these policies?

[PrimeNumber]

What I want to know is why the lame stream media is not examing more of the NDP and Liberal policies? Instead they seem to be worried about pictures of salmon or whatever. Trudeau just wrote a 4 page letter to the premier of Quebec, promising to give that province freedom without interference in areas of joint jurisdiction (in other words a freehand with federal funding) and Mulcair is campaigning with a team of closet separatists and challenging the Clarity Act. When is the press going to do its job and give Canadians a real examination of these policies?

We all know about them already. It doesn't seem like many people care..

[socialist]

We all know about them already. It doesn't seem like many people care..

Many do not know. The MSM has been very quiet.

[On Guard for Thee]

We all know about them already. It doesn't seem like many people care..

Really. That's only 15 year old news.

[PrimeNumber]

Many do not know. The MSM has been very quiet.

It really is a non-issue with most people. Especially many people out west. I think mainstream media actually makes a bigger deal out of it than it actually is. Quebec will be one of the last things on my mind when I go to the polls.

[Topaz]

It was announced on "power and politics" that both, the Liberals and the NDP will be coming out with more info. in Sept., so you'll just have to wait.

[cybercoma]

Even if I accept that premise, the left purchases loyalty by erecting bureaucracies filled with left-wing operatives who vote for left-wing parties in order to perpetuate their wasteful jobs. The same is true for expansion of "welfare programs".

The left does this? Have you seen Harper's appointments? Or do you just blissfully ignore it when he does it?

Edited August 26, 2015 by cybercoma

[Civis Romanus sum]

It is not hard to apply progressive tax rates - it is simple math.

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

Those are the complicated parts and they will remain complicated even with a flat tax rate.

So get rid of them all.

[msj]

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

So get rid of them all.

It would be nice to get rid of much of the Income Tax Act.

However, there are realities to deal with: the definition of income, what should be considered an allowable deduction, the timing of deductions, taxation between countries for non-residents, the prevention of double taxation on dividends, etc... that will forever complicate things to some extent.

But the continual addition of boutique tax credits is going the wrong way - it complicates the system further.

As for a flat tax - once again, once you have gone through the difficult process of figuring out your taxable income it is very easy to apply basic math to arrive at the tax.

To then have to apply the complicated tax credits.

So, no, a flat tax will do little to simplify the system unless performing basic math is a problem (which it isn't because, computers).

[-1=e^ipi]

a flat tax will do little to simplify the system unless performing basic math is a problem (which it isn't because, computers).

True, but a flat tax has other benefits as well. Also, I think that Occam's Razor should apply here. Preference should be given to the simpler tax code unless there is a good reason to complicate it.

Give me one reason why there should be a tiered tax system as opposed to a simple flat tax + guaranteed income.

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

[msj]

True, but a flat tax has other benefits as well. Also, I think that Occam's Razor should apply here. Preference should be given to the simpler tax code unless there is a good reason to complicate it.

Given me one reason there should be a tiered tax system as opposed to a simple flat tax + guaranteed income.

Once again - a tiered system is not very complicated.

Once you know that your income is, say, $100,000 it is not hard to break out tax to be 15% on the first $38,000 and then 22% on the next $x etc...

That is basic math.

It is arriving at the $100,000 of taxable income that is difficult. Then applying various tax credits that may further complicate things.

Too many people just assume taxes should be easy because they get a T4 slip.

No, for these people their taxes are easy because their income is easy.

For the self-employed and businesses and corporations things are automatically and inherently more complicated - that is reality just like the time value of money is a reality (which also leads to various wrinkles in our tax rules complicating things.....).

[-1=e^ipi]

@msj - You are ignoring what I wrote. I never said a tiered tax system is 'not very complicated', but it is more complicated than a flat tax. Preference should be given to the simpler tax system unless there is a good reason not to. So I repeat myself:

Give me one reason why there should be a tiered tax system as opposed to a simple flat tax + guaranteed income.

[msj]

@msj - You are ignoring what I wrote. I never said a tiered tax system is 'not very complicated', but it is more complicated than a flat tax. Preference should be given to the simpler tax system unless there is a good reason not to. So I repeat myself:

Give me one reason why there should be a tiered tax system as opposed to a simple flat tax + guaranteed income.

I've not ignored it. It is basic math.

It is the rules with respect to allowable deductions, superficial losses, types of income, etc that is complicated.

Once you know your taxable income the tax calculation is so easy most people could do it ( assuming they are capable of still doing addition, subtraction and multiplication - skills many seem too hard nowadays).

As for why progressive taxes? Because it generally leads to those who have the means to pay more taxes (proportionately) as compared to those who don't.

I'm a tax accountant who uses TFSA's, RRSP's, a corporation that has a total tax rate of 13.5 %, and I still pay way more income tax, proportionately, as compared to when I was a poor junior accountant.

I see hundreds of tax returns a year so I know that people, even very wealthy people, are more often than not paying proportionately more in taxes as compared to the single guy making $30,000 at some dead end job.

But people who know nothing about the tax system go on about how this would fix it or that; yet they don't even have a clue how the current system works.

Can't know how to fix something when one doesn't even understand what needs fixing.

[-1=e^ipi]

As for why progressive taxes? Because it generally leads to those who have the means to pay more taxes (proportionately) as compared to those who don't.

You can get that with a flat tax + guaranteed income system.

So again I ask:

Give me one reason why there should be a tiered tax system as opposed to a simple flat tax + guaranteed income.

[msj]

I have answered you numerous times now.

If you don't like my answer then don't like it.

However, I suggest you learn the basics of our current system before going off on this flat tax/GI nonsense.

[-1=e^ipi]

If you don't like my answer then don't like it.

I don't like it because it doesn't make sense. Saying system A should be preferred to system because system A can do X isn't a good argument when system B can also do X.

However, I suggest you learn the basics of our current system before going off on this flat tax/GI nonsense.

You say the current system is overly complicated and could use simplification I agree. Where is the disagreement?

Do you think it would make sense to have the best possible tax system that maximizes the well-being of society? If so, how do you determine that?

Perhaps you would benefit from understand the basics of welfare economics, like the fact that people value their leisure time and taxes reduce the incentive to work and this results in a more progressive tax system having a large negative impact on economic output per dollar of tax collected.

As for why progressive taxes? Because it generally leads to those who have the means to pay more taxes (proportionately) as compared to those who don't.

Also, I will point out that this is essentially circular reasoning. The definition of progressive taxes doesn't justify progressive taxes.

[msj]

You say the current system is overly complicated and could use simplification I agree. Where is the disagreement?

Perhaps you would benefit from understand the basics of welfare economics, like the fact that people value their leisure time and taxes reduce the incentive to work and this results in a more progressive tax system having a large negative impact on economic output per dollar of tax collected.

Also, I will point out that this is essentially circular reasoning. The definition of progressive taxes doesn't justify progressive taxes.

The disagreement is how it is complicated. Applying progressive tax rates is the easy part.

Determining taxable income is the hard part.

As for the impact of graduated taxes on leisure and work: nonsense.

The only people who talk like that are people with little experience in either and who have no idea how much tax they really pay and how to make their money work for them rather than work for money ( hint, own a business with staff who earn for you, then take the excess and invest it so that your capital is earning for you - I don't have to turn down any "work" because I may only earn 55cents per $1 because of this. I turn down work because the work is boring or the client is a PITA instead).

As for the definition of progressive tax being the reason for its justification: the definition of many words justifies their meaning.

That's how words and definitions work.

[-1=e^ipi]

The disagreement is how it is complicated.

A constant function is simpler than a linear function.

A linear function is simpler than a quadratic function.

A quadratic function is simpler than as sinusoidal function.

etc.

Not my fault if you don't understand this.

As for the impact of graduated taxes on leisure and work: nonsense.

Yeah, I guess all that empirical evidence must be wrong, so we should probably switch to communism, since apparently the impact of graduated taxes on leisure and work is nonsense. It's not like it's possible to estimate labour supply elasticity that is nonzero or anything.

http://www.sciencedirect.com/science/article/pii/S0047272714002527

[PIK]

Seems to be becoming more common. When the going gets tough federally, the rightys head for Ontario.

Well living in ONT is no fun. Every break we get from harper is taken by wynne. I live here I know. And one thing is for sure , trudeau gets in then the whole country will know what we went thru.

Edited August 27, 2015 by PIK

[On Guard for Thee]

Well living in ONT is no fun. Every break we get from harper is taken by wynne. I live here I know. And one thing is for sure , trudeau gets in then the whole country will know what we went thru.

And maybe the country will go through what it did when Martin was finance minister and later Prime Minister, and we can get off this endless string of deficits and huge run ups in our overall debt.

[msj]

A constant function is simpler than a linear function.

A linear function is simpler than a quadratic function.

A quadratic function is simpler than as sinusoidal function.

etc.

Not my fault if you don't understand this.

I understand it.

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.

What is hard is to compute taxable 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.

You do not understand any of these things so how would you know what I am talking about?

A flat tax would have no effect on those sections of the ITA so it would not alleviate any of the complexity.

Edited August 27, 2015 by msj