Tax Policy

[Renegade]

Spun from the Jack Layton thread.

In Canada we have an abundance of all material things and yet we still have poverty. If you truly wanted a fair system, not exploitive of the poor as it is now, read this:

The Repair of Taxation

This explains quite clearly what Canada's taxation problems are, why the system is so unfair to the poor and even the middle class, and how to fix the system.

Of course we still have poverty. Some people are rich, some are poor, some are beautiful, some ugly, some smart, some stupid. That's life. So what? If we are poor and wish to improve our lot, we will undertake steps necessary to do so. Some will succeed, others not.

I've read the document. Interesting reading. Its objective is to suggest a "fairer" tax system. It defines fairness as follows:

Fairness has two dimensions. Horizontal

equity means that people with the same

resources pay the same tax. Vertical equity recognises

that a dollar taken away hurts more

the fewer dollars you have; the rates are therefore

graduated, higher for higher incomes.

I can't agree with the conclusions in the document, because I don't agree in its presumption of what is fairness. By my definition of fairness, taxes pay for services provided and we consume. A fair tax is one which the taxpayer is taxed proportonate to the level of a specific service he consumes and at a level which is reflective of the cost of the service.

[BHS]

I'm not sure I understand you completely. Are you saying that people on welfare should have a larger tax burden than those who require the fewest possible government services for a given year? Should trucking companies pay more tax than internet based companies, because they use roads less? Please explain.

How do you feel about flat taxes?

[Renegade]

What I'm saying is that in a fair system what we now consider welfare would be funded in one of two ways:

1. As a charity. In this case the donations are voluntary and are not really part of the tax system.

2. As insurance. We would all pay into the system based upon our required level of coverage and our risk of using the system. (Similar to disability insurance). We would collect from the system when some unforseen event caused our income to drop, however we should expect that our future premiums into the system would increase.

As to your second example, yes a trucking company's use of roads should be taxed to pay for the roads. Now, I don't mean that we shoudl have a different tax for different industries, I would favour a "pay-per-use" model where a trucking company paid for each use of the road (or each km used)

Personally I'm not convinced that any tax on income is fair. Sure a flat tax on income is "fairer" based upon my definition, but as I stated above a "pay-for-use" system of taxation is preferred. The biggest reason I can see that a government taxes income is that it is easy to capture, and they can do without the choice of the people being taxed.

[BHS]

It seems to me that you'd be in favour of the American administration's idea of abolishing income tax altogether in favour of a higher sales tax. What do you think of that idea?

[Renegade]

For me any tax should be reflective of the value a government adds to the item being taxed. While sales tax is easy to collect and compute, I don't see a direct relation to the value government adds.

It would be easy to accept a gasoline sales tax if the proceeds of that tax were used to build and maintain the roads. It is easy in this case to see the correlation between the tax and the service provided.

I don't see that relationship with a pure sale's tax, but I could be convinced otherwise.

[Riverwind]

It seems to me that you'd be in favour of the American administration's idea of abolishing income tax altogether in favour of a higher sales tax. What do you think of that idea?

You would need to raise the GST to 28% to replace income tax entirely.

A summary of federal govt income 2003-2004 (billions):

Personal income tax 88,938

Corporate income tax 29,942

Non-resident income tax 4,227

Employment insurance premiums 17,878

Goods and services tax 33,313

Customs import duties 2,943

Other excise taxes

and duties 10,608

Investment income 7,060

Sales of goods and services and other 5,583

[I Miss Trudeau]

Personal income tax 88,938

Corporate income tax 29,942

Sickening.

[mirror]

Is Alberta about to abolish provincial income tax?

[Riverwind]

Personal income tax 88,938

Corporate income tax 29,942

Sickening.

Why? People make more money than corporations in this country:

Total national income in 2004 from selected sources:

Wages, salaries and supplementary labour income: 643,964

Corporation profits before taxes: 175,148

Government business enterprise profits before taxes: 11,842

In other words, people in aggregate paid 13.8% and corporations paid 17.0%. I never calculated these numbers before but it does suggest that corporations are paying their share of taxes - despite never ending complaints from the left.

[Toro]

No need.

[I Miss Trudeau]

Why? People make more money than corporations in this country:

Total national income in 2004 from selected sources:

Wages, salaries and supplementary labour income: 643,964

Corporation profits before taxes: 175,148

Government business enterprise profits before taxes: 11,842

Corporations can greatly enhance their wealth and infrastructure without calling them profits. People can't.

[cybercoma]

Why? People make more money than corporations in this country:

Total national income in 2004 from selected sources:

Wages, salaries and supplementary labour income: 643,964

Corporation profits before taxes: 175,148

Government business enterprise profits before taxes: 11,842

Corporations can greatly enhance their wealth and infrastructure without calling them profits. People can't.

<{POST_SNAPBACK}>

Why do you hate corporations so much?

[Toro]

Why? People make more money than corporations in this country:

Total national income in 2004 from selected sources:

Wages, salaries and supplementary labour income: 643,964

Corporation profits before taxes: 175,148

Government business enterprise profits before taxes: 11,842

Corporations can greatly enhance their wealth and infrastructure without calling them profits. People can't.

<{POST_SNAPBACK}>

People call their profits "savings."

[err]

Why do you hate corporations so much?

<{POST_SNAPBACK}>

You'll have to distinguish distaste rising from a perception of inequity with "hatred".

Canadian corporations pay about 19% taxes. Low-end income earners pay more than that. I perceive inequity... don't you...

Paul Martin has reduced corporate income taxes by over $100 Billion dollars over the past few years.... He hasn't reduced taxes for very many Canadian citizens though....

In fact, he's cut funding for social benefits, transfers for health and education... so that he can give more tax deductions to these corporations.... A real reverse Robin Hood.... Our health care system is in crisis.... but corporate taxes are going down.... No need to bother them with the welfare of Canadians...

You see, Cybercoma, a great many people feel that the public has been dealt a bad hand, and the government is stacking the deck in favour of corporate Canada... We don't hate the corporations, just the way that we are treated as second class citizens to corporate Canada....

[Toro]

Why do you hate corporations so much?

<{POST_SNAPBACK}>

You'll have to distinguish distaste rising from a perception of inequity with "hatred".

Canadian corporations pay about 19% taxes. Low-end income earners pay more than that. I perceive inequity... don't you...

Is that 19% the absolute or marginal rate? What rate do you income earners pay? I thought there was a level at which no one paid tax then the marginal rate kicked in once the person made crossed a certain threshold.

[Renegade]

Corporations can greatly enhance their wealth and infrastructure without calling them profits. People can't.

A major inequity in the income tax system is that corporations are taxed on profit and individuals are taxed on revenue. It makes no sense to me why there should be this disparity. If individuals were taxed on "profit" they could deduct all their expenses (eg mortgage interest, food, clothing, cars, etc) from their income and only pay on what was not spent. Conversely if corporations were taxed on revenue, they would lose the ability to avoid paying taxes by hiding profits.

[stubblejumper]

Good response,leads me right into some of my ideas.

Corporate/Personal Tax Framework

Personal exemption

Indiv-$20k

Corp-$500k

or

Deductions for expenses

Mortage/Rent- max $500 per month

Utilities-max $500 per month

Groceries-max $1k/mth

etc.

**- Limits to be set at median standard of living.

Capital Tax

Indiv- 5% on net worth(eg. house,car,etc.)

Housing deduction of $50k * with personal exemption

Corp.- 10%

Operating deduction of $1M* with corp. exemption

Revenue Tax- with individual exemption

Indiv-

$20,001-$50,000 - 25%

$50,001-$80,000- 30%

$80,001-$120,000-35%

$120,001 < - 40%

Corp.

$500,001-$750,000 - 35%

$750,001-$1,000,000- 40%

$1,000,000-$1,500,000-45%

$1,500,001< - 50%

Net Revenue Tax- with expense deductions

0-1,000- 5%

1,001-5,000-10%

5,001-10,000-15%

10,001-30,000-20%

30,001-50,000-25%

50,001-75,000-30%

75,001-100,000-35%

100,001-150k- 40%

150,001-200k-45%

200,001< - 50%

So Joe and wife that earns $55,000 a year. Own a house worth $100,000, a car at $15,000 and other misc holdings of $10,000.

Would get taxed either

After exception- $15,000 (taxable @ 25%)=$3750

Capital of $125,000 , $75k taxable at 5%= $3750

Total Tax bill- $7,500- Real cost- 13.6%

or

Median income = $25,000 per year

Taxable income - $5,000 @ 10%= $500

Capital Tax- $125,000 @ 5%= $6,250

Total Tax bill- $6750- Real cost- 12.3%

But if Joe and wife make $150k and own property of $350,000

Total w exemption= $53,500-Real cost- 35.6%

Total w. expense ded.= $57,500-Real cost- 38.3%

I think either way more greatly reflects one's ability to pay, over in above the cost of living(comfortably). Median income is probably higher.

Also GST should be a graduated tax from 1-25% dependent on cost of item.

Just some ideas.

[Riverwind]

Capital Tax

Indiv- 5% on net worth(eg. house,car,etc.)

Housing deduction of $50k * with personal exemption

Corp.- 10%

Operating deduction of $1M* with corp.  exemptionp

Capital/wealth taxes are the most vile form of taxation. If someone saves money they should be entitled to keep it forever. If that asset generates income the tax the income. If some sells an asset the tax the profit from the sale.

[Renegade]

I agree with Spar on Capital Tax. The first behaviour that would encourage is for people to hide capital. Money would move offshore in a hurry.

Deductions for expenses

Mortage/Rent- max $500 per month

Utilities-max $500 per month

Groceries-max $1k/mth

etc.

**- Limits to be set at median standard of living.

How do you account for differences in cost of living in different areas? Why are there some low maximiums on each of the expenses? If I'm a bank president, surely my living costs (housing, clothes, entertaining, etc) are higher in order to maintain the image of a bank president. Maybe a maximium which is a % of revenue may make more sense?

Housing deduction of $50k * with personal exemption

Even assuming you taxed capital, why provide an exemption for housing? Doesn't that subsidize homeowners at the cost of others. How does $50K account for regional variations in house prices?

Corp-$500k

Operating deduction of $1M* with corp. exemption

so regardless of the size of the corporation they would get up to a fixed deduction.? Small business owners would be dancing in the streets as they would pay little tax. Large corporations would be best off to split into multiple small corporations each of whom earned less than $500K

Also GST should be a graduated tax from 1-25% dependent on cost of item.

So your saying if I buy 10 doughnuts at 1$ each, I would pay 10cents in taxes, but if I bought a packet of 10 doughnuts I would pay $2.50 in taxes? Hard to see how this would be workable.

I certainly like the idea of putting corporations and individuals on more equal footing.

I was never a big fan of tiered rates, and the rates you have proposed seem a bit steep to me.

[stubblejumper]

How do you account for differences in cost of living in different areas? Why are there some low maximiums on each of the expenses? If I'm a bank president, surely my living costs (housing, clothes, entertaining, etc) are higher in order to maintain the image of a bank president. Maybe a maximium which is a % of revenue may make more sense?

Like I said use the median income level for all individuals in Canada.

Even assuming you taxed capital, why provide an exemption for housing? Doesn't that subsidize homeowners at the cost of others. How does $50K account for regional variations in house prices?

This can be raised or lowered but yes homeowners are subsidised for 1 house.

so regardless of the size of the corporation they would get up to a fixed deduction.? Small business owners would be dancing in the streets as they would pay little tax. Large corporations would be best off to split into multiple small corporations each of whom earned less than $500K

Small business is the engine that drives our economy. Isn't that right ?

So your saying if I buy 10 doughnuts at 1$ each, I would pay 10cents in taxes, but if I bought a packet of 10 doughnuts I would pay $2.50 in taxes? Hard to see how this would be workable.

Not at all. Something like 0-$100-1% .... $1,000,000<- 25%

All tiers and specifics should be polished for accuracy but the jist of it is that the bank president should pay more,especially if his lifestyle is exceedingly extravagant.

[Toro]

Capital Tax

Indiv- 5% on net worth(eg. house,car,etc.)

Housing deduction of $50k * with personal exemption

Corp.- 10%

Operating deduction of $1M* with corp.  exemptionp

Capital/wealth taxes are the most vile form of taxation. If someone saves money they should be entitled to keep it forever. If that asset generates income the tax the income. If some sells an asset the tax the profit from the sale.

<{POST_SNAPBACK}>

I agree completely. However, that's exactly what property taxes are.

[Riverwind]

Capital/wealth taxes are the most vile form of taxation. If someone saves money they should be entitled to keep it forever. If that asset generates income the tax the income. If some sells an asset the tax the profit from the sale.

I agree completely. However, that's exactly what property taxes are.

Property taxes are not the same as wealth taxes because they are not calculated as a fixed percentage of the asset value. What usually happens is the city figures out how much money it needs and sets the mill rate based on the current property values in the city. In other words, it is a way of dividing up the cost of running the city that could have been done in other ways that would produce the same result. For example, property taxes could be levied on the number of square feet of property or the number of bedrooms - both measures correlate with the property value.

[Riverwind]

Not at all. Something like 0-$100-1% .... $1,000,000<- 25% All tiers and specifics should be polished for accuracy but the jist of it is that the bank president should pay more,especially if his lifestyle is exceedingly extravagant.

You make the assumption that a middle class family buying a $25,000 car deserves to pay more tax than a rich man paying $1000 for a bottle of wine.

A variable rate GST would just increase costs of administation and completely undermine the 'value-added' component of the tax. It would also increase opportunities for fraud which would increase policing costs.

The simpler the tax the better it is.

[Renegade]

Like I said use the median income level for all individuals in Canada.

It doesn't explain how if I live in Vancouver with a higher cost of living, I should have the same deduction from income as someone with a lower cost of living in Halifax.

Small business is the engine that drives our economy. Isn't that right ?

OK, so what. Shouldn't they still pay their share of the taxes?

[stubblejumper]

You make the assumption that a middle class family buying a $25,000 car deserves to pay more tax than a rich man paying $1000 for a bottle of wine.

I would say that certain items are not taxable(essentials,utilities,etc.), you could have a $100,000 threshold for houses and $15,000 for a car. Also I would add/deduct several thousand to it dependent on fuel consumption and pollution levels. But that family buying the $25k car does every 5 years or so, while the $1000 bottle of wine gets bought regularly.

This would be more of a luxury tax then a GST or VAT.