Tax Freedom Day exposed

[Mimas]

Actually, EI = $729 and CPP=$1911 for total=$2640. That's 4.4%.

The thing here is that these are not really taxes. Paying CPP means that you will get a pension (so it's saving for retirement, like RRSPs) and EI is insurance on employment and you will get EI benefits if you lose your job. Of course, there are certain similarities to taxes but that's a whole other debate.

The main difference between CPP and EI and taxes is that you pay the same amount of taxes whether you get services or not. You may never go to the doctor or you can spend all your free time at his office, but you still pay the same. With CPP and EI, the benefits you get are directly related to how much you CPP and EI premiums you pay. It's like life insurance - you get the benefit only if and depending on the premium you pay. But you wouldn't say that life insurance is a tax, would you?

For CPP it has some similarity to both a tax and to a savings plan, so I can go either way on it. It is like a savings plan in that I contribute to it and expect my contributions to be held "in trust" for me, and paid out with investment gains upon retirements. It is also like a tax in that the government unilaterally sets payment rates and payout rates and there doesn't necessarily need to be a relationship between the two. For example the government could decide, that by the time I retire, it doesn't have enough to pay out all retirees, and can unilaterally cut payment rates, or hike contributions as they did in the 90s.

I am not convinced that by the time the babyboomers are done with it, there will be something left for me either but all retirement savings (aside from GICs and T-bills) come with some risks - the stock market may crash, your income trust investments may tank. I guess you can only wait and see.

As for EI, it is pretty much the same concept as health insurance. Even if I don't use the benefit, I still pay EI just as I do health insurance. And yes I do consider my tax contributrion to health insurance a tax, so why wouldn't I consider the same for EI?

Because that's a feature of all insurance. If you have a car accident, you get benefits from your car insurance and if you don't have an accident, you get nothing. What you really pay for when you get insurance is 1) certainty and 2) spreading the payments over time. Whether it's car, home, medical or life insurance, it's not a tax. Health care is the odd one out but that's because it's of such vital importance.

BTW, the $729 figure for EI, is that the employee portion only or does it include the amount the employer contributes on my behalf?

That's the employee portion only.

[Mimas]

Maybe, maybe not. The government spends on a lot of things which if we had a choice as individuals we may not buy. I wonder how much money the government actually spends on truly "essential" services, which an individual taxpayer would have to replace if not provided by the government.

I have friends who have had to purchase healthcare insurance in the US and the cost is in the $1200-$1500/month range for a family. I have also heard that the cost of to US employers is in a similar range. One half of the property taxes I pay goes to pay the RCMP and the Fire Department the other half goes to paying for roads and community buildings/parks. Private schools start at $1000/month (after deducting the gov't private school subsidy). Many seniors collect $500-1000/month in retirement benefits. That is a short list of benefits that already add up to at $2000/month which exceeds the direct tax bill of the majority of families in the country.

I agree that the gov't could save some money eliminating wasteful pork barrel projects but I seriously doubt the savings would be much more that 10%. IOW: taxes are not dumped into a pit an burned - a large percentage of the taxes we pay does come back in the form of essential services which we have to pay for no matter what. It is important to keep those facts in mind when asking whether we pay too much tax.

I grant you that there are many essential services. I also agree that some services like healthcare are provided more efficiently by the government. However, I may be single and don't need to purchase schooling or healthcare for an entire family. I may not be a senior and thus do not collect $1000/month in retirement benefits. In short I'm skeptical how many "essential" services would truly been replaced if taxpayers had the option.

You may not be using the schooling right now, but you did at one point (I hope). Also, education is extremely important for the quality of life in a country and you benefit indirectly from it. If 90% of Canadians were illiterate, life in Canada would be quite different. Also, keeping kids in school instead of running around shooting at each other (and possibly you) is a huge benefit too. Finally, those who are now in school are going to provide services for you later and will care for you when you retire and the more capable and educated they are, the better off you will be.

[Mimas]

The thing that bothers me about things like EI is it is not optional. I have a choice when it comes to buying other types of in insurance but not that one. Never mind, I just retired so I no longer pay into it but then I was fortunate enough never to collect it either.

The thing that bothers me about CPP is that it is used for other purposes (disability benefits) and the benefit is not really proportional to what you put in. A person can pay the maximum into it for 30 years and only get a couple of hundred bucks a month more than someone who contributed far less for 15 years.

Wilber, you shouldn't be complaining about the CPP because you paid less than half of what we are now paying so that you can get your CPP. Up until 1997, CPP premiums were so unrealistically low that the plan would have gone bankrupt within a decade if CPP premiums had not been more than doubled.

[Wilber]

Wilber, you shouldn't be complaining about the CPP because you paid less than half of what we are now paying so that you can get your CPP. Up until 1997, CPP premiums were so unrealistically low that the plan would have gone bankrupt within a decade if CPP premiums had not been more than doubled.

I'm not complaining about what I paid in but the way the benefits are paid out and that it is used for other purposes than a retirement pension. I agree, the premiums were unrealistically low. If it was a real pension plan, benefits would be proportional to what was paid in. It was supposed to be a pension plan, not a disability plan. If you are on disability, not contributing and not retired you should not be collecting from a fund set up and paid for by others for their retirement. I'm not saying that people who are disabled shouldn't be looked after but it shouldn't come out of the CPP fund until they are over 60.

[August1991]

geoffrey, total taxes=$400 M, GDP=$1,300 M. You ought to agree that taxes would be roughly 30%, not 47%.

Annual GDP for 2005 was $1,371 million. Consolidated (local, provincial, federal) government revenues in 2005-06 was $532 million. That's about 39%.

Statcan

I think Statistics Canada data on taxes/revenues exclude EI and CPP and other "public sector" costs and benefits. This probably accounts for the discrepancy between Statcan and the Fraser Institute.

---

Despite what others argue in this thread, CPP is a transfer scheme whereby the government takes money from usually younger people and transfers it to other people usually older people. In a similar sense, EI is a transfer scheme where the government takes money from some working people and transfers it to other people.

In that sense, equalization (and the Canada Health Transfer) is a scheme whereby the government takes money from some people and transfers it to provincial governments.

But here's a conundrum in a small example. When the government requires air bags in cars, that means a forced transfer from one individual to another. How should we account for that?

The Quebec government requires that employees contribute to a drug plan. Should that be included?

Politicians have learned all kinds of tricks to declare in many different ways taxes/revenues and costs/expenditures. It is something of a fraud to say that governments balance their budgets.

[Mimas]

Wilber, you shouldn't be complaining about the CPP because you paid less than half of what we are now paying so that you can get your CPP. Up until 1997, CPP premiums were so unrealistically low that the plan would have gone bankrupt within a decade if CPP premiums had not been more than doubled.

I'm not complaining about what I paid in but the way the benefits are paid out and that it is used for other purposes than a retirement pension. I agree, the premiums were unrealistically low. If it was a real pension plan, benefits would be proportional to what was paid in. It was supposed to be a pension plan, not a disability plan. If you are on disability, not contributing and not retired you should not be collecting from a fund set up and paid for by others for their retirement. I'm not saying that people who are disabled shouldn't be looked after but it shouldn't come out of the CPP fund until they are over 60.

Well, it's a naming problem. It's called a pension plan but it's really a pension plan and disability insurance combined. The big chunk of your premium goes to the pension plan and a small chunk goes to disability insurance. Disability payouts amount to only 1-2% of total payouts, so it's not a big deal. Besides those payments also depend on how much you contribute to the plan. I don't mind it a bit and I pray that I'll never need the disability payments.

[Mimas]

geoffrey, total taxes=$400 M, GDP=$1,300 M. You ought to agree that taxes would be roughly 30%, not 47%.

Annual GDP for 2005 was $1,371 million. Consolidated (local, provincial, federal) government revenues in 2005-06 was $532 million. That's about 39%.

Statcan

I think Statistics Canada data on taxes/revenues exclude EI and CPP and other "public sector" costs and benefits. This probably accounts for the discrepancy between Statcan and the Fraser Institute.

Only about 80% of government revenue is from taxes. Governments earn money from investments get the profits of crown corporations (which have been quite profitable lately). Government revenue does not equal tax revenue.

========

From the table you provided

Sales of goods and services 34,913 37,653 39,055 41,274 42,592

Investment income 31,258 33,406 36,284 39,712 44,954

Other revenue from own sources 5,443 9,574 9,460 7,968 9,997

In 2006, the non-tax revenue was roughly $100 Billion (last column). Subtract if from your $532 M and you end up where I said you end up.

[August1991]

Only about 80% of government revenue is from taxes. Governments earn money from investments get the profits of crown corporations (which have been quite profitable lately). Government revenue does not equal tax revenue.

The Statcan data shows 'Investment Income' at about 8% of all revenues. If Hydro-Quebec turns a profit, is that a tax? If it makes a loss, is that a subsidy? God knows.

This is not a small question. The Albertan government collects royalties on oil and gas extracted. Is that really a tax? (I mean: who owns the oil and gas in the ground?) If you pay to enter a National Park, are you paying a tax or buying a service?

All this to say that I don't know where this thread is going. (I avoided it at first for that reason.) If the Fraser Institute wants to create an arbitrary "Tax Freedom Day" then let it.

IMV, Canadians are heavily taxed (and I also suspect that in the future, governments will find it increasingly difficult to collect taxes). Canadian governments spend too much money and they regulate private decisions too much. Canadians don't get value for what the government offers us. If Canada works so well, it's because ordinary Canadians are civilized and honest. It's not because of the prowess of our civil servants or politicians.

In all this, the federal government is the worst offender. (IME, nothing beats the dedicated municipal employees and elected counsellors of a small town for providing good government.)

[hiti]

Tax freedom day is NOT in June as the Fraser Institute falsely claims. Check this out for the truth

Quote: the Institute’s calculations are preposterously exaggerated. Their calculations understate the income of Canadians, overstate their taxes, misuse the concept of averages, and are often misleadingly applied only to

families with at least two members. Inexplicably, the Institute’s statisticians do not include all of a family’s economic income in calculating the effective tax rate paid by a family. They include only what they refer to as the “cash income” of the family. Indeed, since they attribute all taxes paid in Canada to individual families — including those paid by employers, corporations, and taxes paid on capital gains — their calculations treat families as having paid a good deal of their taxes out of income they are not treated as having received.

More info on the flawed Fraser tax freedom day

Professor Neil Brooks Critical of 'Tax Freedom Day'

[August1991]

Indeed, since they attribute all taxes paid in Canada to individual families — including those paid by employers, corporations, and taxes paid on capital gains — their calculations treat families as having paid a good deal of their taxes out of income they are not treated as having received.

Are 'employers' not Canadians? And are the owners of 'corporations' not Canadians too (many with families)? And who pays taxes on capital gains? Martians?

The government can only tax people.

If the government imposed a tax on vacuum cleaners, would you believe that vacuum cleaners paid the tax? So why do you believe that corporations pay taxes on corporate earnings?

[hiti]

Employers are Canadians.... BUT the Fraser Institute only used taxed paid by 'employers' and ignores the income earned by said 'employers.' That's why the Fraser tax freedom day is bogus.

[Mimas]

Indeed, since they attribute all taxes paid in Canada to individual families — including those paid by employers, corporations, and taxes paid on capital gains — their calculations treat families as having paid a good deal of their taxes out of income they are not treated as having received.

Are 'employers' not Canadians? And are the owners of 'corporations' not Canadians too (many with families)? And who pays taxes on capital gains? Martians?

The government can only tax people.

If the government imposed a tax on vacuum cleaners, would you believe that vacuum cleaners paid the tax? So why do you believe that corporations pay taxes on corporate earnings?

Dude, I told you that if you want to add corporate taxes to my taxes, you have to add the corresponding corporate income to my income. You can't claim that I pay my taxes + corporate taxes but I receive only my income and no corporate income. That's nonsense. But that's what the FI does.

No matter how much you dig and try to spin things, you can't find the $200+ billion in taxes that never existed. The Fraser Institute is a bunch of conmen whose purpose is to defend and promote a certain ideology by whatever means will achieve that (including misrepresentation), not to inform you of the truth. It's a PR firm. Don't expect to find reality there.

[Mimas]

Only about 80% of government revenue is from taxes. Governments earn money from investments get the profits of crown corporations (which have been quite profitable lately). Government revenue does not equal tax revenue.

The Statcan data shows 'Investment Income' at about 8% of all revenues. If Hydro-Quebec turns a profit, is that a tax? If it makes a loss, is that a subsidy? God knows.

Ok, you are starting to lose it there. If you make a profit are you taxing your customers? If you have a loss, are you subsidizing your customers? Profit is profit. A loss is a loss. Simple.

This is not a small question. The Albertan government collects royalties on oil and gas extracted. Is that really a tax? (I mean: who owns the oil and gas in the ground?) If you pay to enter a National Park, are you paying a tax or buying a service?

The confused philosopher. You should get some sleep.

All this to say that I don't know where this thread is going. (I avoided it at first for that reason.) If the Fraser Institute wants to create an arbitrary "Tax Freedom Day" then let it.

IMV, Canadians are heavily taxed (and I also suspect that in the future, governments will find it increasingly difficult to collect taxes). Canadian governments spend too much money and they regulate private decisions too much. Canadians don't get value for what the government offers us. If Canada works so well, it's because ordinary Canadians are civilized and honest. It's not because of the prowess of our civil servants or politicians.

In all this, the federal government is the worst offender. (IME, nothing beats the dedicated municipal employees and elected counsellors of a small town for providing good government.)

Well, that's how we always feel. That we are paying too much to the lawyer, too much to the garbage collector, too much for tuition, etc. It sucks to part with your money when you work hard for it and everything looks expensive. Especially, when you have to pay for things that you never realized you are using. But just because they are not right in your face, doesn't mean that they don't exist and that you don't need them.

[Renegade]

I am not convinced that by the time the babyboomers are done with it, there will be something left for me either but all retirement savings (aside from GICs and T-bills) come with some risks - the stock market may crash, your income trust investments may tank. I guess you can only wait and see.

True, that is an argument why is should be considered a "tax". The only real distinction is that the benefits are not paid now, but later.

Because that's a feature of all insurance. If you have a car accident, you get benefits from your car insurance and if you don't have an accident, you get nothing. What you really pay for when you get insurance is 1) certainty and 2) spreading the payments over time. Whether it's car, home, medical or life insurance, it's not a tax. Health care is the odd one out but that's because it's of such vital importance.

Sure health care is important, but it is still an insurance. The point is that if funds used for health insurnace is a tax, then so is EI. The importance of it doesn't change the nature of if it is a tax or not.

That's the employee portion only.

You should include both the employer and employee contributions of EI and CPP in your calculations as they are nothing but a form of employee compensation which would otherwise be paid directly to the employee, but instead is redirected as a tax.

[Renegade]

You may not be using the schooling right now, but you did at one point (I hope). Also, education is extremely important for the quality of life in a country and you benefit indirectly from it. If 90% of Canadians were illiterate, life in Canada would be quite different. Also, keeping kids in school instead of running around shooting at each other (and possibly you) is a huge benefit too. Finally, those who are now in school are going to provide services for you later and will care for you when you retire and the more capable and educated they are, the better off you will be.

The question asked is not whether schooling is useful. I'm sure at some point it was useful. The question is whether I would pay to replace it if the government didn't fund it. If I didn't directly use the schooling facilities (ie if I wasn't going to school or have my kids going to school) I wouldn't bother replacing the service, despite the indirect benefits.

[Charles Anthony]

But just because they are not right in your face, doesn't mean that they don't exist and that you don't need them.

You are a sucker for democracy.

That attitude is exactly what politicians can exploit to waste our money.

[Riverwind]

That attitude is exactly what politicians can exploit to waste our money.

Private corporations waste just as much money but the difference is they spend it providing perks to executives instead of dubious pork barrel projects. We need these essential services and we have to pay for them no matter what and this cost will include the inefficiencies created by whatever system is used. Any system that reduced costs for some people by allowing voluntary participation would simply increase the cost of these services for others. I believe the overwhelming majority of people would end up paying more for these services over the course of their lifetime in a purely private system. Anyone who thinks they could save money in the short term by opting out of services that they think they don't need would end up paying more in the long run because the cost of services that they do need would go up as others opt out of those services.

[Charles Anthony]

We need these essential services and we have to pay for them no matter what and this cost will include the inefficiencies created by whatever system is used.

I think that is a bad excuse for being blind to government waste. We should demand better and we can.

[Riverwind]

We should demand better and we can.

Agreed. But demanding better from the current system is different than demanding that the entire system be tossed out and replaced with another which would simply bring a different set of problems.

[Mimas]

We need these essential services and we have to pay for them no matter what and this cost will include the inefficiencies created by whatever system is used.

I think that is a bad excuse for being blind to government waste. We should demand better and we can.

I'm going to a rediculously expensive X-mas party in two weeks. The company is paying but I can hardly see any shareholder value in it. If you own shares, you'll be paying for my expensive dinner. Are you going to complain about that? I don't see anyone complaining about waste in private industries even though they are owned by the general population. The fact is, that as long as there are people involved there will be waste. Perfectly efficient enterprises don't exist.

[Charles Anthony]

But demanding better from the current system is different than demanding that the entire system be tossed out

Who said that?

and replaced with another which would simply bring a different set of problems.

You are changing the subject!

How do you propose we demand better when our fellow comrades stick their heads in the sand and categorize government waste as "just because they are not right in your face, doesn't mean that they don't exist and that you don't need them"?

or

Do you think pork-barreling is a "necessary evil" that must go hand in hand with socialism?

I'm going to a rediculously expensive X-mas party in two weeks. The company is paying but I can hardly see any shareholder value in it.

You are mixing apples and oranges in a vegetable soup.

If you own shares, you'll be paying for my expensive dinner. Are you going to complain about that?

Nobody is forced to buy shares.

I don't see anyone complaining about waste in private industries even though they are owned by the general population. The fact is, that as long as there are people involved there will be waste. Perfectly efficient enterprises don't exist.

No.

The fact is, that as long as people are not forced to buy shares in your ridiculous example, your ridiculous example is irrelevent.

[Wilber]

Well, it's a naming problem. It's called a pension plan but it's really a pension plan and disability insurance combined. The big chunk of your premium goes to the pension plan and a small chunk goes to disability insurance. Disability payouts amount to only 1-2% of total payouts, so it's not a big deal. Besides those payments also depend on how much you contribute to the plan. I don't mind it a bit and I pray that I'll never need the disability payments.

It does make a basic departure from regular pension plans found in the private sector. At any company where I have worked which had them, disability benefits and pension plans were strictly separate. It's another case of government doing something which would be illegal in the private sector. The government does not consider it just a naming problem when it comes to private plans. CPP disability payments do not really depend on how much you have contributed. A person on disability receives more than they would on pension even though they are not contributing. It is only after they reach pensionable age that their benefit drops to that which they would receive on pension.

I do think we should provide assistance to those who are disabled but not under the guise of a pension plan.