Hundreds of rich pay no tax: Study ?

[msj]

It's the ones in that tax bracket who pay NO taxes that we wonder about.

The problem I have with this is that the frames of reference are either not provided or are not understood. [Actually, they are implied in the original post but only a few people would actually have an understanding of what is being implied]

Look at a proper tax return. Look at line 150 Total Income.

Is that the frame of reference being used to determine someone "made" $250,000 or is it going to be line 260 aka "taxable income?" Let's also not forget about line 236 aka "Net Income."

The distinction is important because it is very possible for a person to have net income of $250,000 but have losses from other years that exceed that which would mean that taxable income is $0.

So this person would be in the non-taxable tax bracket under rules that, may appear complex, but are really just rules applied to recognize that we live in a complex world.

Throw in all the deductions between lines 207 through 235 and lines 244 through 256 and there is a lot that can reduce a person's net or total income to become non-taxable. Then throw in the tax credits, refundable portion of AMT etc... and it is very possible for a person to pay no tax under the right conditions.

So, without a proper frame of reference I have to say that 95%+ of the posts in this thread are a complete waste of time since very few people here actually know what is being talked about in the first place.

Edited October 4, 2007 by msj

[old_bold&cold]

MSI of course we are talking about deduction that reduce the tax to nothing. You many waste our time with tax return line numbers but what it all boils down to is the final number after deductions is tax payable = zero. But what the thread is inferring is that these same people do this year after year and that is just not so. Since this is also impling it as a person it is not a business tax return but personal. There are many businesses that will have very high incomes and after deductions will have no taxable income left, and yes this can happen year after year. But Revenue Canada would have a problem with that, unless it is a charitable company or non-profit organization. These will continuously have zero income tax payable.

For persoanl taxes though also can include business ort investment losses and yes they will lower or even wipeout the tax payable, but not year after year. So when a salaried employee make $250,000.00 per year he may well have some investment losses, but not such to bring this salary to zero payable year after year. He will have years where investments were on thre positive side annd yaxes would then be higher then what the norm for his salary. I know this becaus eI had issues with CCRA and they did everything to say that I could not use my losses to lower my salary. Once I got a lawyer and not an accountant to go after this, it was then garnted but it still cost me thousands of dollars for the lawyer to fight this. So believe me, there are not too many people who can do this, without any costs. I still ask Jennie to show me where anyone has lowered his salary to zero payable over a five year period. That period still would allow for invetment losses claimed over that time frame.

[Topaz]

If you work and paid in EI, should get it, when needed. The welfare maybe different from province to province. When applying, I think you have to show you do need it, if you have any money invested, and any other sources of money before they grant you help. I also think there a limit of time you can stay on it and you have to be out and about looking for a job. So I don't see how any RICH person can be on welfare? As far as paying income tax, there's alot of ways to lower your taxes by paying into RRSP's, education fund, charties, etc. I guess some rich could put off paying for couple of years but sooner or later the government always gets your money!

[NovaScotian]

The rich benefit the most from the current set up, so they should be paying more into the system.

[old_bold&cold]

The rich are taxed at 50% on their highest amounts. Would you tax them even higher?

[geoffrey]

The rich benefit the most from the current set up, so they should be paying more into the system.

That's complete BS. The rich pay in way more than they ever are returned in services.

[Moxie]

The rich are taxed at 50% on their highest amounts. Would you tax them even higher?

I'm not rich but I pay combined Provincal and Federal income tax at 52%. I get to support the welfare life style without being asked. Single young women get to have several kids by different fathers (if they even know who the father is) because the liberals in Canada think I should support welfare hoes.

Before the screamers start screaming I believe in Social Programs, but not for a lifetime. Why am I required to pay to support women who have unsafe sex to up their income? I've had enough of these lazy hoes. Want more children then let the single 17 year old mother and father support them, I've had enough of this lazy bunch. Welfare was suppose to be a transition period of support not a career choice as it is now. The more tastards they turn out the bigger the cheque, sickening to the extreme.

[geoffrey]

I think I'm going to die laughing at the previous post. That was brilliant. Terrible, offensive, absolute trash... but brilliant.

By the way, check out August's list of Federal transfers in this thread. Your money is unfortunately not even going to "lazy hoes." It's going to people with money that want more and know people in the government!

Fantastic. It's so easy to spend other people's money.

[msj]

MSI of course we are talking about deduction that reduce the tax to nothing. You many waste our time with tax return line numbers but what it all boils down to is the final number after deductions is tax payable = zero. But what the thread is inferring is that these same people do this year after year and that is just not so. Since this is also impling it as a person it is not a business tax return but personal. There are many businesses that will have very high incomes and after deductions will have no taxable income left, and yes this can happen year after year. But Revenue Canada would have a problem with that, unless it is a charitable company or non-profit organization. These will continuously have zero income tax payable.

For persoanl taxes though also can include business ort investment losses and yes they will lower or even wipeout the tax payable, but not year after year. So when a salaried employee make $250,000.00 per year he may well have some investment losses, but not such to bring this salary to zero payable year after year. He will have years where investments were on thre positive side annd yaxes would then be higher then what the norm for his salary. I know this becaus eI had issues with CCRA and they did everything to say that I could not use my losses to lower my salary. Once I got a lawyer and not an accountant to go after this, it was then garnted but it still cost me thousands of dollars for the lawyer to fight this. So believe me, there are not too many people who can do this, without any costs. I still ask Jennie to show me where anyone has lowered his salary to zero payable over a five year period. That period still would allow for invetment losses claimed over that time frame.

1) I agree with you that we are not talking about year after year. We are talking about 1999. That is one year. We do not know from the information provided whether or not any of these individuals are not paying tax in earlier and/or later years because the statistics are based on aggregate information.

2) Since we are talking about one year and there is no statistical proof presented here of anyone getting away with paying no taxes while having a high taxable income (or even total income or net income) it is nothing more than idle speculation and, therefore, completely worthless, to "discuss" these alleged tax avoiders.

3) The reason those line numbers are so important is because if I am a proprietor who makes $250,000 in net income in my business this year I will show that $250,000 at Total Income and Net Income. But if I had large losses in the past it is possible that I will have a deduction that would reduce my taxable income to be non-taxable.

Alternatively, I could be a lawyer and make $250,000/year but also own a farm and lose $250,000+ in that year. The two would lead me to be non-taxable (despite restricted farm loss rules as happened to a Toronto lawyer).

4) Many businesses are reported on personal tax returns. These are called proprietorships and partnerships. I have not confused this with a corporate return although in an earlier post I did recommend the use of a CCPC to get around paying CPP premiums.

5) Tax shelter schemes like the buy-low-donate-high scheme's are currently being audited and tens of thousands of taxpayers have been/will be audited and are/will be assessed tax. This undoubtedly includes people from 1999 which will not show in these statistics since they were compiled in 2001.

6) The fact is, other than a vague and inferential original post, most of the posts here are nothing more than speculation based on an incomplete understanding of the law, whether it is the Income Tax Act, Employment Insurance Act or Canada Pension Plan Act.

[jennie]

1) I agree with you that we are not talking about year after year. We are talking about 1999. That is one year. We do not know from the information provided whether or not any of these individuals are not paying tax in earlier and/or later years because the statistics are based on aggregate information.

2) Since we are talking about one year and there is no statistical proof presented here of anyone getting away with paying no taxes while having a high taxable income (or even total income or net income) it is nothing more than idle speculation and, therefore, completely worthless, to "discuss" these alleged tax avoiders.

3) The reason those line numbers are so important is because if I am a proprietor who makes $250,000 in net income in my business this year I will show that $250,000 at Total Income and Net Income. But if I had large losses in the past it is possible that I will have a deduction that would reduce my taxable income to be non-taxable.

Alternatively, I could be a lawyer and make $250,000/year but also own a farm and lose $250,000+ in that year. The two would lead me to be non-taxable (despite restricted farm loss rules as happened to a Toronto lawyer).

4) Many businesses are reported on personal tax returns. These are called proprietorships and partnerships. I have not confused this with a corporate return although in an earlier post I did recommend the use of a CCPC to get around paying CPP premiums.

5) Tax shelter schemes like the buy-low-donate-high scheme's are currently being audited and tens of thousands of taxpayers have been/will be audited and are/will be assessed tax. This undoubtedly includes people from 1999 which will not show in these statistics since they were compiled in 2001.

6) The fact is, other than a vague and inferential original post, most of the posts here are nothing more than speculation based on an incomplete understanding of the law, whether it is the Income Tax Act, Employment Insurance Act or Canada Pension Plan Act.

It has generated a most interesting discussion, I think, where some myths and stereotypes have been addressed, and others reinforced.

Single mothers with pre-school children did constitute about 80% of the welfare rolls last data I saw, and they also had the most consistent turnover rates of 2-3 years. They do get childcare for going to school and most do, and then get jobs. This is the majority. Not saying there are no abusers of the system, but please don't paint all with the same low level brush.

Now tell me about #4 ... getting around paying CPP premiums?

[xul]

I read the article again and I found I made some mistake in my former post.

The article said there is a group of people:

1 Their income is beyond $250,000/year.

2 They pay no tax to Canada for their income.

3 They collect EI.

It seems impossible to coincide all above unless they are cheating. But I think there would be a case can be considered:

I suppose there is a person, he is a Canada citizen, and his boss sent him to this company's American subcompany for six month and then laid him off. He gained $250,000 when he worked in America, so American government taxed his income. He still declared his income to Canada government and payed EI in Canada because he is a Canadian citizen not American, but Canada government did not tax his income again. When he came back Canada, he would still collect EI when he was waiting for a new job.

Edited October 5, 2007 by xul

[msj]

It has generated a most interesting discussion, I think, where some myths and stereotypes have been addressed, and others reinforced.

Single mothers with pre-school children did constitute about 80% of the welfare rolls last data I saw, and they also had the most consistent turnover rates of 2-3 years. They do get childcare for going to school and most do, and then get jobs. This is the majority. Not saying there are no abusers of the system, but please don't paint all with the same low level brush.

Now tell me about #4 ... getting around paying CPP premiums?

1) Where have I painted anyone with "the same low level brush" wrt welfare? I am specifically talking to EI, CPP and IT for which you are one of the worst offenders for knowing very little about those particular Acts and/or for your idle speculation based on limited information and limited knowledge.

2) See my earlier post responding to, iirc, Geoff, about using a CCPC to either pay out dividends or to set up a proper profit sharing plan to get around paying CPP.

[msj]

I read the article again and I found I made some mistake in my former post.

The article said there is a group of people:

1 Their income is beyond $250,000/year.

2 They pay no tax to Canada for their income.

3 They collect EI.

It seems impossible to coincide all above unless they are cheating. But I think there would be a case can be considered:

I suppose there is a person, he is a Canada citizen, and his boss sent him to this company's American subcompany for six month and then laid him off. He gained $250,000 when he worked in America, so American government taxed his income. He still declared his income to Canada government and payed EI in Canada because he is a Canadian citizen not American, but Canada government did not tax his income again. When he came back Canada, he would still collect EI when he was waiting for a new job.

You are getting it entirely wrong:

1) When a person works in the US and is still considered a resident of Canada (which is how we tax people) then that person would not pay into Canada's EI system.

2) A person can make $250,000 in salary during the year, get laid off and, ignoring any effects of severance pay on an EI claim for simplicity, collect EI.

Why? Because EI is not income tested with the exception of the EI clawback (for which the government adds an extra clawback tax to EI benefits if you collect them during the year and then file a return with Net Income in excess of $48,000) and with the payment of EI benefits which are based on the maximum amount (there is a reason a person only pays EI premiums on the first $40,000 of income).

Edited October 5, 2007 by msj

[jennie]

1) Where have I painted anyone with "the same low level brush" wrt welfare? I am specifically talking to EI, CPP and IT for which you are one of the worst offenders for knowing very little about those particular Acts and/or for your idle speculation based on limited information and limited knowledge.

2) See my earlier post responding to, iirc, Geoff, about using a CCPC to either pay out dividends or to set up a proper profit sharing plan to get around paying CPP.

So sorry, msj, it wasn't you of course.

Thanks for the good info.

It was MOXIE ... and this message is for you, Moxie:

Single mothers with pre-school children did constitute about 80% of the welfare rolls last data I saw, and they also had the most consistent turnover rates of 2-3 years. They do get childcare for going to school and most do, and then get jobs. This is the majority. Not saying there are no abusers of the system, but please don't paint all with the same low level brush.

[xul]

You are getting it entirely wrong:

1) When a person works in the US and is still considered a resident of Canada (which is how we tax people) then that person would not pay into Canada's EI system.

2) A person can make $250,000 in salary during the year, get laid off and, ignoring any effects of severance pay on an EI claim for simplicity, collect EI.

Why? Because EI is not income tested with the exception of the EI clawback (for which the government adds an extra clawback tax to EI benefits if you collect them during the year and then file a return with Net Income in excess of $48,000) and with the payment of EI benefits which are based on the maximum amount (there is a reason a person only pays EI premiums on the first $40,000 of income).

Thank you for instruction.

[mikedavid00]

When he came back Canada, he would still collect EI when he was waiting for a new job.

Yup..

Xul knows all about our EI/welfare loopholes for some reason even before he gets here..

hmmmm....

[geoffrey]

2) See my earlier post responding to, iirc, Geoff, about using a CCPC to either pay out dividends or to set up a proper profit sharing plan to get around paying CPP.

msj, I'm sure your qualified in your job. But it's simply not plausible for most people to use the CCPC model to eliminate CPP payments, I'm unsure why you'd even suggest it. Those that could use it, already are.

It was highly unprofessional and unethical of you to actually "recommend" their use in a forum like this to people that generally can't use them or would be disadvantaged by doing so.

I can't imagine the majority of Canadians with T4 income going to their employer asking "hey, do you mind if you just fire me and bring me back as a contractor."

Not to mention you then deal with the cost of individual benefits over group plans and so forth which generally lower your overall income.

Further, tax implications of using a CCPC to pay dividends or have a profit sharing plan on contracting income generally reduce that further.

Realistically, the vast majority of Canadians are required to pay CPP and that's not going to change.

[msj]

msj, I'm sure your qualified in your job. But it's simply not plausible for most people to use the CCPC model to eliminate CPP payments, I'm unsure why you'd even suggest it. Those that could use it, already are.

It was highly unprofessional and unethical of you to actually "recommend" their use in a forum like this to people that generally can't use them or would be disadvantaged by doing so.

I can't imagine the majority of Canadians with T4 income going to their employer asking "hey, do you mind if you just fire me and bring me back as a contractor."

Not to mention you then deal with the cost of individual benefits over group plans and so forth which generally lower your overall income.

Further, tax implications of using a CCPC to pay dividends or have a profit sharing plan on contracting income generally reduce that further.

Realistically, the vast majority of Canadians are required to pay CPP and that's not going to change.

1) I never said anything about employees setting themselves up as contractors. I did say that people can legally avoid paying CPP with the use of a CCPC.

2) I never claimed it would be practical nor that a person would necessarily be better off. If a person is making good money and benefits as an employee I would expect he/she to be smart enough to know this.

3) Anyone, however, can start or buy a business and they may choose to incorporate that business if one of their goals is to avoid paying CPP (which generally is lower on the list than the deferral of income tax and potential liability protection offered by the corporation).

4) I never "recommended" the use of a CCPC. I merely suggested it as an easy way to avoid paying CPP. One could also avoid CPP by leaving Canada or by living off of investment income. I recommend doing the latter but most people are smart enough to realize that for most people this just isn't practical.

5) I was merely pointing out that your suggestion that "f we were allowed to opt out of the plan, then I'd agree. But since everyone pays, everyone should benefit." is wrong. Some people do opt out thanks to being self-employed through a CCPC. Indeed, some people even go so far as to arrange their affairs to avoid paying CPP as can be evidenced in the legal case where a married couple used a profit sharing plan to avoid paying CPP (and they won).

6) Methinks that you just don't like being wrong so you will find any excuse to call me "unethical" and "unprofessional" in an ad hominem kind of way.

[msj]

For those interested here is a screen shot from a 1999 tax return setup to show how a person earning $250,000 in salary may not pay any tax, still get a GST tax credit in the next year (2000) of $257 and get the BC PST tax credit of $50 all thanks to losing money as a, say, farmer:

http://farm3.static.flickr.com/2128/152494...7e34536c5_o.gif

The lawyer who also is a full time farmer is a good example of this.

There is a legal case where a Toronto lawyer had huge farming losses - it went to court because the CRA wanted the losses to be restricted so that he could only deduct a limited amount of the losses against his salary from his legal corporation and then carry the rest forward to be deducted against any farm income if that ever occurred. The lawyer was successful in arguing that he was not only a full time lawyer but a full time farmer; therefore, the full deduction was allowed.

[no queenslave]

Flat tax anyone?

that is what GST and PST is.

Personal income tax is just another form of slavery in the name of the queen.

The canadian government assumed power in 1941 after the STATUTE OF WESTMINSTER gave every person and province the right of sovereignty- autonomy. They govern by corrupt appointed judges giving them powers they have not been given by the people of the country: that is why they are sworn in ,pledging allegiance to the queen and not to a Canadian constitution. Only in a dictatorship as in Canada can the government impose a constitution on the people. In a democratic country the government gets its power to govern by the people creating and ratifying a constitution, as to what powers the people want the government to have. In Canada PET used a British bill and said it was our Constitution, and you do not understand that is how a dictatorship gets control and governs. Even the supreme court ruled our protection is in a constitution which the federal or provincial or both collaborating can NOT chane it ,only the people can change a constitution by a referendum.

politicians are not educated but indoctrinated and only expire to get more control over you, and you just allow them to do what they want , because you haven't taken the time to educate yourself of the powers you have as given to you by the statute of westminster..

[guyser]

The canadian government assumed power in 1941 after the STATUTE OF WESTMINSTER

1931 for starters

Dictatorship...my my...hyperbole aside, what are you saying?

[jennie]

1) I never said anything about employees setting themselves up as contractors. I did say that people can legally avoid paying CPP with the use of a CCPC.

2) I never claimed it would be practical nor that a person would necessarily be better off. If a person is making good money and benefits as an employee I would expect he/she to be smart enough to know this.

3) Anyone, however, can start or buy a business and they may choose to incorporate that business if one of their goals is to avoid paying CPP (which generally is lower on the list than the deferral of income tax and potential liability protection offered by the corporation).

4) I never "recommended" the use of a CCPC. I merely suggested it as an easy way to avoid paying CPP. One could also avoid CPP by leaving Canada or by living off of investment income. I recommend doing the latter but most people are smart enough to realize that for most people this just isn't practical.

5) I was merely pointing out that your suggestion that "f we were allowed to opt out of the plan, then I'd agree. But since everyone pays, everyone should benefit." is wrong. Some people do opt out thanks to being self-employed through a CCPC. Indeed, some people even go so far as to arrange their affairs to avoid paying CPP as can be evidenced in the legal case where a married couple used a profit sharing plan to avoid paying CPP (and they won).

6) Methinks that you just don't like being wrong so you will find any excuse to call me "unethical" and "unprofessional" in an ad hominem kind of way.

Methinks anyone who wants to avoid paying CPP can easily do so by going a couple of hours south.

[no queenslave]

1931 for starters

Dictatorship...my my...hyperbole aside, what are you saying?

just checking . at least you know the year but little else ; as you have demonstrated by your post.

no british law applied after its passing and the people have never requested that it should; only corrupt politicians who committed fraud by omission by not informing the people of their right of sovereignty and right to create any form of government they wanted. It gave every province the right of sovereignty.

[godzilla]

i've never seen such a load of crap that avoids the obvious in such a thread (ok, maybe i have).

READ MY EARLIER POST ON THIS THREAD!

any chat about anybody making $250,000 as T4'd income is boulderdash. how many people in canada do you think really have this income from a T4'd job?! those with this kinda income are making it from shareholders income and have their assests protected behind a corporation.

again, last year i grossed $200k and paid less than a 10% effective combined tax rate. and its all legal. now, how fair is that compared to someone who is taxed at source? and i'm a little guy!

its hilarious to see posts about immigration by people who don't want anyone to pay tax. who the heck will guard the borders then?

people seem to think that clean drinking water, electricity, roadways, telephone lines, law enforcement, fire services, military protection, democracy, border services, environmental protection, health care, central banks etc etc etc would somehow happen if no one were paying taxes!

and who wins?

well, if i pay my taxes and i get all of the services above (because believe me, if you are taxed at source then you _are_ paying for it) then i get this lifestyle and i should be happy. and one of the richest canadians in the country who draws upon a workforce of hundreds of thousands of well fed, healthy, educated people that are able to get to work reliably and are prevented from taking company stuff home etc etc...

then should the rich guy be paying the same _amount_ as the taxed at source guy or the same _percentage_?

isn't the rich guy actually using tremendously more of whatever services are provided?

what do you think the wealthy would say if there was no more taxation?! and they would be responsible for the roads to their businesses, and educating their workers, and providing for their health care etc etc?! they much prefer the current system!!

wake up out there!

Edited October 12, 2007 by godzilla

[godzilla]

oh yeah... and one more thing.

as far as 'corrupt' politicians are concerned. who puts them there!? they don't get there without MONEY! its a pay to play game and the big money makes the rules.