Canadian Economics 101

[Infanteer]

The Canadian Taxpayer's Federation compiles stats on all this stuff:

http://www.taxpayer.com/main/content.php?content_id=6

Here is the 2002 stats for income tax collected in Canada:

http://www.taxpayer.com/pdf/Tax_Statistics_on_Individuals_2002.pdf

As you can see, people who pay taxes (over the basic exemption up to 60,000k) and are "average Joe's" like most of us (myself included) make up 64% of the total amount of taxpayers (total percentage of tax-returns submitted).   This 64% of us payed 43% of the total income taxes collected.

High income earners (who earned 60,000k and up) were 13.5% of the total, and this small percentage ended up paying the other 57% of the total tax burden.

Now, this is not a bad thing in absolute terms.   Since income tax is a percentage of ones income, of course the higher earners are going to put more in towards the total.

What I have a problem with is that the average tax assessed on the high earners (13.5% of the taxpayers) was about 20% of their income while for the average guy (64%) it was only at about 10%.   We are penalizing people for being competitive and either maximizing an investment or bringing a skill to the job market that is in high demand (people usually don't get payed for nothing).   We are essentially saying that you "owe" more to the public pot because you did well for yourself.

Seeing how these people have a high degree of opportunity and mobility, they can either find ways around paying these taxes or leave Canada all together.   I don't know about you, but driving off investors, venture capitalists, and skilled professionals isn't very conducive to a strong economy.   As well, how well would our Government-run Social programs if that 57% of the income pool dried up.

Again, it is easy to say "Well, they make more, so they can afford it", but in the traditions of John Rawls, but yourself in their shoes.   I wouldn't be too happy if I put in more money which represented a greater percentage of my income only to see nothing come out of it.   I feel that egalitarian notions that underscore our democracy should mean that every citizen holds an equal share in the country, is entitled to equal say in its direction (1 Vote), and bears an equal part of the burden.   It is amusing to see that for the most part, the Socialist edifice in Canada is upheld by those who thrive under a Free Market.

 

[a_majoor]

Some practical explanations as to how things work in the "real" economy:

There Was No Double-Dip
The Bush expansion is in its fourth year.

By Greg Kaza

A persistent growl from the bear camp two years ago was that the U.S. economy was headed for a â Å“double-dip recession,â ? meaning the economy was in danger of sliding back into a period of negative growth after having climbed out of it. I respect Stephen Roach, the Wall Street economist who popularized this idea (he was one of the few who forecast the 2001 recession). Yet the double-dip argument was always weak, although that hasn't stopped partisan, and even some non-partisan, economists from giving it considerable attention.

Here's a sampling. In July 2002, The Christian Science Monitor cautioned: â Å“Rumbles of double-dip recession: Trillions in stock-market losses and sagging consumer confidence threaten to repeat a pattern last seen in 1981.â ? CNN/Money fussed in August of that year, â Å“Watch out for the Double-Dip: The economy has hit an air pocket and some fear the worst.â ? Not to be outdone, The New York Times fretted in July 2002, â Å“Is Economic Double Dip Lurking on the Horizon?â ? The double-dip gave partisans one more excuse to attack the Bust tax cuts. In September 2002, then-Senate Minority Leader Tom Daschle confirmed that â Å“There is a real possibility for a double-dip recession.â ?

What gave some economists heartburn at the time? Brief, slower annualized real growth of gross domestic product in 2002, and fears of an â Å“exogenous shockâ ? to the economy.

Today it is clear that there was no double-dip. The 2001 recession started in March and ended in November, according to the National Bureau of Economic Research (NBER) â ” the official business-cycle umpire. Fears about exogenous economic shocks and lagging real GDP â ” it has grown each quarter since the third quarter of 2001 â ” were exaggerated.

Some of us argued in 2002 that the recession had ended. NRO economics editor Larry Kudlow spoke for many bulls in May 2002 when he said, â Å“On Wall Street today, there are too many doomsayers who believe a double-dip recession is on the way.â ?

Well, the doomsayers were once again wrong: The Bush expansion is now in its fourth year. In March it enters its fortieth month. That's longer than five other postwar expansions (1945-48, 1954-57, 1958-60, 1970-73, and 1980-81). Key indicators outside of GDP have also expanded, including the Fed's industrial production index, which measures the physical output of the nation's factories, mines, and utilities. Industrial production reached its trough during the month the 2001 recession ended. Double-dippers ignored it at their peril.

Any review of historical industrial production data, important in the NBER's business-cycle chronology, casts doubt on the double-dip scenario. Double-dippers argue that the economy contracts in primary and secondary movements with a period of growth in between. (Imagine the letter â Å“Wâ ? on a chart, which partisans have called the â Å“Dubya pattern.â ?) However, if you examine industrial production during recent recessions you will find the opposite: largely sequential declines and troughs near coincident to NBER turning points. Industrial production peaked in mid-2000, suggesting recession. But its growth in early 2002 suggested a double-dip was unlikely.

Partisans embraced the double-dip to attack tax cuts. Nonpartisan economists who grabbed onto the idea likely lacked a familiarity with capital-based cyclical analysis. IMF economist Stefan E. Oppers, who gets it right, penned a helpful 2002 introduction that cited â Å“capital-basedâ ? ideas. Against Keynes, capital-based economists argue that â Å“intervention by the monetary authorities [is] the ultimate source of recession.â ? (One way to appreciate capital-based analysis outside the classroom is to work in the American Heartland where â Å“heavy industriesâ ? produce durable goods like motor vehicles.)

Capital-based analysis was a central argument for great cyclical theorists like Friedrich Hayek, who was cited in Oppers paper. In the thinking of economists like Hayek, the seeds of recession are sown when monetary authorities mistakenly set short rates below the natural, or market, interest rate during an expansion, causing malinvestments that appear first in heavy industries. This capital-based analysis is endogenous, where exogenous theories rely on factors like the external shocks of an oil-price hike or negative geopolitical events such as those in hot spots like the Middle East. Double-dip theorists hang out in the latter camp.

Arguments about exogenous versus endogenous cyclical theories are a sort of inside baseball to economists. But as the economy continues to expand the double-dip scenario is a reminder that seemingly obscure economic debates can sometimes be hijacked for other purposes â ” like talking down tax cuts.

â ” Greg Kaza is executive director of the Arkansas Policy Foundation, an economic research organization based in Little Rock.

 
http://www.nationalreview.com/nrof_comment/kaza200502180852.asp

 

[a_majoor]

Right-wing statists will concede that government does a disastrous job of curing poverty, "running" the economy and producing health care and education. They have a harder time coming to grips with built-in government incompetence when it comes to providing common defence, or even worse, invading and occupying other countries. Left-wing statists like to mock the missile defence shield as an unworkable boondoggle, but believe a benevolent government with all the "right" information can somehow manage global climate change. Both sides would do well to understand the perverse incentives created in a command economic system and look instead to decentralized markets and voluntary cooperation to produce the goods they desire.