Tax relief

[a_majoor]

Even given the rather limited range of action a minority government has, I have to agree with this editorial. From an economic perspective, the best and most effective tax system is one which is broad based and simple. Our system is anything but, and the raft of exemptions, loopholes etc. simply serve to narrow the tax base.

The other reason to support borad based tax relief is the simple fact (proven by direct observation in many times and places) that lowering taxes leads to greater revenues, since more resources are now available for investment, spending and saving. 30 million people choosing their own investments, spending preferences and savings vehicles can certainly power a far wider range of economic choices than a small handfull of bureaucrats and politicians.

http://www.canada.com/reginaleaderpost/news/viewpoints/story.html?id=1747a840-0d62-47d0-b1dd-755d4cfedffa

Tory tax talk really taxing 

Saskatoon StarPhoenix

Saturday, December 30, 2006

Here's one item we hope is high on federal Finance Minister Jim Flaherty's list of New Year resolutions: "I will deliver REAL tax cuts to Canadians in 2007."

We stress "real" because cutting taxes is a long-standing Conservative resolution Flaherty largely failed to keep in 2006. Despite Flaherty talking a good tax-cutting game when he delivered his first budget, the facts don't support him:

n Reducing the GST to six per cent from seven per cent? Big catch -- you've got to spend something to get it. And unless you are buying a big-ticket item like a house or car, the GST cut is mere pennies a week.

n The Universal Child Care Benefit of $100 a month? It only applies to children under six, excluding millions of Canadians whose children are older, plus it's taxable.

n The new $500 Canada Employment Credit? You don't get it until you file your 2006 income tax return this spring.

n Income tax? Flaherty hiked the bottom rate to 15.5 per cent from July 1, just months after the former Liberal government had cut it to 15 per cent from 16 per cent.

An array of tax credits and deductions for students, apprentices and tradespeople -- plus a tax credit for children in fitness programs -- are welcome, but they are tax breaks not tax cuts.

The Canadian Taxpayers Federation (CTF) takes a similarly dim view of Flaherty's "meagre" offerings this year and points out that workers will also "pay $70 more in payroll taxes" in 2007 because the EI threshold and CPP contributions have been raised.

"Under his (Flaherty's) plan, there will be no income tax relief without significant debt interest savings," the CTF complains. "This is an excuse for Ottawa to keep taxes high." The CTF notes that according to the international Organization for Economic Co-operation and Development and Canada's own Finance Department, "our personal income tax burden remains the highest of the G-7 nations."

We agree with the CTF that meaningful tax relief means Flaherty cutting income taxes and increasing personal and spousal exemptions in his upcoming budget. Another slew of tax "breaks" and promises of future tax cuts tied to federal debt reduction simply will not do.

Flaherty must resolve to do better.

© The Leader-Post (Regina) 2006

 

[Genetk44]

The point we all have to keep in mind is the nature of politicians and bureaucrats...they are empire-builders. Empire builders amass power and their natural tendency is to keep doing so, hence the overly complicated tax system, that the ordinary layman can never fully comprehend. Therefore the concept propounded in the final paragraph of your post, "The other reason to support broad based tax relief is the simple fact (proven by direct observation in many times and places) that lowering taxes leads to greater revenues, since more resources are now available for investment, spending and saving. 30 million people choosing their own investments, spending preferences and savings vehicles can certainly power a far wider range of economic choices than a small handfull of bureaucrats and politicians." to empower the taxpayer, will never be implemented.

 

[Long in the tooth]

"The other reason to support broad based tax relief is the simple fact (proven by direct observation in many times and places) that lowering taxes leads to greater revenues, since more resources are now available for investment, spending and saving. 30 million people choosing their own investments, spending preferences and savings vehicles can certainly power a far wider range of economic choices than a small handfull of bureaucrats and politicians."

This doesn't really apply to the narrow tax cuts made by the Harper Gov't.  The 'direct observation' your'e referring to is the broad based tax breaks made by the US in the last 15 years or so.  The theoretical formula is called the 'Laffer Curve' and is based on (IIRC) aggregate demand.  Up to a point (20%? 30%?) of total GDP taxation does not effect supply and demand, but after that point crowds out private (and assumably more efficient) investment.  Currently we send a total of 42% of all revenues to various government agencies.  If we assume a multiplier of 5 for every dollar that remains in the economy and a marginal tax rate of 40%, a 1% drop in marginal tax actually increases revenue by expanding the economy.

This is a bit of a leap of faith to be sure.  However, when I argue with my left leaning friends about the benefits of big government (and ours is big), I attempt to pin them down.  Firstly, they don't know how much of a cut the government gets, only see the 'benefits'.  Being knowingly absurd, I suggest sending all our money to government.  Sometimes they are actually eager to do this, but then I point out the car in the garage, the stereo and the food they eat, wondering if they would like the grocery store to operate the same as our health care system.

Believe it or not, most come to the conclusion that we are overtaxed, and a reasonable rate would at most be 35%.  Leviathan lives very well, indeed.

 

[Cdn Blackshirt]

1)  Any tax cut that forces Ottawa to reduce the bloated Civil Service is a step in the right direction.
2)  Although simple taxes sound like a great idea, I'm actually a believe that we do need a carrot & stick approach to get people to strategically do the things they should be for the maximum benefit of the country.  Specifically, although I understand the interest in flat tax systems, I think it's more important to lower tax burdens on the lowest income earners in order to give them that small lift to get them out of the poverty trap.  Then with that targeted tax cut, providing additional tax credits to get them educated, not only because it means they'll be more productive individually, but also because of the role model impact that will have on their children.
3)  With that all in mind, my biggest objective remains debt elimination.  The fact we still have a massive debt pains me to no end.  I should add that the standard use of "Debt-to-GDP ratio" to me is far less important than "Debt Servicing Cost as a percentage of Tax Revenues".  In addition, on principle the idea that previous generations are leaving debt to myself and those younger than me pisses me off to no end.  In terms of government debt, tax structures should be structured based on each age demographic being tax revenue/expenditure neutral.


Matthew.

 

[Long in the tooth]

"Although simple taxes sound like a great idea, I'm actually a believe that we do need a carrot & stick approach to get people to strategically do the things they should be for the maximum benefit of the country.  Specifically, although I understand the interest in flat tax systems"  Cdn Blackshirt.

Is your point that there are only two options?  Micro tax exemptions or a flat tax?  The more tax exemptions you have, the more the issue is clouded and the more lower income earners lose.  Wealthy members have accountants who will wring every deduction out of the tax man.  I wonder how many families with a one income earner of $45,000 (hey, that's almost an Army Cpl's pay) have an accountant?

The clearer the collection system the more accountable government is.

What total taxation level are you comfortable with (this is not rhetorical)?  Right now it's 43-45%.  For peace, order and good government I think we can do it for 35%.

 

[Cdn Blackshirt]

"Although simple taxes sound like a great idea, I'm actually a believe that we do need a carrot & stick approach to get people to strategically do the things they should be for the maximum benefit of the country.  Specifically, although I understand the interest in flat tax systems"  Cdn Blackshirt.

Is your point that there are only two options?  Micro tax exemptions or a flat tax?  The more tax exemptions you have, the more the issue is clouded and the more lower income earners lose.  Wealthy members have accountants who will wring every deduction out of the tax man.  I wonder how many families with a one income earner of $45,000 (hey, that's almost an Army Cpl's pay) have an accountant?

The clearer the collection system the more accountable government is.

What total taxation level are you comfortable with (this is not rhetorical)?  Right now it's 43-45%.  For peace, order and good government I think we can do it for 35%.

RE: "Flat Tax or Not" as the only two alternatives? - Yep....because either you have a flat tax, or you don't.  ;D

RE:  Accountable Government - I think all Civil Servants and MP's expenses as well as detailed departmental budgets should be pdf'd and available on the net.  Transparency is what guarantees accountability.

RE:  Taxation Level of 35% - Absolutely perfect....that would be my target too as soon as you eliminate the debt.  Our present ability to have the services we do and run surpluses has only been the result of a low interest rate environment.  If interest rates ever spiked, at our current level of debt we'd be in the shiiit again immediately.


Matthew. 

 

[Long in the tooth]

Ok, if it's down to a flat tax or not, let's get rid of all the levy's, user fees and smorgasborg tax exemptions.  Or not....

 

[Brad Sallows]

The low-end federal rate is 15.25%, not 15.5%, and the employment credit amount is a maximum of $250, not $500.

 

[a_majoor]

2)  Although simple taxes sound like a great idea, I'm actually a believe that we do need a carrot & stick approach to get people to strategically do the things they should be for the maximum benefit of the country.  Specifically, although I understand the interest in flat tax systems, I think it's more important to lower tax burdens on the lowest income earners in order to give them that small lift to get them out of the poverty trap.  Then with that targeted tax cut, providing additional tax credits to get them educated, not only because it means they'll be more productive individually, but also because of the role model impact that will have on their children.

The problem with this sort of approach is who is deciding "the things they should be [doing] for the maximum benefit of the country". Liberal politicians had a vast number of programs "for the maximum benefit of the country"; who knew Bombardier and all those Montreal Ad agencies were such vital links to Confederation?

3)  With that all in mind, my biggest objective remains debt elimination.  The fact we still have a massive debt pains me to no end.  I should add that the standard use of "Debt-to-GDP ratio" to me is far less important than "Debt Servicing Cost as a percentage of Tax Revenues".  In addition, on principle the idea that previous generations are leaving debt to myself and those younger than me pisses me off to no end.  In terms of government debt, tax structures should be structured based on each age demographic being tax revenue/expenditure neutral.

Debt/GDP is pretty difficult to fudge, and it also forces politicians to consider ways to increase the GDP to make the figure and themselves look better, which benefits us all. Using strange formulations like "Debt Servicing Cost as a percentage of Tax Revenues" is an incentive to cheat by Enron style book cooking; although Paul Martin as Finance Minister could have taught those executives a thing or two (multi billion dollar over taxation, excuse me, "surplus" vanishing just before the actual budgets; lots of shuffling accounts to different fiscal years and even boldly setting up "foundations" to send billions of dollars out of the oversight of parliament or the Auditor General.....). Of course reducing the absolute value of the debt is by far the simplist and most effective method of fixing things, imagine that?

 

[Long in the tooth]

Should we attempt to eliminate the debt completely?  In my view, banking is one of the greatest leaps forward in civilization.  We would not have won a war in the last century or produced any great capital project like the St Lawrence seaway without it.  Our forebears may not have chosen perfectly but leave us with incalculable infrastructure.

Our federal debt now is about $550 Billion, but we have tangible assets many time that.  Might I suggest that a federal debt of $300 billion might be in order to pass on to the inheritors of this?

 

[a_majoor]

Since about 1/3 of tax revenues go to paying debt charges, there is a very compelling reason to eliminate or at least drastically cut the debt. Even at the civic level, the City of London pays @ $60 million/year in debt charges, so debt reduction at every level will (should) result in a great deal of tax relief.

Wishful thinking I know, but unless we get voters engaged in a very big way, this will not happen, with negative consequences for us all.

 

[Brad Sallows]

There's no reason to religiously hold government debt at zero, but it should be like a responsible person's credit card balance.  It goes up temporarily (eg. major one-time expenditures), and then is paid down.  Sometimes things may crop up for which part of the cost will be the cost of the money borrowed to meet the aim.

 

[tomahawk6]

In the US tax cuts seem to generate more revenue for the treasury than before. Higher taxes seem to stiffle economic growth. Pretty basic.

 

[a_majoor]

Things may be moving in the right direction. Let's see what the next budget will bring:

http://www.theglobeandmail.com/servlet/story/RTGAM.20070123.wharper23/BNStory/Front/home

Harper pledges to cut taxes
GLORIA GALLOWAY

Globe and Mail Update

OTTAWA — Prime Minister Stephen Harper celebrated the first anniversary of his election victory by pledging to cut taxes and resolve the fiscal imbalance in the coming federal budget.

"We need to prepare Canada as much as possible for the challenges and cycles of the global economy," Mr. Harper said during a noon-hour speech to Conservatives in the ballroom of an Ottawa hotel.

"It's why we will introduce a 2007 budget that will keep federal spending focused on results, reduce taxes even further for families and individuals and resolve the fiscal imbalance within the Canadian federation."

The Prime Minister spoke at length about the accomplishments of his Conservative government, including the new Federal Accountability Act, the $1,200-a-year childcare benefit, a slew of justice initiatives, tax cuts, the beefing up of the military, the softwood lumber deal and a new international presence.

"To a world that thought Canada had fallen asleep, we served notice Canada's back," he told the cheering crowd of supporters.

In all, it was a job that Mr. Harper said warrants congratulations to all members of his party.

"I still occasionally pinch myself to make sure I'm not dreaming."

But, despite the list of achievements, the new agenda rolled out by Mr. Harper Tuesday looks very much like the one that his party presented during the last election campaign.

"Canadians have made it very clear they want the Canadian government to be more accountable and more democratic," he said. "That's why our legislative line-up includes a package of democratic reforms, fixed election dates, term limits for senators and yes, finally, term elections to fill vacancies in the senate of Canada."

Canadians also continue to demand safer streets, and more action against gun, gang and drug crime, said the Prime Minister.

"That's why we're going to keep pushing for passage of our crime bills: mandatory minimum sentences for the perpetrators of violent crimes, reforms to the bail system, a crackdown on impaired driving, and protecting children from sexual predators."

Canadians also want decisive action on the defence of Canada's values and interests, he said. "That's why we will continue rebuilding our armed forces."

There was no mention of health care in Mr. Harper's 15-minute, address. Obtaining a wait-times guarantee from the provinces had been one of his government's top five priorities but seems to have fallen down the list.

And although the recent cabinet shuffle that moved Treasury Board President John Baird to Environment to replace Rona Ambrose was seen as a signal that Mr. Harper was ready to focus on the environment, his speech did not reflect that change in direction. Rather than talk about new climate-change initiatives he had planned for the future, the Prime Minister instead gave a brief mention to some of the environmental announcements his government has already made.

"The Canadian population wants us to continue to adopt a concrete and realistic strategy to protect the environment," said Mr. Harper. "Last week we announced our eco-energy initiative. Our eco-energy initiative has demonstrated our unequivocal commitment to improving air quality, lowering greenhouse gas emissions and living better by consuming smarter."

 

[hotelquebec9er]

"1)  Any tax cut that forces Ottawa to reduce the bloated Civil Service is a step in the right direction."

I agree to a large extent, but you do realize that once the bureaucrats start hashing out a plan they'll take their axe to DND first. It appears the most historically "cuttable" departments in Ottawa has been DND, yes?  When offered a choice between hospitals and the military...  a great majority of Canadians pick to keep hospitals.  So how do you change that?  I have a feeling the "bloated" portions of Ottawa paper pushers would survive if this was attempted.

 

[Long in the tooth]

Bureaucracies gives the illusion of control, just as 'reorganization'  can look like progress. 

 

[a_majoor]

An interesting idea at the municipal level:

http://responsiblegovernmentleague.blogspot.com/2007/02/river-of-ponds.html

River of Ponds
A little community on Newfoundland's Northern pensinula known as River of Ponds is heading towards a flat municpal tax. The first reaction from our provincial minister of all things municipal isn't all that encouraging . .

Jack Byrne via CBC:

" . . .Municipal Affairs Minister Jack Byrne said River of Ponds is the first town to make such a move, which he described as bearing risks.
'I certainly don't see the larger municipalities being able to use a fee-for-service and being able to survive, because of the lack of revenues that they may generate from that process,' Byrne said.

If more municipalities follow the lead of River of Ponds, Byrne said, it could cut into the budget of the Municipal Assessment Agency. . . ."


Wow, that's a marvellous attitude. Fear tax cuts, think about the tax agency first, and buy into the assumption that all tax cuts are revenue cuts. . . Sad. Maybe there are municipalities that will never be able to make use of this, but I think we should be pleased that some commuities can do this and lower taxes for many people and businesses with a stake in the community. River of Ponds, provided they don't come to any other level of government for supplements, should be commended for this change. Other towns who can should follow suit. Businesses who see this sort of progressive change who might have been considering coming to a town like this should definitely reward River of Ponds for their sensible challenge of a stale status quo.

The highlighted portion pretty much defines how the opposition (Bureaucracies and other vested interests) will react anywhere. Only relentless pressure by voters and taxpayers will ever result in a change.