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Of Dead Pigs and Taxes

It’s Tuesday and having nothing better to do while I wait for the results of the Alberta election, I decided to compare tax rates across Canada.

I can be a bit masochistic at times.

Today is the deadline for filing your taxes in Canada. The tax deadline is normally April 30, of course, but Canada Revenue Agency screwed up somehow and so the deadline was extended for five days.

Nobody questioned how the tax department could miss its own deadline even though they’ve been doing this tax collecting thing for decades – Canadians can be very forgiving at times. I suspect most of us would be a lot less forgiving if it was something we wanted that got delayed.

But nobody wants, or at least enjoys, paying taxes.

They’re necessary, of course; it’s how we pay for things like roads, defense, health care and helping political parties to buy votes at election time. Taxes used to also be used for building other things like the St. Lawrence Seaway and the TransCanada Highway but it seems these days; that has become a lost art.

For a variety of reasons, we aren’t able to even build a pipeline or maintain our existing infrastructure very competently anymore so the tax dollars get spent on other stuff.

The conventional wisdom in Canada is that Conservatives are better fiscal mangers than Liberals and that we all prosper and pay less tax under Conservative governments than we do under the governments of other parties.

I’m not sure how that rumour got started but it’s only almost true.

When you compare income tax rates across the country, my province, Quebec, continues to be the winner with the highest tax rates in the country although a couple of other provinces are quickly catching up.

Based on an annual average salary of $50,000, a person living in Quebec would have a combined average tax rate of 22.39% and would pay $11,139 in federal and provincial taxes. Quebec is currently governed by the Liberals which is actually a Conservative Party in Quebec. For the preceding year, it was governed by the Parti Quebecois which is a separatist party with no economic ideology – or skill to put it delicately.

Right behind Quebec with average tax rates above 20% are Manitoba (NDP), Saskatchewan (conservative), New Brunswick (Liberal/Conservative), Nova Scotia (Liberal/Conservative) and Newfoundland (Conservative).

In other words, three of the provinces with the highest tax rates are governed predominantly by Conservatives, two are governed alternately by Conservative and Liberal governments and one is predominantly governed by a socialist government.

Continuing down the list, Ontario (Liberal) is usually considered by right-thinking Conservatives to have a terrible tax rate but, in fact, Ontario’s average income tax rate (17.4%) is lower than Alberta’s (Conservative -18.7%) and only slightly higher than British Columbia (Liberal – 17.04%) and the three northern territories which have average tax rates that don’t reach double digits.

Don’t take any of this as a suggestion that somehow the Liberals are stronger economic managers than Conservatives – they aren’t. Ontario, which has been governed for just a little too long by the Liberals, has a relatively high sales tax which is actually a fairer form of taxation than income tax but also has ever increasing hydro rates, user fees for almost everything and a rainbow of environmental taxes.

Ontario Premier Wynne likes to refer to those additional taxes and fees as revenue tools rather than taxes but if it comes out of our pockets and goes to government, it doesn’t matter what you call it – it’s still a tax.

Alberta, conversely doesn’t have a sales tax although there was talk – or at least there was during the election campaign until the NDP pooped on the Conservative electoral cakewalk – of adding one.

Quebec has a simple rule.

“What we can’t extort from the federal government – we tax you to get. You don’t like it – too bad so sad, just put on your big boy panties and suck it up and in the language of your choice.” 

In Quebec, tax revenue is considered bilingual.

Taxation has only two purposes in this country. The first is to fund government operations and programs. The second is provide sufficient funds to the government in power to buy votes in election campaigns and no party has a monopoly on the misuse of tax dollars for either of those imperatives.

Everybody but politicians hate taxes except at election time. During elections everybody hates taxes or at least only those taxes that are specifically applied to ‘them’. Most folks don’t seem to mind others paying more taxes.

People who support the Conservative’s Income Splitting Program are quite happy that they will get a benefit that reduces their taxes even if it means that others are financing it through their taxes. Others, like the federal Liberals, think that increasing the taxes on the wealthy to provide tax breaks for others is sound economic policy and the NDP believes corporations aren’t paying enough even though the unions that support their party don’t pay any taxes on their income from membership fees and the returns realized from investing those fees.

All of these are as right as they are wrong.

The real issue with taxation is that the way we are taxed is overly complex which allows for a significant level of unfairness. Canada’s ‘progressive’ tax system is more regressive than progressive. There are so many tax credits and loop holes that have been built in over time that the marginal income tax rate has become meaningless.

Two people earning identical salaries and with a marginal tax rate of 50% can end up paying significantly different amounts in taxes depending on where they live or how they earn their income. Some who are straight salaried employees can only benefit from things like investments in RRSPs and Tax-free Savings Accounts. Others, like the self-employed, some professionals or sales people have a variety of additional tax credits they can use to reduce their tax owing.

Families with children get tax credits that are unavailable to other families. Single folks are simply tax targets.

Typically, the working poor have virtually nothing available to them to reduce their taxes while they richest among us have a raft of tax break opportunities including the ability to ship some of their wealth off-shore where the government can’t find it.

That isn’t an argument against being rich. It’s an argument against an absurdly complex, regressive tax system that has spawned an entire industry of tax planners and preparers to help the villagers (that would be folks like you and I) figure out how much money they have to pay their own government every year.

Imagine that; paying someone more of your money just to figure out how much of your money you have to give the government. It’s not difficult to understand why when you consider that the current tax code has more than 3,300 pages of rules in it.

The stupidity of how we allow ourselves to be taxed is breathtaking. Last year, Canadians paid the equivalent of their entire salary from January 1 to June 9 in taxes. This year it will be one day later and we will all work for the government until June 10.

I suspect that extra day is the result of the excess expenses charged by Senator Mike Duffy who is currently on trial for enjoying our tax dollars just a little too much.

The simple truth is that how we are taxed is overly complex which provides an additional benefit to government. It makes it virtually impossible for anyone to figure out the truth about the effects of reducing taxes, increasing them or a fairer distribution of taxation. In the lead up to this fall’s federal election, there have been credible arguments made on both sides of that discussion which tends to mean that nobody knows the truth.

At the end of the day, we all benefit from and make use of the same services and things our taxes provide through government be it health care, infrastructure, national security, education and other core services. We should all be paying equivalently for that, not in real dollar terms, but certainly as a percentage of our income.

Some argue for a flat tax similar to that in Alberta which seems reasonable although it won’t necessarily guarantee lower tax rates. Alberta has a higher tax rate than Ontario which has a muddled kind of progressive tax system.

Still, a flat tax makes some sense. If the rate was 20%, a person earning $50,000 would pay a flat tax of $10,000, someone earning $500,000 would pay $100,000 and someone, like some of our Bank and Corporate CEOs earning $5 million would pay $1,000,000.

That would certainly provide more fairness in the way we are taxed while continuing to provide government with the resources it requires to do the things we need. It would only work, however, if politicians were blocked from adding new ‘revenue tools’ to the mix.

A flat tax is only effective and universally fair, if you eliminate all of the convoluted tax breaks and loop holes that have been built into the system over decades by both conservative and progressive governments. Reforming it would be like trying to undo the Gordian knot.

Further complicating things is that taxation has become the means by which governments attempt to redistribute wealth and socially engineer society in their own image.

Personally, I think government should leave wealth redistribution to citizens and should focus its attention exclusively on providing the programs required to maintain core services to an effective functional level.

If taxation is to be considered a tool then it should be seen exclusively as a tool to fund necessary government operations not as a tool to redesign society. Government isn’t very good at re-engineering much of anything and trying to redesign society seems a bit ambitious considering the muddled job they’ve made of it to date.

All, including corporations should pay their fair share. The big fear is that if we don’t reduce business taxes, corporations will leave and take their jobs with them. You only have to take a look around at how well that concept is serving us.

Ontario has some of the lowest corporate taxes in North America but Volkswagen and GM are relocating plants out of the country because of high labour and energy costs.

Alberta not only has low corporate tax rates but takes a smaller royalty on its crude than almost all other producing countries on the planet. Where are the corporations going to go if they walk from the oil sands? It’s not like the crude goes with them, those companies have to go where the crude is located and that, my friends, is Alberta. Giving it away at bargain rates out of fear that oil producers will leave is unrealistic.

That doesn’t mean I believe we should gouge corporations – I don’t. I simply believe in fair taxation for everyone and that means corporations and unions as well as individuals.

I also don’t believe that all of us should be taxed so some of us can get subsidized gym memberships, renovation tax credits, clothing allowances or for political parties to raise funds in order pay for advertising to lie to us.

In the end, the key word for me is – simplify.

Simplify the tax act. Simplify what is taxed and what isn’t. Simplify how we report our earnings and pay our taxes so that we don’t have to hire people to do that for us. Simplify what our taxes can and cannot be used for by government.

Taxation isn’t ideological – that’s a myth perpetrated by both sides of the political spectrum. All parties promise lower taxes; all parties when in government misuse our tax dollars while in government. Rather than promising lower taxes, they should be promising and working towards responsible taxation and the use of tax dollars.

The current federal Conservatives have spent almost $1 billion of our tax dollars to purchase advertising to tell us how wonderful they are which is pretty much exactly what the Liberals did when they were in power.

The Ontario Liberals squandered $2 billion to relocate two gas-fired power plants that were still under construction in order to get a cabinet minister re-elected and have just handed Volkswagen half a billion of our tax dollars to relocate its factory to Mexico. Quebec spends tax money to provide cheap day care to the affluent and to finance language Nazis to prowl the streets examining restaurant menus for English words.

If we want to reduce taxes – reduce political waste brought about by political self-interest. A simplified tax code and system would help in that regard because there would be fewer places for the little buggers to hide their manipulations.

This year’s federal election will be fought, in part, on taxation and the Liberals and Conservatives are making proises that sound more like competitors on Name That Tune.

“I can reduce taxes in six notes.”

“I can reduce them in five.”

The stupidity is that taxes have no political affiliation – they are simply a necessary fact of life. We would go a long way to a fairer form of taxation if we first figured out what we needed and wanted government to fund with our taxes and then simplified how those taxes were levied and collected.

I’m a conservative but I’d vote for a dead pig that could begin to deliver that. Unfortunately, there are no dead pigs running in the current election – just more bloody Liberals and Conservatives who are increasingly difficult to distinguish from each other and a  very well-dressed group of NDP socialists.

The more things change – the more they stay the same.

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© 2015 Maggie’s Bear

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Twitter: @maggsbear – Facebook: Maggie’s Bear  – ivmaki@sympatico.ca

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  • TerrorSquad

    I used to work in IT consulting primarily for government agencies and trust me the civil servants are part of the problem.

    • MaggiesBear

      There is no question that the bureaucracy is too big and some within it are unproductive. We agree on that. It isn’t much different than many private sector corporations. You have some great employees and you have some dogs but there is something you ignore.

      The size of the bureaucracy is dictated by politicians, not the bureaucracy. It is politicians that establish the programs, the employment rules including such stupid concepts as employment equity, attempts to balance regional employment and language laws.

      I have no issue with improvements being made to the civil service; my issue is the constant carping that it is they who are responsible for the bloated size of government. If we’re going to improve something, we first have to identify the root problem and the root problem with bureaucracy is political. Politicians can’t suck and blow at the same time although they try hard enough. Blaming the public sector for the imperatives imposed on it by politicians is merely playing the game politicians want us to play.

      • oldwhiteguy

        I should not keep harping on this but you are incorrect when you say the size of a bureaucracy is dictated by the politicians. that is simply not so. the politician may determine that a specific bureaucracy is required but once established it will grow internally by leaps and bounds. sometime ago I printed of a list of agencies and departments. that list was 21 pages long and did not contain the sub lists related to the agencies and departments. there are far too many.

        • MaggiesBear

          I agree that there are too many agencies but those agencies were mandated by politicians in government. In the past few years, the public service was increased by 43,000 new employees, then it was reduced by 26,000 all on the orders of the Conserative government. Bureaucrats do not create the programs that lead to hiring, they do not approve their own budgets that facilitate hiring, I appreciate that you would prefer to blame public servants rather than the political leadership you support but as long as people are unwilling to put the blame where it belongs — the problem will never be addressed or corrected.

  • oldwhiteguy

    as someone who has paid 56% in taxes over the years, when I was a productive person, I am usually very pissed about all government waste and government wages. if someone in government actually produced something that even covered a portion of their cost to the taxpayer I would be excited. now for all those pro government people, do not get bent out of shape. we need the military, police etc., but we do not need legions of bureaucrats sitting in offices trying to figure out new ways to reduce our freedom or screw us out of more tax money.

    • MaggiesBear

      Who do you think produces all of the cheques for EI, Canada Pension and OAS, Who do you think guards our borders, handles immigration, does food inspections, environmental assessments and provides the necessary administrative support for services like that?

      More than half of the federal public service is comprised of just two departments; National Defense and Canada Revenue Agency and the latter is larger than our military.

      Who do you think creates the need for a larger bureaucracy other than the very politicians who pass all of the legislative imperatives under which the bureaucracy works. Virtually all civil servants pay full taxes because they do not have access to all the professional business and sales tax credits available to private sector professionals. The current government increased the civil service by more than 10% and that’s the point. We always end up blaming the wrong folks. I have been in the 50% tax bracket since the 80s. It’s politicians I blame for the mess — not civil servants. They’re as frustrated as we are.

      • oldwhiteguy

        civil servants are and continue to be part of the problem. they create rules and regulations without parliament. they live in a self perpetuating circumstance. we do not need as many of them as we have and we need a reduction in the rules and regulations that strangle the countries productivity. I was a business owner and ran several businesses and I know whereof I speak. you can praise all those who carry out some of the trivial tasks and I did say there were some needed positions but we have too many people working for government producing nothing.