An Assiduous Reader of PrefLetter writes in and says:
I believe your Equivalency Factors for taxes (Table 3 in Preletter March) are wrong for low-income earners.
The dividend credit can be applied to other income which results in a negative marginal tax rate on dividends. For example, for BC $30,000, 2009 tax year, this is -14.36% (regular income taxed at 20.06%) so
equivalency is 1.43.This handy website will give you the marginal rate without capping them at 0% like the E&Y calculator does:
The point is well taken – but unfortunately I do not consider taxtips.ca to be an authoritative source. According to their website:
TaxTips.ca is owned by a small private company located in Cedar, British Columbia. It is prepared by a husband and wife team who are retired from owning and operating a small business, with one being a retired CGA (Certified General Accountant). The goal of the site is to be a reference site for easy to understand tax, financial, and related information.
In order to consider a source authoritative I want to see names. I also want to see that the person making a claim has something at stake in the matter and is pronouncing on a subject on which they are earning a living. I consider it highly important in this wonderful world of looney-tunes in which we live that somebody maing a claim get hurt – either directly in the pocketbook, or (as in the case of academics) in reputation – if they make a mistake. And size helps (although I am realistic enough to recognize that it’s no guarantee): Ernst & Young, for instance, will have many opinionated partners who will jump on any egregious or doubtful claim because E&Y’s reputation is their reputation. While this means that many publicly expressed opinions get diluted to the point of uselessness, it does imply that what they do say has a reasonably good probability of being right.
So, while the Assiduous Reader’s claim has a ring of truth to it, I am – as I always stress – not competent on tax matters and am looking for an authoritative source to substantiate the claim. Any help will be appreciated.
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