20 Responses to “February 18, 2020”

1. stusclues says:

   February 19, 2020 at 9:29 am

   Soak the rich!

   BC is definitely leading the way in progressive taxation. Good for them!

2. baffled says:

   February 19, 2020 at 11:41 am

   stusclues says: , you comment …..”Good for them!” , be careful , you are an investor ,so you are a sitting duck , when the gov changes the cap gains tax rate or the div tax credit . all govs are bankrupt , dont think they wont be coming after you . remember , the gov takes everything but the blame .

3. stusclues says:

   February 19, 2020 at 3:26 pm

   baffled: I am more concerned about plutocrats and oligarchs than I am about (western) governments.

   “The government is us; we are the government, you and I.” – Roosevelt

   I think our current tax system is not serving the vast majority of Canadians very well. It is driving all kinds of adverse capital allocation decisions and increasing inequality to unsustainable levels. What can’t continue, won’t. For capitalism to thrive, changes need to be made.

   So what would be a better system? Something like this:

   -Implement UBI at about $18000/yr per adult
   -Implement a progressive tax on net worth – 0% below $2M, 2% above, maybe something higher at another bracket
   -Eliminate taxes on investment flows (capital gains and dividends)
   -Make the brackets on remaining income (mostly wages) more progressive
   -Eliminate corporate income taxes
   -Keep the carbon levy revenue neutral
   -Leave the GST at 5%
   -Eliminate RRSPs and TFSAs (no longer necessary given the above)

   This will reward the job creators, reduce poverty, simplify the tax system, encourage risk taking, discourage the accumulation of economically useless wealth such as monster homes, and tax the plutocrats more appropriately, to name a few benefits.

   If you play with the budget revenue figures for the Federal Gov’t, you’ll see this can actually work without increasing overall government revenue.

4. stusclues says:

   February 19, 2020 at 4:15 pm

   Whoops. UBI doesn’t work in the above. That was a different spreadsheet 🙂 All the rest results in a similar revenue capture by the Federal Government. UBI at the level I showed is a whole different ballgame.

5. Prefhound says:

   February 19, 2020 at 5:32 pm

   OK, for my 2 cents worth, marginal tax rates over 50% are a huge disincentive to work or invest since one is then working for the government. BC’s top marginal rate will be 53.5% – slightly more than rapacious Quebec at 53.31% according to taxtips.ca.
   The 1% can’t command much political support but rather votes with their feet – a factor the government blithely ignores when making revenue forecasts.

6. baffled says:

   February 19, 2020 at 5:45 pm

   Prefhound says: ,yup , i think its been proven 100% of the time , raise rates on the rich and you end up with less tax brought in .

7. skeptical says:

   February 19, 2020 at 6:48 pm

   -Implement a progressive tax on net worth – 0% below $2M, 2% above, maybe something higher at another bracket
   Why 2 million? Why not 200,000? Why not 100k? When more than half of the population has less than 20k to their names, 100k is royalty.

   Let’s not forget, Canadians already pay wealth tax of about 1% on more than half of their net worth. How? The house property tax.

   Well if 220k or about 160k USD is rich, then why should people bother working harder than this?. Lots of docs already do that. Why work harder to get less than 50% of your income? And for self employed, it’s going to get worse as CPP already takes about 11% extra for income upto 62k or so.

   Simple solution- Pay off your house. Buy used cars. Eat out less. Minimize your spending and enjoy your life.

8. stusclues says:

   February 19, 2020 at 7:12 pm

   i think its been proven 100% of the time , raise rates on the rich and you end up with less tax brought in

   The 1% can’t command much political support but rather votes with their feet

   Prefhound/baffled: I politely disagree. Both of the above statements are more ideological than factual. Both are backed and aggressively promoted by the massive lobbying dollars of the plutocrats (see Chrystia Freeland’s book “Plutocrats” for example).

   Before, I sound even more like a communist, let me explain that I am solidly in the 1% myself. I retired into managing my own portfolio and enjoyable casual paid-work at 51. I LIKE capitalism and I think market economies have the potential to allocate capital in the best way humans have thought of so far.

   I don’t like the current tax set up in Canada and think we are headed for (more) serious social problems if it is not changed. In Capital in the 21st Centure, Thomas Piketty warns of “social rupture”. It doesn’t have to end in beheadings like the French Revolution or overthrow the of the Czars, but it won’t end well.

   I find it interesting that the highest marginal tax rate for individuals in the USA (yes the USA) was over 90% in the 50s and early 60s. Rather than go there though, I think wealth taxes are much better. Taxing “stocks of capital” rather than “flows” is much more direct and ought to lead to less gaming of the system.

   Yes, there are problems in measuring wealth but I guarantee that any person with more than a few million $ knows pretty much exactly their net worth. The rules we apply to capital gains can be adapted to for wealth – i.e. if we can tax the flow we can tax the stock.

9. stusclues says:

   February 19, 2020 at 7:27 pm

   Why 2 million? Why not 200,000? Why not 100k? When more than half of the population has less than 20k to their names, 100k is royalty.

   $2M allows for the $0.5-1.0M house plus investment assets of $1-1.5M, the latter which (in reasonable hands) ought to yield at least $50-$100K per year of income. I just picked that level of income (in the absence of paid work – like Grandma) as being reasonable to be tax free. Of course, any number (or progressive scale of numbers) can be picked.

10. mbarbon says:

    February 19, 2020 at 7:42 pm

    “$2M allows for the $0.5-1.0M house plus investment assets of $1-1.5M”

    Outside of Golden Horseshoe/Vancouver, you will actually have close to 2M in assets !!!

    In the core of the Golden Horseshoe/Vancouver, you’ll be left with less than 0.5M!!

    Taxing Assets is problematic, just as taxing earnings are problematic !!! Without allowing for accumulation of assets above $10M, Canada would lose big time … Think of all those Doctors/Surgeons who will just leave.. Where will companies get money to grow and prosper !!!

    Just be careful what you ask for !!!

11. skeptical says:

    February 19, 2020 at 7:56 pm

    $2M allows for the $0.5-1.0M house plus investment assets of $1-1.5M, the latter which (in reasonable hands) ought to yield at least $50-$100K per year of income. I just picked that level of income (in the absence of paid work – like Grandma) as being reasonable to be tax free. Of course, any number (or progressive scale of numbers) can be picked.
    The irony here is so strong that I’m left speechless. 2 million asset holder paying zero taxes. Yet asking for wealth taxes above this 2 million threshold. When the pitchforks come, distinction between 2 million and 10 million will be lost. Perhaps those with 20 million can charter a plane and fly to their favorite bunker in New Zealand 🙂

12. stusclues says:

    February 19, 2020 at 7:59 pm

    Without allowing for accumulation of assets above $10M, Canada would lose big time … Think of all those Doctors/Surgeons who will just leave.. Where will companies get money to grow and prosper !!!

    Who said anything about not allowing accumulation of assets above $10M or $100M? Not me.

    If you re-read my proposed re-arrangement of tax revenue, I suggest eliminating tax on INCOME from wealth in favour of taxing wealth directly. I suggested 2% as a level of taxation. Add 2% inflation to that and those very important doctors and surgeons only need to beat 4% per year to grow their wealth. This simply means they act less like rentiers and more like capitalists. This is where companies will “get money to grow and prosper”.

    Oh … and I also suggested that there be no corporate tax at all. Zero. No need to tax corporations when they are owned by people paying wealth taxes.

    And … before I get jumped on this too … yes non-Canadians own shares in Canadian companies. This would be dealt with via tax treaties, much like now. No tax treaty = withholding taxes on flows.

    I didn’t mean to suggest that this was going to be easy 🙂

13. stusclues says:

    February 19, 2020 at 8:03 pm

    The irony here is so strong that I’m left speechless. 2 million asset holder paying zero taxes.

    Again. This is not what I suggested. Tough crowd.

    A $2M asset holder with NO EMPLOYMENT INCOME would pay no taxes. These are the retirees.

    I suggested a progressive income tax scheme for non-investment income.

    The guts of my first post are to tax wealth not income from wealth.

14. stusclues says:

    February 19, 2020 at 8:04 pm

    A $2M asset holder with NO EMPLOYMENT INCOME would pay no taxes. These are the retirees.

    For further clarity, these are retirees without pension income.

15. skeptical says:

    February 19, 2020 at 8:16 pm

    A $2M asset holder with NO EMPLOYMENT INCOME would pay no taxes. These are the retirees.
    Precisely. How can we have that? How do you reconcile such outrageous wealth when poor and middle class people have to toil for 40 hours per week to get a fraction of what you make without even working for an hour? That’s confiscation level wealth.

    For further clarity, these are retirees without pension income.
    Do you remember the ridicule and righteousness that was thrown on all the ‘poor’ doctors and small business owners who were pleading on these lines a few years ago? Nobody shed a tear for them and unless our country makes a sharp right turn, we’re all going to be soaked.

    I’m just being devil’s advocate. When wealth creation, entrepreneurship and risk taking is generally undermined by a society, as it’s happening in our country right now, the distinction between reasonable and foolishness is lost. The events related to Energy projects, blockades, tax changes suggest that we are going it the stupid direction.

    We don’t need more taxes in Canada. We need to grow our economy(we have had zero per capita income growth in the last several years. Think about that), grow our businesses and not sabotage our primary resource sector. There will be more dollars for social programs and broader prosperity.

16. stusclues says:

    February 19, 2020 at 8:42 pm

    We don’t need more taxes in Canada.

    My post didn’t propose more taxes, it proposed different taxes.

    When wealth creation, entrepreneurship and risk taking is generally undermined by a society, as it’s happening in our country right now, the distinction between reasonable and foolishness is lost.

    100% agree. We need to encourage risk taking especially, if we want Canada to be competitive in long run.

    Do you remember the ridicule and righteousness that was thrown on all the ‘poor’ doctors and small business owners who were pleading on these lines a few years ago?

    They were not pleading the same thing at all. They were pleading to be allowed to have their retirement savings taxed at corporate rates rather than personal rates.

    How can we have that? How do you reconcile such outrageous wealth when poor and middle class people have to toil for 40 hours per week to get a fraction of what you make without even working for an hour?

    First, I just suggested $2M. It can be a different number. Make it lower. This is a democracy. However, I will say that $2M is not so outrageous for a retiree when it includes their home and the accumulated savings on which they need to live. Make it a lot lower and the inevitable arguments about forcing Grandma to sell her home will pop up.

17. adrian2 says:

    February 20, 2020 at 7:59 am

    The irony, stusclues, is that your proposals are almost perfectly suited to your own situation (consciously or not):
    1. don’t tax investment income, including capital gains: check!
    2. don’t tax corporations, pushing up valuations: check!
    3. tax wealth, but only above 2 million (guessing that’s close enough to your case): check!
    4. tax employment income: check!
    5. abolish the RRSP’s, going forward, after you have used them for decades, and don’t need them any more (as per #1) but others still need them (as per #4): check!

18. stusclues says:

    February 20, 2020 at 10:46 am

    adrian2: that would be convenient if true. Its not. The winners would be:
    1. Canadian savers who could accumulate their first $2M (or pick a number) completely without tax. RRSP/TFSA are redundant in this scenario.
    2. Canadian workers who would face a jobs boom and face lower payroll taxes (I also said make the income tax system more progressive).

    Anyway, this all just shows how difficult the job is to do anything in Ottawa. Just imagine if JT tried to pull something like this off.

19. mbarbon says:

    February 21, 2020 at 2:37 pm

    Please note, that a pension is an asset !!!
    I know lots of Retirees that have just CPP, and thus rely on their assets to sustain themselves.

    So a government pension paying $x/month has value, and must be included in the assets the person has.. I’m not an actuary, but some lucrative government pensions indexed to inflation may be worth almost $1m….

    Maybe someone out there can tell us what at $50,000/year pension indexed to inflation is actually worth for a retiree aged 60 ?

20. stusclues says:

    February 21, 2020 at 3:55 pm

    Please note, that a pension is an asset !!!

    You’re talking about the commuted value of the pension. It definitely could be valued as an asset (then subjected to wealth tax) or it could be excluded from net worth and considered income as is now.

    If we do it your way, the pensioner could possibly avoid paying tax if the wealth tax threshold (such as $2M) was higher than the commuted value plus their other assets. If we leave it out as an asset, the pensioner would pay income tax.

    The value of a pension is similar the price of an annuity. There are online calculators for that.