Friday, October 12, 2018

Canadian Conservatism: Scheer Ineptitude, Max's Madness, Harper's Return and How to End the Income Tax

Andrew Scheer, leader of the Conservative Party of Canada, is an amiable dude with little charisma and, seemingly, even less political sense.

Having won the leadership of the party by the narrowest margin over rival Maxime, Bernier, Scheer demonstrated the sheerest ineptitude by appointing Bernier, to the shadow cabinet not as the representative of one of the great offices of state: Finance, or External Affairs but, drum roll, the Innovation non-portfolio.

Mad Max, as Bernier has long been known, a man crazy enough to run a double marathon to catch the public eye, responded with "piss on that," or words to that effect, and launched his own People's Party of Canada (PPC). Meantime Stephen Harper is, to judge by his latest book, preparing for his own second coming.

For Scheer, the prospect of success appears now to be zilch. With the right of center vote split with the  PPC, Scheer will surely lose the 2019 Federal election to Trudeau's flaky feminists front for global governance, whereupon Sheer will be pushed aside and Stephen Harper will be called upon, once again, to unite the right.

To succeed, Harper will need to bring Bernier back within the Conservative Party fold, which means offering him the portfolio of his choice. The Department of External Affairs has profile, but no real power because Canada is a negligible power on the world stage. Bernier, therefore, will chose Finance.

 Bernier at the Department of Finance might be a fine thing. But only if Bernier has a clue what to do with the department that largely dictates the vitality of the Canadian economy and hence the fortune of every Canadian.

But Bernier, if anything like almost every politician, is bound to be too focused on either getting or enjoying power, to have energy to worry much about the public good. Indeed, of all Canadian politicians it is hard to think of more than a couple with much idea about where they were going. One was John A. Macdonald, whose idea was to unite the British North American colonies into one country that was not America. The other was Pierre Elliot Trudeau, whose idea was to unite all the countries of the world into one political system under a sexy dictator like Mao Tse Tung, Fidel Castro, or someone named Trudeau.

Here, then, as a service to the nation, we offer a policy for our future Finance Minister, Mad Max Bernier.

First, the income tax. Don't mess about, Max, with a piddling increase in the basic personal exemption. Just abolish it. Yes, just abolish the income tax. Period.

But wait, you say, the income tax provides half of all Federal Government revenue? Yes, exactly. That's the reason to abolish it.

You think government doesn't waste half it's revenue? Listen, before I wised up, I worked for three governments. In every government office where I worked the goal was the same: maximize the budget and hire more people. The result? Managers and more managers, directors, and directors general, coordinators, program managers, middle managers, matrix managers, micro-managers, every one of them a more or less complete waste of time. in fact a dead weight soaking up resources destroying wealth and sucking the creative intelligence out of all who work for them.

But bureaucrats aren't stupid. Deny them the security of a government office and most will soon be on their feet again, even perhaps contributing to the sum total of human happiness.

But if you fear that Ottawa cannot manage with less than 300 billion a year, here's how to replace the income tax: with a beefed up GST. The European equivalent of the GST, the Value Added Tax, runs as high as 27% in Hungary, 25% in Norway and Sweden, 20% in Britain and 19% in Germany. So, why is Canada's equivalent only 5%?

The GST is a consumption tax that is rebated to those of low income, so there's no social argument against raising it from the current 5% to, say, 20%, a mid to low rate by European standards and only slightly higher than China's 17% and Russia's 18%. Raising the GST to 20% would generate an extra hundred billion, or two thirds the current income tax revenue. The shortfall could be covered by some useful down-sizing of government: for a start, most of the auditors at Revenue Canada.

As for the advantage of the GST over the income tax, just think of those young people saving to buy a home, or so many older folks rather desperately trying to save for their retirement. No income tax means a much greater opportunity to save, with the income from savings, whether in the credit union or invested in the stock market, all adding up tax free. Yay!

But what about rich people, some may ask? Why should they not pay a healthy chunk of income in tax? Yeah, well remember, the really rich pay essentially not tax anyhow. They're mostly invested for capital growth, which means no tax payable until the capital gains are realized, which may not be for years, and even then, in Canada, the rate of tax on capital gains is only half the rate on earned income.

Makes sense, eh! Income earned by the sweat of your brow taxed at the full rate, capital gains accumulated while you loll in a leather arm chair, or sunbathe on a Caribbean beach, taxed at only half the full rate, and even then only after accumulating untaxed for possibly decades, or generations.

But even with the GST set at a sensible rate, the Federal money gusher will be a bit below full flood, so how to fully satiate Ottawa's addiction. Easy really, a capital tax such as they have in that most democratic of all democratic countries, Switzerland. A one point five percent annual levy on all household wealth over $1.5 million would be about right. That would touch only the top ten percent, and would generate something like $60 billion a year. Ouch!

But how bad is that, really? Consider if you were comfortable with a household wealth of, say, ten million, then you'd pay $150,000 a year in capital tax. Is that a punitive rate? Well assuming the $10 million were invested, the income from those investments together with your director's or professional consulting fees might add up to, say, three-quarters of a million a year. In that case, the income tax you'd pay, under current law, would be around $300,000 a year. So switching from income tax to a capital tax, would cut your tax liability approximately in half.

Wow, this is like magic. We're slashing everyone's tax, rich or poor, yet government gets the same revenue.

But wait a minute, there's that hefty new rate of GST. Who will be paying that? Well not the poor, since they get the GST rebate. And it's not those trying to save for a home, for school, or for retirement. Then it must be the rich. Unless they live modestly and invest their wealth in farms and factories and rental housing, etc.. In that case they won't be greatly touched by the GST. Instead, their surplus income will be added to the invested capital of the country thereby enhancing the productivity of labor and thus raising wages, lowering housing costs and generally benefiting other people.

But if the rich spend for consumption, them we got 'em. A new mansion for ten million, that'll be $2 million five in GST, thank you very much. A world cruise for two, a coupla hundred thou for the bridge-deck state room, beer, light wines and general entertainment, and it'll be fifty G's in GST.

Ain't that beautiful. Rich people incentivized to invest for the public good, unlike that London banker's wife who, over several years, spent twenty million on wines and spirits, plus a coupla hundred million more on a private jet, jewelry, etc., etc.

Obviously there's much more we might propose. A sweatshop import tax, for instance, or what we might more tactfully call the Federal Wage Arbitrage Tax, to give our poor Montreal garment-industry workers some slack in the competition with those even poorer Bangladeshis working for pennies an hour in collapsible factories for Canada's billionaire Weston family to make fashionable garments modeled by Justin Trudeau for sale in Canada.

But we can't solve all the problems of the day in just one blog post.

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