Showing posts with label capital tax. Show all posts
Showing posts with label capital tax. Show all posts

Sunday, September 10, 2023

If I Owned Canada

Klaus Schwabb's demand that every national leader hand over their country to his World Economic forum (see my previous post), prompts the thought, why not me?

Hey Justin, gimme, gimme, gimme. 

Once Canada belongs to me, here's what I'd do. 

First, I'd abolish the GST and the Income tax which would surely make me wildly popular. 

Then, to avoid immediate bankruptcy: 

I'd freeze public sector hiring.

Then I'd cut public service salaries by 25%. 

What's more, I'd introduce a mandatory Public Service retirement age of 50. After that, I'd further lighten the payroll by offering business start-up and further education grants to civil servants who still hadn't quit. 

After that I'd end Federal to Provincial transfers and equalization payments, thereby saving a cool ninety plus billion a year. If the provinces want to spend money, let 'em raises the taxes themselves.

Then I'd raise cash by auctioning off some of the ten percent of Canada's land mass owned by the Federal Government. At the same time I'd advise the provinces to cut taxes and raise cash by auctioning off some of the ninetey percent of the provincial territory that they own. 

In addition, I'd impose a yearly capital tax of one percent on personal wealth in excess of one million dollars. That will raise a hundred billion or so, which should be good enough to get by on. Sure, that's only a fifth of what Justin Trudeau's government burns through in a year, but does anyone really believe justin Trudeau's half-trillion-a-year budget -- about $50,000 per family of four -- is money well spent? I mean, where does that money go?

Give me a week or two, and I'd have a lot of other good ideas, but that's enough to indicate how much better off Canadians would be by handing ownership of the country to me rather than to Klaus, you-will-own-nothing-and-eat-the-bugs Schwabb, aka the WEF, or leaving it in the hands of the present custodians.

Thursday, February 14, 2019

Taxing the One Percent

Make the rich pay: that's a good populist slogan, and very dangerous — to the rich.

How do the rich fight back? Currently, two ways. First, they have some dupe or colluding leftie to advocate for higher income tax. Currently, for example, newly elected US Congress woman, Alexandria Ocasio-Cortez, is calling for a 70% top tax rate, while Bernie Sanders, an old-line Commie, calls for a more moderate 15% increase in the top tax rate to a mere 52%, or about what Canada's 1% pay, already.

But what does that mean for the rich. Well here's Bill Gates, one time richest man in the world, on how income tax impacts the rich:

In terms of revenue collection, you wouldn’t want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income.
Get it? For rich people the income tax rate is essentially irrelevant because they pay it on only a trivial amount of their actual annual increment in wealth. How come. Because, as Bill Gates goes on to explain:

(The rich) have income that just is the value of their stock, which if they don't sell it, it doesn't show up as income at all, or if it shows up, it shows up over in the capital gains side. So the ability of hedge fund people, various people — they aren't paying that ordinary income rate.
OK, and the second way to fight making the rich pay?

Why, like Canada's young and handsome Prime Minister, Justin Trudeau, you point out that the poor don't pay any tax at all

This is, of course a preposterous lie, since in Canada, income tax kicks in on any earned income in excess of $12,069 per year: or approximately $750 US per month.

How do Trudeauvians justify such a preposterous claim? Why, easy sleazy: from your tax payment we deduct the cost of the government services you receive, for example, brain-washing your kid with compulsory sex "education, " you know, indoctrinating the youth of the nation with the idea that the only sexual vice is reproduction. Then there's the cost of all those wonderful bureacratic services you receive from Ottawa, like that of Revenue Canada, for example.

The argument is absurd: like saying that when you buy a new car you don't pay for it because, well hey, you received a car of value equal to the money you handed the car dealer. But what else could a rather dim-bulb trust-fund kid like our Justin say?

But in any case, who really benefits most from government? The rich, obviously, who are absolutely dependent on the military and the forces of internal law and order to secure their property from the depradations of both fellow citizens and foreign enemies. Thus, the chief form of taxation should be on wealth, not earned income.

How should wealth be taxed? By a simple yearly percentage.

How much should be the tax on capital? Enough to pay for the maintenance of the state, which is to say the cost of the military, the police, the physical infrastructure upon which the functioning of the state and the value of most property depends — for example, a house without road access, water supply, or sewer connection is of little or no value.

In addition, the tax on wealth should cover the cost of basic social services that contribute to the education and health of the people upon whom the owners of capital depend for the operation of the corporations in which they are invested, and the provision of the infrastructure and services such as roads, airports, sewage works, etc.

So how much should this tax on wealth be? For Canada, we can work that out from the fact that the average net worth of a Canadian currently stands at $808,000 or thereabouts.* That means the total wealth of Canadians amounts to around $29 trillion, of which 80% is owned by the wealthiest 20%. So let's exempt the poorest 80% from the wealth tax, and impose a tax of 1% a year on the nearly $24 trillion, or $3.4 million each, owned by the top 20%.

Such a tax would yield $240 billion a year, which is more than the current combined Federal Government revenue from income tax and the job killing corporation tax, both of which could be abolished. Then the poor really would pay no tax, but the rich would still be rich.

According to the French economist Thomas Picketty, financial assets yield around 7% annually over the long-term.  Thus, even if inflation eats 3 or 4% of that return annually, the rich could still expect a positive, after-tax unearned income of 2 or 3% on their investments. What more do they expect? Well, any amount obviously. But if the alternative is a bloody revolution, they should be well content with a real after tax unearned return of 2 or 3%.

Meantime, the really hardworking entrepreneurs and corporate employees, the people who are not rich, by the standards of the rich, but who earn big money, would have maximal incentive to be productive by working like crazy, without the distraction of attempting to minimize their tax obligation through off-shore structures, and the use of trusts and foundations.

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* Different sources give widely different estimates of Canadians' net worth. The actual number makes no difference to the argument presented, only to the extent to which a capital tax reduces the need for other taxes.

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.

Monday, August 6, 2018

Abolish the Income Tax


Among nations of hunters, there is hardly any property. People usually have nothing to gain from injuring others, and there is little need for any formal administration of justice. But where property exists, things are otherwise. There are potential gains from theft. The avarice and ambition of the rich, or the desire for ease and enjoyment among the poor, can lead to private property being invaded. ...  It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security.

Adam Smith: The Nature and Causes of the Wealth of Nations

In Canada the rich have done well in recent years. The total wealth of the top 20% of the population exceeds $8 trillion, or more than $1.3 million per person, versus an average net worth of about $7,000 for the remaining 80% the population.

Why then should the 80% pay Federal tax on income in excess of a starvation wages of just over $11 thousand, to provide security for the 20%, with an average of 185 times as much wealth as they themselves possess?

Not only are ordinary working Canadians taxed on ridiculously small amounts of income, but they are subject to multiple other imposts from provincial income and sales taxes, the Federal GST, UI payments, and multiple hidden taxes and duties such as the gas tax, and taxes passed on to them in the price of goods and services that they purchase, including import duties, business licenses many other government imposed charges.

It is time to redress the balance between the rich beneficiaries of police and military protection from both domestic and foreign thieves and predators, and the poor who mostly respect the rights of the wealthy while themselves subsisting on, and possessing, very little. 

To start with, then, let's abolish the income tax, source of half the Federal Government's revenue. True rich people pay most of it, but by deferral of capital gains tax, tax shelters, offshoring of revenue to the Bahamas, Panama, or other tax havens, the rich usually pay rather trivial amounts of income tax relative to their total income.

To compensate for the lost revenue, the first thing the Federal Government can do is cut spending, including spending on programs to help poor people who, having been freed of the income tax, won't now be quite so poor. But assuming that pissing away about half the wealth of the country on mindless bureaucracy and the destruction of national resources such as the Atlantic cod fishery,  and the Pacific Salmon fishery is what governments in Canada are irrevocably committed to doing, then an alternative to the income tax as a source of revenue will be required. 

The best solution would be to jack up the GST from the current 5% to around 20%, which is less by a substantial margin than the sales tax, or VAT, levied in countries such as Sweden, Denmark, Hungary and Croatia where the rate is 25% or more.

True, the GST is a burden on poor people. But it can be refunded in full to the 80% based on their tax returns. The GST would then serve as a consumption tax on rich people. The rich would be able to avoid the GST by spending less, but in so doing they would contribute to the development of the economy by investing their saved income in productive ways that will, in general, be beneficial to all. 

In addition, if a shortfall of revenue remains, the gap should be filled by a yearly capital tax of one  percent on all  wealth in excess of, say, $10 million. Such a tax, which would affect only the O.01%, would bring in not much less than $80 billion, which would be more than enough to cover any gap that might otherwise exist in the Federal Budget.