NDP's Ontario Tax the Rich will reduce Govt. Revenues

[moahunter]

What a surprise:

Alexandre Laurin, author of the report, notes that the ease with which high-income earners can adopt strategies to reduce their taxable income means the new levy will probably be applied to a smaller pool than anticipated by New Democratic Party leader Andrea Horwath when she strongarmed Dalton McGuinty’s minority government into adopting it, in return for allowing the Liberals’ budget to pass.

The government hoped the new tax — an extra 2% on incomes over $500,000, which translates into a 3.1% increase when an additional surtax is applied — would raise $470 million. Laurin estimates the number will be closer to $450 million initially, falling to zero by 2019 as wealthy taxpayers adjust, and a net loss of $200 million by 2027.

Ottawa will also be affected by the expected tax-reduction strategies, producing a combined revenue loss of about $800 million a year a decade from now, according to the report.

Laurin notes that Ontario already redistributes taxes from rich to poor more extensively than most other provinces. “The top 1% of earners shoulder more than one-quarter of all income taxes, while the bottom 75% shoulder about 12%,” he writes. The share of taxes paid by the wealthiest earners is more than double their share of taxable income, while the top 10% pay two-thirds of all net income taxes.

...

But each generation has to learn anew, and some never do. Sitting around a park with your Occupy buddies, moaning about the raw deal society has dealt you, it’s easy to agree that higher taxes on other people are both necessary and just. It’s also easy to agree that capitalism is bad and a society ruled by freebies would be much better. And it probably would be, if it worked. But it doesn’t. Just like higher taxes.

http://fullcomment.nationalpost.com/...tax-fantasies/

[Chmilz]

It's like finding out you're going to start getting punched in the face regularly, and the people punching you thinking you'll just stick around for it.

Progressive taxation is fine, but class discrimination is not. I'm sick of the lazy pukes of the world hating on me/you/most people for making more than minimum or union wage.

[GizmoForMayor]

This argument makes no sense. According to this logic people earning over $500,000 would already be paying no tax...I mean, they've only had an eternity to get used to the current tax structure and find 'tax reduction strategies' to reduce the amount they have to pay.

'lazy pukes of the world', eh?... I guess this would be the wrong place to find a constructive discussion on progressive taxation. Stay classy.

[edmonton daily photo]

Read the institutes actual "report" http://www.cdhowe.org/the-unexpected...the-rich/18025

Which has little side comments that read like you would find in the SUN. I find it unbecoming for an institute to publish items with non factual quips and that goes for Left or right leaning.

[Paul Turnbull]

What a surprise, a think tank representing the rich says that taxing the rich is bad.

More seriously the problem he is pointing at is not what he thinks it is. If the problem is people using tax breaks/loopholes to reduce their taxable income then the problem lies with the the loopholes. I've long been in favour of eliminating all tax deductions. It would vastly simplify the forms, reduce costs at Canada Revenue, reduce costs to taxpayers, and lower the base rates across the board.

I also wonder why the rich are not fully exploiting their tax loopholes now? It strikes me as odd that there would unexploited ways to lower ones taxable income amongst this group of people.

[moahunter]

^^^it does make sense, its human psychology. People don't mind paying their fair share, or even more than that (e.g. the 1% paying 25%), but people don't like being picked on. If everyone had a tax increase, I think that wouldn't result in the same avoidance issue. But because this one group has been picked on I think its fair game (and interestingly, it's not even the super rich, as they tend to earn their money off investments not income from work). If you feel picked on, there is a lot you can do if you have money for good planners / accountants like:

- organize more of your income stream into capital investments
- max RRSP's / RRESP's
- consider out of province trusts
- etc.

^^the report is referenced, you might not like what it says, but that's what it is.

^No amount of "loophole" planning can ever catch up (although an approach might be like Texas in the US, where they tax properties instead of incomes), for a last resort, people are mobile as well, they can simply leave to where the climate is more appealing. Many of these high salary earners in Toronto (primarily doctors, partners in law/accounting firms, some VP's, etc.), get constant offers from the US to work there.

[edmonton daily photo]

^ so are you saying that the Lowest levels of the system needed to be taxed too?!

[moahunter]

^no, I don't think anyone minds the low income exemption, it helps everyone. I'd like to see it raised. I do think though if you want to increase the tax rate, yes, all bands should be increased, not class warfare against one band over another. That just doesn't work (as the analysis shows). Further to that, raising taxes when already heavily taxed, just doesn't work long term, it slows growth which slows government revenues.

[edmonton daily photo]

I would say we need more user pay systems that closer represent actual costs but I don't agree that from an economical/taxation standpoint that everyone should be treated as equals. Different bands and segments of the population have different tax responsibilities and obligations based on the level/types of services they use/require.

The Tax burden of someone who uses public transit and libraries as part of their daily life should differ from someone who requires Airports, nationwide ground transportation systems and employees as part of theirs.

Alberta's Flat tax still overly burdens the lowest income earners of this province. Further to that "SIN" taxes and hidden taxes and user fees have long been used to increase prov rev without official "raising taxes" and this has to end too.

[GizmoForMayor]

Originally Posted by moahunter

^^^it does make sense, its human psychology. People don't mind paying their fair share, or even more than that (e.g. the 1% paying 25%), but people don't like being picked on. If everyone had a tax increase, I think that wouldn't result in the same avoidance issue. But because this one group has been picked on I think its fair game (and interestingly, it's not even the super rich, as they tend to earn their money off investments not income from work). If you feel picked on, there is a lot you can do if you have money for good planners / accountants like:

- organize more of your income stream into capital investments
- max RRSP's / RRESP's
- consider out of province trusts
- etc.
.

Do you really think the highest income earners are currently not looking for more tax loopholes because they don't feel 'picked on'? ......?

[moahunter]

Originally Posted by GizmoForMayor

Do you really think the highest income earners are currently not looking for more tax loopholes because they don't feel 'picked on'? ......?

Yip, most people just get on with their lives and don't worry about it, but every time something like this happens, esp. when it forced on a government by a party like NDP, yeah, work picks up considerably for personal tax planning accoutants / lawyers. But don't take my word for it, read the report / analysis which provides quantitative support which shows this to be true.

[Chmilz]

I just did some reading. Ontario's progressive system is:
Ontario 5.05% on the first $39,020 of taxable income, +
9.15% on the next $39,023, +
11.16% on the amount over $78,043

That's actually really low compared to many provinces. All but Alberta have a higher top rate and most also have a higher bracket.

So in the context of the rest of Canada, I don't think adding 2% to Ontario's top bracket, or adding a higher bracket, is a big deal. I would assume they're adding a higher bracket somewhere up in the $150,000 income range, but I can't recall the details.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

[Chmilz]

Thought experiment: If average wages are falling, and we keep increasing personal exemptions, doesn't that put an extraordinary burden on high-income earners, since less people would be paying less taxes?

If the worldwide competition is stronger and as a result we need to accept reduced wages, shouldn't we be lowering the personal exemption levels to maintain a "normal" threshold that doesn't create class discrimination?

[Paul Turnbull]

Originally Posted by Chmilz

I just did some reading. Ontario's progressive system is:
Ontario 5.05% on the first $39,020 of taxable income, +
9.15% on the next $39,023, +
11.16% on the amount over $78,043

That's actually really low compared to many provinces. All but Alberta have a higher top rate and most also have a higher bracket.

So in the context of the rest of Canada, I don't think adding 2% to Ontario's top bracket, or adding a higher bracket, is a big deal. I would assume they're adding a higher bracket somewhere up in the $150,000 income range, but I can't recall the details.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

I believe they are adding an effective 3.1%* in a new bracket over $500,000. The odd thing in Laurin's report is that he says the current top rate in Ontario is 17.4% while the CRA lists it as 11.16%. As does Ontario's own site. So I'm unclear on how he derived his numbers.

*2% + a 56% provincial surtax - I have no idea how that works, that's just what I read.

[Chmilz]

So the 2nd top bracket runs from $78,043 -$500,000?

Ok, there's absolutely no way this will affect anyone. No one making more than $500,000 will give a crap about an extra 3.1% being taken off on the income between $500,001 and infinity.