The Robert Reich documentary, Inequality For All explains with remarkable clarity what has happened in the United States over the last forty years and in Canada over the last thirty years. Reich argues that the economy will implode unless there is a fairer distribution of income between citizens. That idea is beginning to percolate in Canada. Carol Goar writes:
But continuing to neglect the problem will allow the top 0.01 per cent of the population to skim off an ever larger share of the national income at the expense of everyone else. It will leave most of the electorate with no stake in the country’s collective success. And it will deepen the sense of unfairness hard-working Canadians already feel.
Even banks and business-friendly think-tanks recognize the danger. In a special report last week, the Toronto Dominion Bank urged the government to “lean against income inequality.” A day later, the C.D Howe Institute devoted its annual Benefactors Lecture to rewriting the tax code to restore fairness and give Canada’s next generation a chance.
And, taking his cue from Reich, Kevin Milligan has suggested that several changes need to be made to the way Canadians are taxed:
First, get rid of all the loopholes, starting with the “boutique tax credits” that have proliferated under Prime Minister Stephen Harper. The list includes the children’s fitness tax credit, the green renovation tax credit, the volunteer firefighting tax credit, the public transit tax credit, the tradespersons’ tool tax deduction, the tuition tax credit, university textbook tax credit, the working income tax credit, the video production tax credit and the adult gym membership tax credit and the search-and-rescue tax credit. “These credits are inefficient and they’re biased toward higher earners,” Milligan said.
Second, apply the same tax rate to all forms of investment income: dividends, capital gains and interest payments. Milligan contends this would simplify the system and get badly needed capital into the hands of entrepreneurs and innovators with the potential to go global.
Third — and most controversially — move to a dual income tax system. There would be one flat rate for all forms of capital income, but a more steeply progressive rate structure for employment income. This would include two new tax brackets at the top: one for those with incomes of $250,000 or more (32 per cent), the second for those making $400,000 or more (35 per cent). This, coupled with the closing of tax loopholes, would leave the hyper-rich with fewer ways to escape paying their share of the tax burden.
Goar admits that there are problems with Milligan's proposals. Most Canadians don't have capital income, so the system would still be tilted in favour of the rich. But Milligan would put an end to the tax cuts that have bought Stephen Harper votes. And the rich would pay more of their fair share.
And, until we stop buying the canard that the rich create jobs, we're heading for disaster.
10 comments:
I'll say tax 10% across the board that everyone should pay corporations rich 1%er's etcetera. Plus no more corporate welfare. Every entity pays 10% we would have a smaller bureaucracy and realize tons more in tax revenues that could provide needed social services. Plus it would free up money to drive the economy. Also no tax free off shore havens...
You earn a dollar whether selling real estate newspapers or oil you pay $0.10 cents and it works. We would realize far more revenue than this corporate welfare game and would give working families a huge break and incentive to participate in the economy.
Now Harper is an "Economist"? I don't think so he has been in totalitarian power since 2011 and has made foreign corporations healthy and happy at the expense of real Canadian families..
That's the so called "flat tax," Mogs. But there is a problem with it. People on small incomes pay proportionally more of their incomes than the wealthy.
The wealthy use the same infrastructure and government benefits. Why not have a proportional income tax, instead of paying proportionally more of your income?
Harper might claim to be an Economist, Owen, but in reality he is a master and divide and conquer. There are a number of small, incremental steps that any party holding power in Ottawa can take to assist families to survive in this wonderful so-called global economy.
They have benchmarks for what constitutes "poverty" in terms of income that are calculated around number of adults and children in each domicile. Any household earning at or less that the appropriate benchmark should not have to have any income tax deducted at source from earned income and be able to download the tax form right off the internet. (If they can do that in the US, then surely we can do the same in Canada). All one does is enter the total income and e-file to Ottawa. No need for hundreds of clerks employed to audit a growing number of households that fit this category. In fact, why shouldn't the government routinely supply the various income tax packages that we now have to pay $40 or so to purchase? You'd think a wise, cost-cutting, economically sound government would want to do that just to save the cost of space required to store hard copies of all these documents. More savings can be realized.
Then start cutting out all the fluff and get back to basics, which would automatically level the playing field and yield more revenue to implement their programs (or, heaven forbid, reduce the debt accumulating to all taxpayers). Tax credits are an incredibly expensive way to implement tax policy. The more complex, the more staff required to review/audit, unless of course you only look at your 'hit' list.
Am I being too simplistic here? Dreaming in technicolour, maybe?
I don't think so, Lulymay. The boutique tax credits are clearly meant to buy votes. They have little to do with the overall economy.
um, people on smaller incomes already pay proportionally more of their incomes - and with some of the small incomes I've had the gov't was still taking 20% or more off in deductions, others I know working as techs in hospital labs for example, are paying 40% of their hard earned wages - so 10% across the board would give us back considerably more of our bit of money. 10% of the billions the banks make, for example, would pump a nice sum back into providing healthcare etc for this country, it seems to me
Raising corporate taxes even a percentage point or two would make a huge difference, Anon.
The so called flat tax looks like a good idea. It is often promoted by those we call the 1%. Unfortunately they are scamming us. They want you and I to pay our flat tax but they always leave loopholes for themselves.
We tend to forget that it was Teddy Roosevelt who favoured progressive income taxes, Toby.
Roosevelt was the "trust buster" who knew that progressive taxes were a simple expression of fairness.
I have always said that we should be proud to pay a higher rate of income tax on our second million than we do on our first million.
And in those cases, Anon, no one is going to be broke.
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