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Taxation and the middle class
#1
Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.
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#2
(01-09-2020, 10:12 AM)Momo26 Wrote: Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.

Here's another novel idea, let's not be afraid of raising taxes instead of being in a race for the bottom where we're constant cutting useful and necessary services. Maybe then us and almost every other (sub)urban area in North America wouldn't be in the infrastructure upkeep crisis  that we are, and would have better transit, public housing, and so on.
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#3
But then consumers would have less money to throw at pointless electronics and assorted Chinese-made tat. That would be extremely traumatic.
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#4
(01-09-2020, 05:20 PM)Bytor Wrote:
(01-09-2020, 10:12 AM)Momo26 Wrote: Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.

Here's another novel idea, let's not be afraid of raising taxes instead of being in a race for the bottom where we're constant cutting useful and necessary services. Maybe then us and almost every other (sub)urban area in North America wouldn't be in the infrastructure upkeep crisis  that we are, and would have better transit, public housing, and so on.
Sorry,  What I pay in income tax, then after tax is more than enough.  I agree, making a new tax in the name of some planet saving effort is ridiculous.
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#5
(01-09-2020, 10:12 AM)Momo26 Wrote: Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.

The whole point of Pigou taxes, like the carbon tax, is to internalize externalities. By using the money to fund a per capita grant of cash, in effect it becomes a requirement that people who incur an externality pay everyone for the privilege. If I am going to pollute your air, I have to pay you. Of course, I don’t pay you, individually; I pay a certain amount, it is split up among everybody, and combined with the certain amounts being paid by everybody else. It is obviously incorrect to assert that the carbon tax hurts the middle class.

Without a carbon tax, everybody pays for carbon usage, regardless of how much they emit. With a carbon tax, one has the option of paying less by using less. A person using a roughly average amount of carbon is in the same financial situation with or without the tax.

The poorer the person, and therefore the less gasoline etc. they are likely to be able to afford, the less they pay in tax; but they still get the same cash grant so they come out ahead. Note that this is way better than rations and other clumsy mechanisms because it leaves the choice of exactly how much to consume in the hands of the individual.
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#6
(01-09-2020, 10:12 AM)Momo26 Wrote: Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.

This meme ("middle class pays the most taxes") probably has its roots in the US, where the tax system is considerably different than ours. Let's look at the Stats Canada data, which allows us to calculate average tax rates:
https://www150.statcan.gc.ca/t1/tbl1/en/...1110005501
  • Bottom 50% of taxpayers: $17,200 average income, 4.6% average tax rate
  • Bottom 90% of taxpayers: $35,400 average income, 11.9% average tax rate

  • Median taxpayer (all taxpayers): $35,100 income, 7.7% average tax rate
  • Median taxpayer (in top half): $79,500 income, 11.7% average tax rate

  • Top 50% of taxpayers: $79,500 average income, 20.0% average tax rate
  • Top 10% of taxpayers: $165,300 average income, 27.2% average tax rate
  • Top 1% of taxpayers: $477,700 average income, 36.7% average tax rate
  • Top 0.1% of taxpayers: $1,624,600 average income, 40.5% average tax rate

Non-progressive taxes (such as HST) adjust the picture somewhat but the reality is that in Canada the total taxation still remains progressive.

And, personally, I don't think our income tax rates are too high ...
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#7
(01-23-2020, 03:47 PM)tomh009 Wrote:
  • Median taxpayer (all taxpayers): $35,100 income, 7.7% average tax rate
  • Median taxpayer (in top half): $79,500 income, 11.7% average tax rate

  • Top 50% of taxpayers: $79,500 average income, 20.0% average tax rate
  • Top 10% of taxpayers: $165,300 average income, 27.2% average tax rate
  • Top 1% of taxpayers: $477,700 average income, 36.7% average tax rate
  • Top 0.1% of taxpayers: $1,624,600 average income, 40.5% average tax rate
Non-progressive taxes (such as HST) adjust the picture somewhat but the reality is that in Canada the total taxation still remains progressive.

And, personally, I don't think our income tax rates are too high ...

Strongly agreed. I would say my average tax rate but that would disclose my income with this chart here. I will say that I think that my average tax rate is more than reasonable and it's certainly higher than the 20% and less than the 40% numbers.

People also always misunderstand marginal tax rates. It's like we don't teach people in school what a marginal tax rate means.
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#8
(01-23-2020, 09:25 PM)plam Wrote: People also always misunderstand marginal tax rates. It's like we don't teach people in school what a marginal tax rate means.

Exactly. Just because your marginal tax rate is over 50% doesn't mean you pay half your income in taxes. Not even close.
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#9
(01-09-2020, 05:50 PM)ijmorlan Wrote: The poorer the person, and therefore the less gasoline etc. they are likely to be able to afford, the less they pay in tax; but they still get the same cash grant so they come out ahead. Note that this is way better than rations and other clumsy mechanisms because it leaves the choice of exactly how much to consume in the hands of the individual.

The problem with the rebate system, and the carbon tax, is that it *does* affect poor people more. And here's why: they get a larger tax return -- and this occurs only once a year. With that money, they're not saving it to pay for carbon taxes and using the rest for whatever. They're spending that money right away, perhaps on thing they don't need, like a larger screen TV. They don't save it, though. So what winds up happening is that these people are more broke 11 months out of 12, and in that 12th month, they behave like someone with money.

I think it would have been better if the rebate was monthly, or perhaps quarterly with the GST payment.

As for the ones that are poor, they still have heat their homes, and pay for transportation, and anything related to transportation, and therefore are the least likely to afford it, as I truly don't believe for a microsecond that these carbon taxes are revenue neutral once everything is factored in. Not only that, the Liberals have already decided to reduce the amount that residents in provinces would be getting back from their initial promise.

What I would prefer to see: higher taxes on large vehicles at point of sale, surcharges on destinies where flights/cruise ships are used. Getting meaningful carbon tax dollars on discretionary spending, not on essential spending. If you can afford a $10,000 cruise every year, you can afford the taxes, though I do see how this would be next to impossible to implement.
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#10
(01-24-2020, 12:10 AM)jeffster Wrote:
(01-09-2020, 05:50 PM)ijmorlan Wrote: The poorer the person, and therefore the less gasoline etc. they are likely to be able to afford, the less they pay in tax; but they still get the same cash grant so they come out ahead. Note that this is way better than rations and other clumsy mechanisms because it leaves the choice of exactly how much to consume in the hands of the individual.

The problem with the rebate system, and the carbon tax, is that it *does* affect poor people more. And here's why: they get a larger tax return -- and this occurs only once a year. With that money, they're not saving it to pay for carbon taxes and using the rest for whatever. They're spending that money right away, perhaps on thing they don't need, like a larger screen TV. They don't save it, though. So what winds up happening is that these people are more broke 11 months out of 12, and in that 12th month, they behave like someone with money.

I think it would have been better if the rebate was monthly, or perhaps quarterly with the GST payment.

As for the ones that are poor, they still have heat their homes, and pay for transportation, and anything related to transportation, and therefore are the least likely to afford it, as I truly don't believe for a microsecond that these carbon taxes are revenue neutral once everything is factored in. Not only that, the Liberals have already decided to reduce the amount that residents in provinces would be getting back from their initial promise.

What I would prefer to see: higher taxes on large vehicles at point of sale, surcharges on destinies where flights/cruise ships are used. Getting meaningful carbon tax dollars on discretionary spending, not on essential spending. If you can afford a $10,000 cruise every year, you can afford the taxes, though I do see how this would be next to impossible to implement.

The point about the rebate being yearly is very good. From a political point of view, also, it would probably have been better to add it into the Canada Child Benefit payments. Then people would see the carbon tax money coming back, and would have it every month. As it is, everybody just got a slightly larger tax refund (or smaller amount owing) than previously. I agree entirely that paying more through the year and then getting it back at the end of the year is not conducive to good cash flow, especially for those at the lower end of the economic spectrum.

Re: your last paragraph, this is exactly the kind of complicated nonsense that we should be moving away from. It’s easy to say “higher taxes on large vehicles”, but now you have to define “large”. Then somebody says “but I need it for my farming” so you put in an exemption. Then somebody else points out that there is obviously no way to move their large family so you put in an exemption for families with at least 4 kids. Then somebody else says they only have 3 kids but one of them is in a wheelchair. And so on and so on forever. Pretty soon your carbon strategy is as simple as, and works about as well as, municipal land use zoning.

By contrast, a carbon tax simply imposes an estimate of the true cost of burning oil on doing so. If particular activities are worthy of subsidy (e.g., carrying wheelchairs for kids who need them), they should be subsidized separately, regardless of whether the expense is related to the carbon tax or not.

Also, I don’t believe in any exemptions whatsoever. What I mean by this is, for example, that the choice of whether to live in rural Ontario or in downtown Toronto is a personal choice, so the rural dweller should get no special carbon tax consideration; the fact that they are now paying the full price of (I suppose) burning more fuel because they live outside the city is just another factor in how they choose to live their life. Similarly, farms should get no special breaks. Farms are businesses, and if they’re only economically viable if they get to pollute for free, then they’re not really economically viable and should shut down (or find a way to modify their operations).
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#11
(01-24-2020, 12:10 AM)jeffster Wrote: I think it would have been better if the rebate was monthly, or perhaps quarterly with the GST payment.

Wait, I’m sorry for going even further off topic here, but are you saying that families receiving the GST rebate receive it quarterly? So they receive GST rebate 4 times a year and CCB 12 times a year?

Shouldn’t all those payments be consolidated into a single monthly income stream? And the carbon tax added to it, along with any other federal payments?
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#12
(01-24-2020, 11:26 AM)Momo26 Wrote: Just grasp for a moment how much of your - already taxed - $1 of income is in turn then taxed when it is circulating in the economy.

OK, sure. Let's assume your "middle class" means $80K/year.
  • Median taxpayer (in top half): $79,500 income, 11.7% average tax rate

That's $70,200 after tax. If you spent all of that on HST-taxable items (no groceries and no savings, for example), that's another $9100 in tax, and your direct taxes would come out to a total of $18,400, or 23% of your income. Not including property tax as that really depends on how you live.

But I do believe that we Canadians get a lot of valuable services for that 23%.
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#13
Are you including federal? If also include CPP and EI deductions that's more like:

Salary
$80,000
Federal tax deduction
- $11,245
Provincial tax deduction
- $5,566
CPP deductions
- $2,749
EI deductions
- $860
Total tax
- $20,420
Net pay
* $59,580
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#14
(01-25-2020, 12:06 AM)Momo26 Wrote: Are you including federal? If also include CPP and EI deductions that's more like:

Salary
$80,000
Federal tax deduction
- $11,245
Provincial tax deduction
- $5,566
CPP deductions
- $2,749
EI deductions
- $860
Total tax
- $20,420
Net pay
* $59,580

I don't think it's fair to call EI and CPP taxes. EI I could see the argument, but CPP is just mandatory retirement savings.
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#15
(01-25-2020, 02:04 AM)taylortbb Wrote:
(01-25-2020, 12:06 AM)Momo26 Wrote: Are you including federal? If also include CPP and EI deductions that's more like:

Salary
$80,000
Federal tax deduction
- $11,245
Provincial tax deduction
- $5,566
CPP deductions
- $2,749
EI deductions
- $860
Total tax
- $20,420
Net pay
* $59,580

I don't think it's fair to call EI and CPP taxes. EI I could see the argument, but CPP is just mandatory retirement savings.

It's considered a Payroll Tax (CPP and EI) -- though the point was that if you earn $80,000, your deductions won't leave you with $70,000.
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