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September 12, 2017 | War

Garth Turner

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

No, forget it. You’ll not hear any more plaintive tales on this pathetic blog from 1%er docs or teeth-pullers morose about Ottawa abruptly changing the tax code and turning them from respected professionals into furtive, maligned tax thieves.

Recent comments should tell you why. They won. The taxers and anti-business forces are now in control of the public agenda. Resistance is futile. Andrew Scheer will not rescue us. It’s over. The best, and only, strategy now is to save yourself. Barbarians at the gate.

The latest news confirms it all. In BC the Dippers this week increased taxes on the ‘wealthy’ by a bloated 14% (the rate rises from 14.7% to 16.8%). Those forking it over – not even qualifying for the shiny new Trudeau federal eat-the rich tax bracket – will be people earning $150,000+. “We believe those at the top can pay a little bit more to be able to contribute to the services and programs for all British Columbians,” said the finance minister.

Small business operators also got it in the neck. The corporate tax rate in BC, where there are apparently too many jobs and entrepreneurs, is increasing by 9% (up a point to 12% of net revenues). Now, combine that with what the Trudeau-Morneau tag team are legislating, and it’s enough to drive you to weed. As you know, the feds are about to hammer small business with a tax load of up to 73% on retained earnings and other measures seriously increasing the levy on those two million people who create most of the jobs.

And speaking of that, here’s Ontario’s contribution to increasing overhead and reducing employment. The province will soon legislate a monumental increase in minimum wages – from $11.40 an hour to $14 in the space of a few weeks. That 23% increase in labour costs is just the start. A year later, it goes to $15 – a move which will cost at least 50,000 jobs.

No, that’s not the conclusion of this righty blog but rather that of the province’s own Financial Accountability Officer. These are “unchartered waters,” he says of the forced raise. “There’s evidence to suggest these job losses could be larger given the magnitude and rapid pace of this increase.” Worse, it’ll be the kids working at McD’s out of luck. No wonder the franchise guys are installing robots. No wonder Metro is automating grocery stores instead of spending $45 million a year more on payroll. No wonder Dollarama – where lower-income folks can find bargains – is installing robot tellers, to reduce workers (who make minimum wage).

Taxes are a fact of life, inescapable and required in a country with a thin population and big expectations. The marginal rate for people earning more than $225,000 is now 54%. The federal liberals are pushing ahead with a campaign to portray legitimate portions of the tax code, in place for decades, as loopholes which cheat the system. The masses cheer. So there will be more.

Up next may be the items that Morneau wanted to pass in the last budget, including increasing the capital gains inclusion rate and diddling with dividends. Combined with the assault on corporate earnings and labour costs, it could prove fatal to a lot of small businesses who simply can’t make revenues meet expenditures.

Meanwhile the ‘wealthy’ income-earner, making $150,000 in Vancouver, still can’t afford a house but is officially considered rich. “Those at the top can pay a little more,” the politicians in Victoria say. In Ontario the premier states, “I know mom-and-pop stores will go through challenges.” But, too bad. As for Mr. Morneau, in the middle of a public consultation process he said, “We’re not backing down”. So much for caring what you think.

Some days ago I showed you the difference between the rich and the rest. The wealthy hold assets while the not-so-rich hold debt. Canadians have so obsessed over real estate that they’ve run up more than a trillion in mortgages, Hoovered their retirement savings and engaged in extreme leverage to buy homes many actually can’t afford. Family finances are a wreck. Four in ten live paycheque-to-paycheque and couldn’t survive the loss of even one. A third say the first quarter-point bank rate increase hurt them. RRSP and TFSA contributions are in reverse. And now higher mortgage costs and debt fears have real estate wobbling. That one-asset strategy’s looking suicidal. Middle class families, architects of their own demise, think politicians can save them by leeching others.

So, this is war. They tax. We avoid.

Stay tuned.

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September 12th, 2017

Posted In: The Greater Fool

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