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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

April 5, 2016 | Leftie Peril

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.

 

“I feel like you would defend Hitler himself if he was rich,” said a poster to me some hours ago. “After all, burning Jews in Europe doesn’t directly affect my life, or yours. But that doesn’t mean we have to be cool with it, or worse, start investing in German oven manufacturers.”

“But hey, it doesn’t affect Garth Turner’s pocketbook in Canada, so who cares, right? We obviously need to focus on the real crimes, like a duly elected government raising taxes a tiny amount on those whose cup is overflowing.”

I’ll spare you the rest of the vitriol, which came as a result of my response to the Panama Papers – the latest leak telling you rich people are different. Who cares, I said? This will not affect your life, or mine. Get over it. Focus on what does. And someone else then responded, “Telling somebody to ‘get over something because it’s legal’ doesn’t carry much weight when you consider that at one time slavery was legal.”

Hitler. The Holocaust. Slavery. Damn, I should know better than to rise to the bait of the left-wingers who come here to be irritating (it works). They see the world divided into two pieces. A little tiny hunk of folks who have too much wealth, probably stole it, and should be ashamed and taxed mercilessly. And the rest, who (regardless of merit) deserve more in the name of economic and social equality. This, of course, is the world view of the T2 crowd, whose very first act was to take from the rich (creating a new tax bracket for high incomes) and give to the poor (lower middle class tax cut).

Hating rich people, or spending time vexing over the ‘super elite’ like sexy Vlad Putin or that dumb Icelandic guy who resigned today, is pointless. Just as unrealistic and useless as writing to blogs decrying all the Chinese-looking dudes buying houses on your street that you can’t afford. There’s a certain perverse comfort in feeling like a victim – it relieves you of responsibility for your own inadequacies – but it’s a giant waste of time. Like saying I’d support Hitler. Or selling people.

For the record, lots of smart folks have money in many jurisdictions and, yes, usually for tax purposes. The largest US corporations, like Apple or Google, are perfect examples. But avoidng taxes by choosing to hold funds in a less-taxed jurisdiction isn’t illegal. Nor are the tax avoidance techniques this blog talks about all the time. It’s perfectly okay and above-board to give your adult kids TFSA money, put cash into your spouse’s RRSP, establish a family trust, do an estate freeze, create a tax-deductible mortgage on your house, get money from a RRIF free of tax or avoid probate fees with joint accounts.

Tax avoidance is a cornerstone of financial planning. If your advisor isn’t aggressive about it, get a new one.

And, for sure, the tax code does still favour people with money to invest, because they’re also the ones whose capital ends up funding corporations and creating jobs. Thus, profits made on financial assets which rise in value (like stocks or ETFs, for example) are 50% tax-free. If you earn $200,000 working you’ll lose half of it in tax. If you earn the same amount investing, your maximum tax falls to just 25%. Plus, interest on money borrowed to make money is fully deductible from the money you earn. And you can receive dividend income every ninety days in return for holding assets, and collect the dividend tax credit each year. You can even use life insurance to create a 100% tax-free pension income stream. Business owners can income split with spouses or kids, using salary or dividends. And more. Lots more. All kosher.

Tax evasion, however, isn’t okay. You’ll go to jail for it. And these days it’s increasingly difficult to get away with such criminal activity.

The key flaw in leftie thinking is that people who have more money than you are depriving you of it. They believe wealth in some creates poverty in others, that if rich people were “properly taxed” government programs benefitting everyone else would be better capitalized and prosperity would ensure.

Really? When T2 promised his special eat-the-rich tax would totally fund a very modest middle-class tax cut, reality intervened. Now we’ve added more than $2 billion to the annual shortfall because Ottawa learned there aren’t enough millionaires to soak. It could well be in future we find there are even fewer, as a high-tax culture drives them into places where wealth isn’t viewed as a social disease.

Last week I told you this blog won’t enable bigots, racists or any other dinglenuts who blame their own inability to buy a house on somebody else with more money and a different ethnic background. We’re not about to let you call wealthy people fascists or slave-owners, either. In fact, this site will continue to explain how to (a) make more money and (b) avoid losing it in tax. It will laud capitalism, support entrepreneurs, question politicians and remind you that nobody can be built up by tearing someone else down.

Get over it.

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April 5th, 2016

Posted In: The Greater Fool

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