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November 24, 2017 | The Few vs the Many

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.

This week the prime minister committed $50 million to survivors of residential schools in Newfoundland (before the province joined Confederation). He also promised $40 billion for a housing strategy focused on lower-income-earners and women. Every week since being elected, with few exceptions, Ottawa has announced a new spending program. Over four years the federal government is expected to write cheques for about $100 billion more than it takes in.

CPP benefits will be increased. Families now receive $6,400, tax-free, for each child under six and $5,400 a year, per kid, for 11 years after that. The age at which people get seniors’ pogey was rolled back to 65 by the current government. The cost is $69.4 billion. (By the way, OAS has an unfunded liability of about $560 billion – to be paid by future citizens.)

On and on. To finance this, the average family pays about 43% of its income in taxes of all kinds. Ottawa has created a new tax bracket for ‘the wealthy’, who now face a 53% tax take on income. The budget in March will implement measures to increase taxes on the self-employed. It may also increase the capital gains tax inclusion rate, or alter the dividend tax credit.

In a speech a few days ago the prime minister blamed rich people for not paying enough, and vowed to change that. Meanwhile his own finance minister had a horrible summer as he tried to defend the considerable personal wealth he’d been sheltering from the federal ethics commissioner.

The supporters of Justin Trudeau, which seem legion, support the efforts to close the gap on income disparity. Instead of growing the economy and raising wages overall, the emphasis has been on taxing more. But narrowly.

There are some 270,000 people in Canada who earn over $230,000 a year, in the 53% tax bracket. That’s 0.62% of the population. The average tax they paid (before the latest increase) was $160,000. Together this tiny group of people (average age, 52) earn about 10% of all the income but pay 22% of all income taxes. Seems like a good deal for everyone else, but the prime minister says it’s not enough.

As pointed out here in the past when irritating lefties show up, this is not a social justice blog. We like money, income, investible assets, capital gains and financial independence. We practice tax avoidance. We’re into real estate, exchange-traded funds, designer dog treats, crypto currencies and mocking the deplorables who think it’s okay to be seen near a Costco.

Here there’s no shame to be accomplished, wealthy or even (gasp) self-employed. And we wonder why, in an age when it’s apparently okay to do nothing and let your house make you a millionaire, it’s wrong to start a business, employ people, and earn a million? Why’s one pile of money tax-free but the other open for tax plunder?

A tenet of successful politics is us-vs-them. Works every time. It’s working now. So the spring 2018 budget will not be a happy event for the 1%ers. Ironically, Ottawa could Hoover all the wealthy people of most of their income, and the needle still wouldn’t move for the 99%. Most people will continue to borrow too much, buy houses they can’t afford, save and invest little, be financially illiterate and look to the government to bail them out. Meanwhile every dollar in over-spending and each future commitment made by the gang in Ottawa will indenture the middle class (and especially the young) to higher taxes later. If we had more rich people things might look better. Alas, we have a drought. And the few are in the crosshairs.

So let’s put our cards on the table. Open the kimono. Bare all.

Do the affluent pay their fair share of the tax load? Do you?

Our GreaterFool survey asks for a simple question: What did your household earn last year, and what did you surrender in tax?

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November 24th, 2017

Posted In: The Greater Fool

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