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February 19, 2020 | Dr. Moneybags

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.

Whadda nation.

Domestic terrorists shut down the railways, throwing thousands out of work, whacking the economy and the federal government calls for… negotiation. Houses, already unaffordable, escalate in price so the feds… lower mortgage requirements, goosing values. Iran shoots down a passenger plane full of Canadians, and Ottawa is…  silent.

Four in ten families pay no tax as government handouts increase, forcing just 10% of citizens to generate 54% of all revenues. And now yet another province – the one where it costs the most to live – will be taking over half of what successful people earn.

Let’s flip to Vancouver, and a comment from blog dogs calling themselves “Dr. and Mr. Moneybags”. Yes, two of the hated 1%ers that Comrade Horgan & The Dippers wish to turn into proletariat.

That was a nice little surprise that the BC Premier gave us the other day eh? Out of nowhere he decided to raise the top marginal rate from 16.8% to 20.5%. My wife is a doctor (apparently “ultra wealthy” according to the BC finance minister) and we were just getting ready to  put in offers on houses in the next couple of weeks and instantly our available cashflow is reduced by nearly $1,000 a month. This means we now have to adjust our expectations downward by a couple hundred grand. We rent in a nice area for $5k a month currently and are definitely not in the NDP demographic it seems.

Any tips for us “ultra wealthy” people who “need to pay a ‘little bit’ more? I was thinking of deferring my wife’s entire RRSP deduction to the next tax year, suggesting she incorporate and take a salary below $220k (or less), and seriously step back and see what kind of house we can afford in the part of Vancouver where the poor people do NOT live…..or buy in East Van instead where it is cheap but has that doobie smoking anarchist vibe. Also this is retroactive to Jan 1, but was announced today! Is this even legal?

What did BC do?

For the second time in three years tax rates on people at the top of the income scale were rammed higher. A lot. The trip has been from 13% to 20.5% (on top of federal taxes), for an increase of more than half. This means that a little over 40,000 people will be milked for more than $200 million in extra payments. It boosts the top marginal rate in BC to 53.5%, which is the same as Ontario – where it costs less to live and there are no silly second-property and vacant-house taxes in place.

As politicians drift left – pulled that way by voters looking for more government in their lives – the system becomes more and more unequal. The top 10% of Canadians includes everyone earning $96,000 or more. As stated, they pay 54% of all income tax. The other 90% foot the rest – 46%. We give money to people because they have children. We give them more because they get old. We excuse close to half of them from contributing into the system. And while we have a Minister of Middle Class Prosperity, we’re hammering those who make an upper-middle class income of less than a hundred grand.

Since 1982 the number of people in the top ten per cent has risen by 13%, but their tax load has increased by almost 25%. Despite this, governments wallow in red ink. The feds will run a deficit of $28 billion this fiscal year, and incur more debts annually. There is no target time for when taxes will meet expenditures. It’s a formula for even higher taxes in ten future – which should be terrifying a lot of Millennials.

And what of Dr. Moneybags?

Take enough salary from your professional corporation to max the RRSP contribution of $27,230 – and put that into a spousal plan. Dividend the rest. Doc gets to deduct it from her income but hubs gets the money to withdraw at a lower rate, now or later. Consider keeping money invested inside the PC to the allowable limit (before the Morneau tax hit happens) and also mull using it to buy that house.

Future appreciation would be taxed at the capital gains rate (very low for most corps), and you’d live there for free with the exception of a taxable benefit approximating rent. If you open an office in the basement to see patients, much of the financing would be deductible. Of course, Doc could just decide to work part-time, keeping her salary below the top rate threshold, and making the primary care crisis worse. That’s NDP math. Spend billions on doctors, then tax them so much they stop working. Genius.

Media coverage of the BC budget this week referred to people like our blog dogs as alternatively “wealthy” or “rich.” But people in Vancouver earning $250,000 a year are neither. It’s barely enough to qualify for financing a Vancouver Special unrenovated dump. Earning a lot of money doesn’t mean you have instant wealth, high net worth or investible assets. But it does make you a target. In the hands of zealots and power-mongering pols, envy is a lethal weapon.

By the way, have you heard any opposition politician, anywhere, stand up and argue that excessively taxing successful people – like those who spend a decade in school and residency to become doctors, or start companies which employ thousands – is insane? An incentive to leave?

Nope. You haven’t. They leave that for a pathetic blog.

Whadda country.

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February 19th, 2020

Posted In: The Greater Fool

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