January 24, 2021 | The Target

My great-grandfather, Ebenezer Vining Bodwell, seems like a cool dude. He went to Ottawa as an MP in Canada’s first Parliament (1867). Later he ran Ontario’s Welland Canal and afterwards took over the books of the Canadian Pacific Railroad.

That eventually led him to Vancouver in 1887 (a year after the city was incorporated), where he also became president of the Vancouver Board of Trade. He died two years later in the far north. A bear? Wolves?

None of this I knew thirty years ago when I lost my mind, ran for the leadership of the federal Progressive Conservative Party, and hauled the Van BOT’s giant debt clock to Ottawa for the PC convention. Maybe it was fate.

At the time I was trying to embarrass my own political colleagues (the outgoing Mulroney government) over the disgraceful debt/deficit situation in Canada because a third of all taxes was being piddled away in interest. It didn’t work. Nobody cared. Kim Campbell was elected. But at least I didn’t come last.

Anyway, the debt clock project eventually was taken over by the rabid Canadian Taxpayers Federation. This brings us to today. Justin Trudeau just broke the clock.

The issue is that the thing only goes to $999,999,999,999, which is nine hundred and ninety-nine billion. But Mr. Socks, Chrystia the Impaler and Covid have pushed it past $1 trillion. So, we need a new clock. It will show the nation’s debt load now rises $1 billion a day.

As you know, the shortfall in Ottawa this year will be $383 billion or 7x greater than the worst-ever mess we previously had when Harper spent $56 billion to fight the credit crisis. Canada is spending more than any other developed country on earth, per capita, and we’re far from being finished. New lockdowns and economic devastation promise rising jobless rates, less government revenues and more expenditures. If it weren’t for rock-bottom emergency interest rates, we’d be permanently pooched. But this can change. Eventually it will. And the debt will need to be financed.

Okay, so the slimy little pathogen is behind all this, right? How can you blame poor Justin?

Says Taxpayer Federation director Aaron Wudrick:

“This government cannot blame the pandemic for the fact it broke its own promise to balance the budget and racked up more than $100 billion in additional debt during its first four years in office, nor can it justify $100 billion more in debt-financed spending in coming years, especially since it doesn’t even know what it’s spending it on.”

Okay, a trillion is bad news. But it’s a fair guess that now, like when I moaned over the issue years ago, nobody cares. Odds are there’ll be an election this year. The betting is the Libs will take it. The spending – CERB, enhanced EI, more child care pogey, wage subsidies, gender-based initiatives, climate change agenda and maybe a UBI – will increase.

So will taxes.

When Chrystia Freeland, who has no financial training or experience, became the first woman Minister of Finance, she was given a mandate letter. In it the prime minister instructed her to “identify additional ways to tax extreme wealth inequality.” This point was then reinforced in the Speech from the Throne, which was read by another Trudeau appointee, Julie Payette. (Snide comment withheld.)

The NDP, which currently props up the minority federal government, wants a wealth tax. However most countries have found this doesn’t work out. Thirty years ago a dozen western nations were trying to raise revenue based on overall wealth, but now only three or four continue. Seems rich people are elusive, slippery, mobile creatures. They also own stuff, like businesses, which can’t be taxed based on capital value.

So it’s lot easier and cheaper for governments to tax salaries and investment returns, or to raise sales taxes – which are more democratic, since they hit consumption rather than income. But there’s little doubt, given the $1 trillion in debt and escalating deficits, that Chrystia’s first full budget – expected in a couple of months – will be taxing. As T2 said, the target is “extreme wealth inequality.”

A new bracket for higher-income earners seems like a slam-dunk, so those 5.78% of blog readers who fessed up last week to making $400,000 a year or more will be feeling no love. And will the Libs revisit their war on doctors, lawyers, plumbers, anesthesiologists, drywallers and others elites earning incomes through professional corporations? It’s a good possibility, so stop hanging on to those retained earnings.

As for the capital gains inclusion rate, this is also believed to be a prime target. Right now half of cap gains are free and half added to annual income, then taxed at one’s marginal rate. The top tax grab is therefore 27% – seven points above the UK or the US. The NDP and other lefties want the inclusion rate jumped to 75%, which would constitute a massive tax increase on things like stocks, mutual funds, ETFs, rental real estate, PMs, art and businesses.

Most of the capital gains taxes in Canada are extracted from people making over $100,000 (that’s 10% of all Canadians, but 76% of this pathetic blog’s patrons), and they’re already paying 40% of all the taxes collected by government. So, guess what? You’re richer than you think. Pay more.

By the way, folks hit by these capital gains taxes are usually the ones who invested in financial or real assets that help sustain or build the economy and create jobs. Raising the tax encourages them to stop doing that and move their wealth elsewhere.

Good thing Ebenezer already got that damn railroad built.

Garth Turner January 24th, 2021

Posted In: The Greater Fool

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