July 5, 2021 | The Big Lie

Shortly after the herd is dosed, it will get to vote.

A Thanksgiving election? If so, how appropriate. Justin, Our Pandemic Protector, will wish you to shower him with thankful ballots for having overseen the virus attack, which only crashed the economy for 15 months and killed 26,362 people. But it could have been worse. And we ended up being among the fastest-vaxed in the world (even though the provinces orchestrated that). So, politically, dropping the writ in September makes sense.

Of course, the cost of this slimy little pathogen was epic. The deficit was $19 billion in 2020 – which was twice what we were told it would be when T2 was elected. But last year that turned into $354 billion. Next year at least half that again. And the national debt will soon have doubled under a guy who’s only been in office since 2015. (It took 148 years to go $600 billion into hock and six to do it again. Yikes.) There is currently no timetable for getting back into balance. Never, probably.

So, here’s the PM’s plan. Vote. Majority. Budget. Big taxes.

Since the Libs have convinced young voters (now the largest cohort) that Indigenous issues, the environment and social justice matter more than money stuff, you can be sure election themes will be (a) more money for natives, families, green anything and (b) old, rich dudes can pay ‘a little more’ to finance it.

This is a winner in elections, since ‘the rich’ is anyone doing better than you. But does this make any sense?

“With each passing day a self-proclaimed ‘overeducated’ youthful generation reminds us that our financial ills would be solved if only we’d adhere to the left wing mating call ‘Tax the Rich’,” says blog dog Lee. “My question, has anyone done the math on that?  I did, a little, and even the small amount that I did indicates that the overeducated crowd may have missed some important classes.”

So Lee looked at US numbers, where the annual deficit has averaged $1 trillion. What if Washington just sucked off the entire net worth of the richest people? Like, took it all? Including the $180 billion or so that Bezos and Musk have in corporate wealth, plus Gates, Zukerberg, Buffett? Plus the entire the worth of the two dozen families?

Of course that would mean liquidating their holdings, including Amazon, Tesla, Facebook and all the stuff Berkshire Hathaway owns. Bezos alone employs more than one million people, so this action would like crash the American economy and hasten a deep recession. Maybe worse. China would love it. After all, the richest people don’t have billions in their bank accounts – this net worth resides (almost always) in business equity.

Anyway, the result: the annual deficit would be paid for 1.5 years. Then resume, but a lot bigger (since the rich people would be rich no more, and pay nothing). The national debt would be untouched. “Billionaires would need to be gutted wholesale just to break even for even a handful of years.  It goes without saying that the resulting depression would make the 1930’s look like a party,” says Lee, sensibly. “Conclusion:  There’s massive fiscal problems, and none of them have to do with the rich not paying their fair share.  100% are governments acting irresponsibly, they have indebted themselves multitudes beyond any amounts they could ever pay back.”

Now, we don’t have too many people like that in Canada, and there is no wealth tax. So let’s just assume we raise income taxes from the current 54% max to 100% for all the rich among us. What would that do?

Canada has just over 280,000 people (out of 28 million population 15+) who are 1%ers. The average income is $381,300 (and this includes our handful of billionaires, plus fabulously-enriched free blog owners). So if you took all their income – $108 billion a year – it would cover about 30% of the amount the government borrowed in 2021. Oops. And in doing so, every heart surgeon and CEO in the country would be emigrating.

So what if we just Hoovered the top .01% – the ultra-rich? There are 2,550 of them with an average income of $2.6 million. Would that make a difference?

Nah. The haul would be $6.6 billion. Enough to pay last year’s deficit for one week. So now consider the relative miniscule amounts that will be raised by increasing the capital gains tax inclusion rate from 50% to 75%, ending the favourable tax treatment of dividends, creating a new tax bracket for those earning over $400,000 or enacting TFSA account limits. It’s symbolism. Don’t fall for it.

Unless government spending actually crashes; unless then 40% of families who pay no net tax start contributing; unless we come to our sense and elect politicians who promise less; you’re pooched. Not the Boomers. Not the billionaires. The middle, and especially your kids. And their children.

The virus was bad. Worse beckons.

Garth Turner July 5th, 2021

Posted In: The Greater Fool

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