All In Favour Of A Tax Revolt, Raise Your Hand

Someone once said, “It is a good thing we don’t get the big government we pay for.”

People often debate the fariness of a given tax but overlook the need for it in the first place. Taxation is the way government gets the money to carry out their role. Their role is governing. It is not social justice. It is not solving the personal problems of the people. It is not creating equality of outcome. It is merely creating a level playing field where  people know the limits society chooses to create and further know how they will be applied.

Notice, the people create the limits and application is uniform.

Governments like more complex rules because they need interpretation and governments like the ability to decide how to apply them. What power would they have if the had no ability to interpret and apply to suit themselves? Reward their friends. Punish their enemies.

Tax fairness

Politicians have concocted an entire garden of reasons to support their taxation schemes. Regressive/progressive  is one of the parameters. Please notice, the wealthy always pay more regardless of the system. Do they mind? In my experience, they do not. In Ontario someone who earns $500,000 a year pays $229,824  in income tax.  Ten people each earning $50,000 will may a total of $80,600. The high earner pays almost 3 times more. How progressive would the system need to be to be fair?

As taxes become a burden rather than a nuisance, other behaviours emerge. The next $500,000 earned would cost over 50% in income taxes. The model becomes John Maynard Keynes, “The avoidance of taxes is the only intellectual pursuit that still carries any reward.”

The govertnment approach is more cynical, albeit simple. According to Jean-Baptiste Colbert, 17th century French Minister of Finance, “The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.”

Spending fairness

Governments don’t really care how they get the money. If one tax doesnot work, another will replace it. The key is to have enough to spend.

But, money used to support the flexible standard idea is wasted. It usually benefits the provider more than the recipient. It takes money from some to give to others. The reasons are often unclear, but the outcome is clear. If you rob Peter to pay Paul, you can count on Paul’s support.

In Canada no government has too little to spend responsibly. All of them have too little to spend profligately.

Where next.

In my experience no one likes paying taxes but the mature among the people recognize it as a necessity to provide a functional society. Unfortunately for us, functional society is a poor talking point for politicians. No one rejoices in the old and working. They want new and different. So the politicians provide that. What is new and different even welcome, becomes a legacy cost in a decade. No one values it because it has always been there. No one has the nerve to cut it because the bureaucrats value providing it.

When governments decide to cut, they do so poorly. Cuts must be more focused. A 5% cut across the board makes old and useless programs on a par with useful ones. Everyone loses then.

The easiest way to cut is before you start. Not introducing an unnecessary program is easier than taking it away.

Everyone loves a good revolt.

Income tax is but one of hundreds of taxes. In Canada the average share of income going to taxes was 42.5% in 2016. This old article from the Toronto Sun makes some interesting points.  Time for a tax revolt

Where to begin?

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

Please be in touch if I can help you. 705-927-4770

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