TAXES:
STILL TOO HIGH

The art of taxation consists of plucking the goose so as to extract the maximum amount of feathers with the least amount of hissing.

Jean-Baptiste Colbert,
Finance Minister for Louis XIV

Understand?  If we don�t start hissing, (and really hissing) they�ll keep on taxing! 

If you believe that Canadians are over-taxed, then we hope you will want to join together with us to try to do something about this. 

Too many Canadians think it is useless to fight... that taxation, like death,  is just inevitable.  So do Canadians not exercise, watch their diets or see doctors? And just as most of us enjoy obtaining good information about how to put off death, we hope you appreciate our attempt to share with you some of our ideas about how to reduce our tax burden.

PLAYING THE TAX GAME
First, although we appreciate the efforts of the many tax experts who give us advise about how to qualify for the many deductions, credits, and other loopholes that our government offers us, playing this �tax game� ultimately harms all of us.  Rather than spending our life energies on what is most enjoyable or most productive, we have been diverted into jumping through whatever government hoops are necessary to qualify for particular tax deductions.  Canadians have set up artificial businesses, or artificial forms of businesses just to qualify for a tax break.  Although these strategies makes sense for the individual, they hurt the rest of us.  It is like the driver who uses the parking lane to jump ahead at the traffic light.  He gets ahead, but the rest of us all lose, because we have to pick up more of the tax burden.  If we don�t play the game, we are �suckers� so all of us end up trying to shift more taxes onto each other, making all of our lives more complicated and having spent resources in ways which don�t help our economy.  Just think of how rich Canada could be if all the smart lawyers and accountants who earn their living shifting taxes from their clients to the rest of us were instead engaged in activities that added to our country�s productivity. We think Canadian taxation methods are already too complicated.  We don�t want new �smart� deductions or credits because these are all ultimately self-defeating.

Second, we want to warn you against the demagogues with �easy� but wrong tax solutions.  These demagogues rail against �unfairness�, making you think that the �rich� or the �corporations� are taking advantage of you.  But the facts show otherwise.  The rich already pay a disproportionate amount of our taxes.  According to the Fraser Institute�s Canadian Tax Simulator, the top 30% of earners in Canada (who earned 58.5% of Canada�s income) paid 65.6% of our taxes and paid taxes equal to 50-60% of their income.  The bottom 30% of earners in Canada (who earned 9.0% of Canada�s income) paid 4.3% of Canada�s taxes and pay only 15-30% of their income.  There just aren�t enough rich people to pay for all the government services that some people want and besides the rich can afford to be �footloose� and escape to lower tax regimes if you try to milk too much from them. 

And corporations?  Most people seem to forget that corporations already face �double taxation�.
Corporations are taxed on their earnings and then
their owners are taxed AGAIN on any dividends that they receive.  Corporations are also footloose.  They don�t have to be in Canada, but choose to come here if there an opportunity to earn a return.  If our taxes make this difficult, corporations can go elsewhere.  Governments around the world have decided to be friendlier to corporations, understanding that the opportunities that corporations create are more important than higher taxes government could obtain from the smaller number of corporations who find it difficult to move.

CUTBACKS?  WHAT CUTBACKS?
Our conclusion is that the only way to obtain substantial and necessary tax reductions is by reducing government spending.  This is no surprise.  If you want to save money, you have to spend less.  We all know this in our personal lives and government is not different.  And despite rhetoric from our current political leaders governments are NOT learning to be more responsible with our money.  We don�t need to make cheap shots about recent scandals to make this point. Just look at the total spending.

As the diagram on the previous page shows, Statistics Canada reports that in 2002, spending by all levels in Canada reached $457.8 billion or 39.6% of GDP or $14,574 per person. There has been NO decrease in per capita spending. Rather spending has increased 1.8% from last year, up 18.4% from five years ago, up 25.4% from ten years ago.  Discounting for inflation, (as done in the table) total government spending per person rose 0.8% from last year, up 10.1% from five years ago, up 8.1% from ten years ago. 

It is hard to turn on the news or pick up a newspaper without hearing some special interest group complain about cutbacks.  The story we have been told is that we were forced to make cutbacks in the mid-90s when the international bond market warned our governments that debts were too high. Now that debt levels are more reasonable, these groups want their spending back.  Special interest groups always want more.  It�s their job to complain, but we don�t have to believe them.

Look at the table again. Spending wasn�t cut.  Only it�s increase was reduced while taxes continued to rise. Government revenues rose 21.8% over the last five years, 53.3% over the last ten!  Discounting for inflation, the increase was 13.3% over the last five years and 32.2% over the last ten years.  Total government revenue is now $472.8 bn or 40.9% of GDP.  This works out to $15,051 per person and since only around half of Canadians are employed, this works out to a much too high -- nearly $30,000 per employed Canadian.

The turnaround in government finances was NOT produced by cutbacks but on the backs of  taxpayers.  And now that government debt is more reasonable, isn�t it time that WE get our tax cut?

Libertarians want governments to learn to live with less, so that earners get to  keep what we earn.

Contact us for our ideas about how to reduce government spending and how to reduce it substantially while we increase the quality of the services we used to expect from government.

Click here for an earlier article.