The Rich Pay Less in Taxes than the Poor
Thu, 2007-11-08 05:08
#1
Lard Tunderin Jeezus
The Rich Pay Less in Taxes than the Poor
Thu, 2007-11-08 05:08
#2
Lard Tunderin Jeezus
quote:
The Canadian Centre for Policy Alternatives researched the progressive tax system from 1990 to 2005 and found the top 1 per cent of the income bracket -- Canadians with annual earnings of more than $265,000 -- is paying the least amount of tax.According to the report, "Eroding Tax Fairness: Tax Incidence in Canada 1990 to 2005," those earning the most saw their taxes fall by four percentage points over the 15-year period to 30.5 per cent.
By contrast, Canadians with an income of $13,523 -- the lowest 10 per cent of family earnings -- were paying 30.7 per cent in federal and provincial taxes, representing an increase of five percentage points.
[url=http://news.sympatico.msn.ctv.ca/TopStories/ContentPosting.aspx?feedname...
Thu, 2007-11-08 05:10
#3
Sad but true. [img]frown.gif" border="0[/img]
Thu, 2007-11-08 05:12
#4
Lard Tunderin Jeezus
Thu, 2007-11-08 05:56
#5
Wow, this report is a nightmare trying to understand where the additional taxes are coming from.
quote:
Another important example is that inheritance and gifts grew by 185% compared to 101% for broad income. This shapes tax incidence because inheritances and gifts are not taxable and are concentrated in the upper part of the distribution
Apparently gifts/inheritance is skewing it to the favour of the top few percentiles.
Another part I'm having difficulty getting my head around is figure 5 on page 14... Low income earners are paying huge percentages of their income to commodity taxes. Tax a corporation and they pass this to their consumers as a flat amount, which to low-income earners is a huge percentage while the same amount to high-income earners is a lower percentage. Does that sound correct?
Thu, 2007-11-08 06:34
#6
quote:
Apparently gifts/inheritance is skewing it to the favour of the top few percentiles.
All the more reason why an inheritance tax is needed. Of course, since there's no party now calling for one, it's unlikely there will be one any time soon.
Thu, 2007-11-08 06:52
#7
Here's my idea for an inheritance tax:
If you are getting less than $1,000,000, you are taxed at a rate of 99%. Inheritances of less than $1,000,000 are the worst, as they go to people who should really be working.
If you are getting more than $1,000,000 but less than $10,000,000, you can only keep it if it is capital in a family firm. Otherwise, it too is taxed at 99%.
If you are getting more than $10,000,000, there is probably a fortune that needs to be maintained for the long term good of the economy. So long as you can prove that, the tax goes down to 1%. Otherwise it stays at 99%.
Loose cash as inherited money is the absolute worst thing a person can have. They think they are bourgeoisie, but they do not know the difference between a stock and a bond. They parrot all the bourgeois morals, but if it came down to the crunch, they would run to Nanny State for assistance. Thus it is best to give Nanny State all their money in the first place.
It is always best to leave children of rich people as little as possible. These are people no one should really have any sympathy for. And after all, if you grow up in a palace, and you are tossed out to fend for yourself, you might achieve Buddhahood. It worked for Siddhartha.
Thu, 2007-11-08 06:59
#8
The world's 2nd-richest person agrees with the thread title!
quote:
Warren Buffett, the famous investor known as the "Sage of Omaha", has complained that he pays a lower rate of tax than any of his staff - including his receptionist. Mr Buffett, who is worth an estimated $52bn (Ј25bn), said: "The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It's dramatic; I don't think it's appreciated and I think it should be addressed."During an interview with NBC television, Mr Buffett brandished an informal survey of 15 of his 18 office staff at his Berkshire Hathaway empire. The billionaire said he was paying 17.7% payroll and income tax, compared with an average in the office of 32.9%.
"There wasn't anyone in the office, from the receptionist up, who paid as low a tax rate and I have no tax planning; I don't have an accountant or use tax shelters. I just follow what the US Congress tells me to do," he said.
Mr Buffett also took a pot shot at hedge fund managers. He said: "Hedge fund operators have spent a record amount lobbying in the last few months - they give money to the political campaigns. Who represents the cleaning lady?"
[url=http://www.guardian.co.uk/business/2007/oct/31/usnews]I should pay more tax, says US billionaire Warren Buffett[/url]
[ 08 November 2007: Message edited by: Albireo ]
Thu, 2007-11-08 09:04
#9
Interesting how wealthy capitalists are less right wing than broke Conservative ideologues.
Thu, 2007-11-08 16:10
#10
I have argued here and elsewhere for an inheritence tax-- it is essential. The value of estates changing hands in this country is high-- you would not need a very high estate tax to make a big difference. I would propose 10% on the first $500,000 and 20% thereafter. It has been a while but when I looked at the numbers years ago this was enough to bring the basic exemption to the cost of living (about double where it is now) and then index it. This is where it should be-- you pay tax on your earnings that are over the basic cost of living-
That said the report does not get into the other point that needs to be made about taxation. I have not got the data with me at present but I know it is there and have seen it before. The wealthy use considerably more government services and obtain more benefits from government (way, way, way, more than those on social assitance by the way)-- if you consider this the regressive nature of our tax system becomes even more apparent.
Thu, 2007-11-08 16:14
#11
Which brings us to the ultimate capitalist nightmare-- that they may one day wake up to find themselves in a capitalist country.
Thu, 2007-11-08 16:15
#12
Interesting, but I had a US tax attorney lecturing me on how inheritance taxes are far higher in Canada than they are in the US or have ever been in the US. Canada just doesn't call them that. He was right. But the best part, he wasn't aware of the level of probate fees so he was underestimating the actual taxes levied on estates. [img]frown.gif" border="0[/img]
Thu, 2007-11-08 16:27
#13
Ya, that's in the States where the superrich are leaving even the merely rich behind. The Feds in Ottawa are only shovelling money to the superrich with all hands. In the U.S. they use diesel powered shovels. Our stoogeocrats aren't quite that efficient yet.
Thu, 2007-11-08 16:42
#14
Well let's introduce some facts:
Canadian probate fees vary quite a bit from 0.000045% in Quebec to
0.0145% in Ontario
Clearly this isn't going to make anyone wish they did not inherit now is it?
US federal estate taxes start at $2,000,000 lifetime amount and above that they are 45%
State inheritence taxes vary- the quickest I found was Ohio which starts at 2% for estates over $40,000 going up to 7% for those over $500,000.
Clearly the US has a significant Estate tax and Canada does not.
Thu, 2007-11-08 17:31
#15
quote:
Originally posted by Sean in Ottawa:
[b]
Clearly the US has a significant Estate tax and Canada does not.[/b]
Investigative news journalist, David Cay Johnston, author of [url=http://www.forbes.com/ceonetwork/2004/02/12/0212chat_transcript.html]Per... Legal: The Covert Campaign to Rig Our(US) Tax System to Benefit the Super Rich[/url] --and Cheat Everybody Else, said in 2006 that the [url=http://www.nytimes.com/2006/07/23/business/23tax.html?_r=1&oref=slogin]IRS fired half of tax auditors[/url] who normally handled estate taxes for the uber-wealthy(Dubya's base)
Thu, 2007-11-08 20:51
#16
A modest proposal. Instead of special estate taxes, why not just tax the beneficiaries, counting inheritances as regular income, using the usual forward and backward averaging rules. This would encourage people to spread their wealth out a little on death, maybe make them a little more likely to make bequests to organizations, and probably simplify the tax rules considerably. The only special arrangements needed would be for things like the family home(so a cash-poor family wouldn’t be force to sell it to pay the tax - maybe something like exempting the first $ quarter million or so in principal residence assessment would do the trick).
Fri, 2007-11-09 04:05
#17
quote:
Originally posted by abnormal:
[b]Interesting, but I had a US tax attorney lecturing me on how inheritance taxes are far higher in Canada than they are in the US or have ever been in the US. Canada just doesn't call them that. He was right. But the best part, he wasn't aware of the level of probate fees so he was underestimating the actual taxes levied on estates. [img]frown.gif" border="0[/img] [/b]
You are correct, we don't call them that.
There are, of course, probate fees for transfering certain property. That's not what he was talking about. The reason there is no inheritance tax is because of the deemed disposition upon death rules.
When someone dies, they are deemed to have disposed of all capital property. They are taxed on the proceeds of this deemed disposition on their terminal tax return. So the reason there is no inheritance tax is because Canada taxes the deceased on the money they leave, rather than the beneficiaries on the money they receive. The benefciaries get it tax free because it was taxed to the deceased.
[b]Edited to add:[/b] To put the rates in perspective, the taxable capital gains on the deemed disposition are taxed at the marginal rates for individuals. So a deceased with a taxable capital gain of $10 million on their terminal return would pay something in the neighbourhood of 46%, the same as if they had been alive when they earned it.
That exceeds some of the American estate tax rates posted above.
[ 09 November 2007: Message edited by: Law Student ]
Fri, 2007-11-09 04:12
#18
quote:
Originally posted by Sean in Ottawa:
[b]I have argued here and elsewhere for an inheritence tax-- it is essential.[/b]
I remember a similiar dicussion a few years back on rabble about this. A good point was made about the transfer of family farms to the next generation.
Fri, 2007-11-09 04:57
#19
quote:
Originally posted by Law Student:
[b]You are correct, we don't call them that.
There are, of course, probate fees for transfering certain property. That's not what he was talking about. The reason there is no inheritance tax is because of the deemed disposition upon death rules.
When someone dies, they are deemed to have disposed of all capital property. They are taxed on the proceeds of this deemed disposition on their terminal tax return. So the reason there is no inheritance tax is because Canada taxes the deceased on the money they leave, rather than the beneficiaries on the money they receive. The benefciaries get it tax free because it was taxed to the deceased.
[b]Edited to add:[/b] To put the rates in perspective, the taxable capital gains on the deemed disposition are taxed at the marginal rates for individuals. So a deceased with a taxable capital gain of $10 million on their terminal return would pay something in the neighbourhood of 46%, the same as if they had been alive when they earned it.
That exceeds some of the American estate tax rates posted above.
[ 09 November 2007: Message edited by: Law Student ][/b]
No, this is not true because the base is different- first, you are talking about capital property subject to capital gains and this is not equal to the whole estate and second the dead person's exemptions apply including the capital gains from a family home up to $500,000 and lifetime capital gains exemptions. For real property the percentage is 15% of the capital gain portion only. For other investments it is the marginal rate the person would be paying, and most people when they die are not earning the top rate and again this is not on the value of the assets but only the capital gain amount. There is absolutely no 46% amount.
In a nutshell we are talking about a capital gains tax which is quite different and limited. If the person left you $1,000,000 in cash you pay no tax here whereas that would be subject to tax in the US it is quite wrong to compare our capital gains tax (including deemed disposition) to the sweeping inheritance and and estate taxes that exist south of the border. This difference is so great that Canadians are advised to be careful when investing about having too many assets in the US that could be subject to these US taxes which are effectively much higher than in Canada.
Hope this explains a bit more.
Fri, 2007-11-09 06:35
#20
Thanks for refuting that just before I was going to, Sean. Sounds as if too many people are listening to lectures from U.S. Tax attorneys. Estate taxes are long overdue.
Fri, 2007-11-09 06:44
#21
quote:
Originally posted by scooter:
[b]
I remember a similiar dicussion a few years back on rabble about this. A good point was made about the transfer of family farms to the next generation.[/b]
That would be when the NDP proposed reinstating the inheritance tax in the last election. For doing so they were roundly derided in the media - hysterically I might say. A lot of distortion and 'they will take the farm' nonsense.
And on here of course there were two schools. Those who pilloried them for making such a politically suicidal policy statement, and those who were appalled that they downplayed it, focusing on other aspects of their platform, after the media tar and feathers routine.
Fri, 2007-11-09 08:01
#22
quote:
Originally posted by Sean in Ottawa:
[b]No, this is not true because the base is different- first, you are talking about capital property subject to capital gains and this is not equal to the whole estate and second the dead person's exemptions apply including the capital gains from a family home up to $500,000 and lifetime capital gains exemptions. For real property the percentage is 15% of the capital gain portion only. For other investments it is the marginal rate the person would be paying, and most people when they die are not earning the top rate and again this is not on the value of the assets but only the capital gain amount. There is absolutely no 46% amount.
In a nutshell we are talking about a capital gains tax which is quite different and limited. If the person left you $1,000,000 in cash you pay no tax here whereas that would be subject to tax in the US it is quite wrong to compare our capital gains tax (including deemed disposition) to the sweeping inheritance and and estate taxes that exist south of the border. This difference is so great that Canadians are advised to be careful when investing about having too many assets in the US that could be subject to these US taxes which are effectively much higher than in Canada.
Hope this explains a bit more.[/b]
You as well are making several mistaken assumptions.
First Re: capital property. Most people with significant assets don't keep those assets as cash in a bank account. They keep them as shares, mutual funds, etc. - capital property.
Second, the principal residence exemption (capital gains on a family home) is not limited to $500,000. You are confusing the principal residence exemption with the lifetime capital gains exemption (now $750,000, not $500,000). The lifetime capital gains exemption is severely restricted, and is limited to gains on qualified farm property and shares of a qualified small business corporation. The definition of a QSBC isn't directly relevant here, except that I will point out it must be carrying on a business; incorporated investment portfolios will not qualify for the lifetime capital gains exemption.
Re: your comment that for real property the capital gain is only 15%. Please provide an Income Tax Act section reference, as in my three years of studying the Act, I've yet to see this.
I realize there is not 46% amount. That is roughly the highest marginal federal/provincial rate, which I mentioned since you folks are working on the assumption that inheritances are mostly attributable to the highest income earners.
Capital gains are most definitely taxed on death. They will not make up all of the estate, but in the case of the ultra-wealthy, they make up the majority of it.
You are correct that cash transfers are not taxed, nor should they be in my opinion. Bank balances are after-tax amounts, unlike capital assets, and should therefore be transferred free of tax. This is the same reasoning why when you get $50 from Grandma for your birthday, it's not taxable. It's already been taxed, and therefore the ITA recognizes it shouldn't be subject to tax again.
And the reason people are wary of holding US investments is the possibility of triggering both US estate tax and tax under the deemed disposition rules, which may or may not be subject to relief from dual taxation under the Canada US tax treaty.
And the "sweeping" inheritance taxes you speak of south of the border are, in my understanding, fairly easy to minimize (though admittedly I don't practice there). It is almost impossible to avoid the deemed disposition here, other than the transfer of property to a spousal trust or transfer of farm property to children.
Fri, 2007-11-09 08:15
#23
quote:
Originally posted by Law Student:
[b]
You are correct that cash transfers are not taxed, nor should they be in my opinion. [/b]
I had to cull that out of your lengthy post.
You philosophically oppose inheritance taxes. You think the U.S. is taxing dead people's money twice and you don't want such a terrible thing to come to Canada.
Why not just say so?
Fri, 2007-11-09 08:24
#24
quote:
Originally posted by unionist:
[b]
Why not just say so?[/b]
As you note, I did say so. In the sentence you quoted. But I'll put it more bluntly.
I oppose inheritance taxes on income that has previously been taxed.
Unless the US has a deemed disposition rule as well, they [i]aren't[/i] taxing money twice.
[ 09 November 2007: Message edited by: Law Student ]
Fri, 2007-11-09 08:26
#25
quote:
Originally posted by Law Student:
[b]As you note, I did say so. In the sentence you quoted. But I'll put it more bluntly.
I oppose inheritance taxes on income that has previously been taxed.[/b]
Ok, next question: What about inheritance taxes on property on which the owner has previously paid capital gains tax, or sales tax?
Fri, 2007-11-09 08:30
#26
quote:
Originally posted by unionist:
[b]Ok, next question: What about inheritance taxes on property on which the owner has previously paid capital gains tax, or sales tax?[/b]
That's no different than my previous statement. Where capital gains have been taxed, the income derrived from the disposition of that property has been taxed. Inheritance taxes on that gain would be double taxing it, which, as you'll note above, I have a problem with.
Sales tax isn't income tax. Some capital property will be subject to sales tax, some won't. Whether or not it has been applied doesn't alter my opinion about being against double income taxation.
Fri, 2007-11-09 08:46
#27
Thanks, LS, that wraps up my questions for now.
As I said, the sooner we tax estates (progressively and significantly), the better. Otherwise, we just perpetuate and aggravate the immoral divide between rich and poor.
Fri, 2007-11-09 08:59
#28
Fair enough.
Look, I'm not naive enough to think I'd convince anyone here to agree with me, and no one here is going to convince me that we need an American style estate tax.
I just wanted to show that there are taxes triggered at death for capital holding individuals. Whether that's sufficient or the best way to impose a death tax is arguable.
I've got a fair amount of practice reading tax legislation, and I find tax policy rather interesting, so I just wanted to add my two cents to this thread.
Cheers!
Fri, 2007-11-09 09:18
#29
Pogo
I think we have to distinguish between income taxes (capital gains, payroll etc...) and wealth taxes. When we talk about inheritance taxes we are talking about a wealth tax that is calculated after all the income taxes have been completed. At least that is what I understand it to be, not just wrapping up all the income issues.
I do agree that it is better to have this tax calculated as a probate fee and not called a tax given the way MSM treats the subject. The problem with probate fees is that they punish people for not planning.
Fri, 2007-11-09 09:24
#30
quote:
I oppose inheritance taxes on income that has previously been taxed.
Taxes are assessed on individuals and entities. That money has been taxed when earned by one taxpayer does not mean it is doubly taxed when earned by another taxpayer. It is the taxpayer, not the money, that is assessed. It is an inheritance tax because the tax is imposed on the inheritor, an entirely new taxpayer.
[ 09 November 2007: Message edited by: josh ]
Fri, 2007-11-09 09:26
#31
quote:
That would be when the NDP proposed reinstating the inheritance tax in the last election.
I think that was two elections ago. They didn't even bother bringing it up the last election. [img]rolleyes.gif" border="0[/img]
Fri, 2007-11-09 09:44
#32
quote:
Originally posted by josh:
[b]Taxes are assessed on individuals and entities. That money has been taxed when earned by one taxpayer does not mean it is doubly taxed when earned by another taxpayer. It is the taxpayer, not the money, that is assessed. It is an inheritance tax because the tax is imposed on the inheritor, an entirely new taxpayer.
[ 09 November 2007: Message edited by: josh ][/b]
There is more than one accepted definition of double taxation.
For example, assume I operate a branch business in the US. Subject to the Canada-US tax treaty, I will incur both US and Canadian tax. This is one accepted definition of double taxation, in which the same taxpayer is taxed twice.
Another example is if I own shares in Royal Bank as part of an investment portfolio. Royal Bank pays corporate income tax, and pays out part of its profits as a dividend. I am taxed on that dividend. This is also double tax. Two different taxpayers are being taxed, but the same income itself has been taxed twice.
The concept of double taxation can, depending on the context in which it is used, refer to taxing the same individual twice, or the same profit twice. So my statement was not incorrect, and neither is yours. [img]smile.gif" border="0[/img]
[ 09 November 2007: Message edited by: Law Student ]
Fri, 2007-11-09 09:45
#33
Pogo
Taxes cross over each other. No double taxation is a meaningless concept invented to attack the tax system.
Last time I paid GST it was with money that I had already paid income tax on.
Fri, 2007-11-09 09:47
#34
You're comparing income tax with consumption tax. The income tax system seeks to avoid double income tax, not double tax as a result of income tax and consumption tax.
Fri, 2007-11-09 09:49
#35
quote:
The concept of double taxation can, depending on the context in which it is used, refer to taxing the same individual twice, or the same profit twice. So my statement was not incorrect, and neither is yours.
I was referring to the specific example of the inheritance, and the "double tax" canard often leveled against it.
Fri, 2007-11-09 09:53
#36
Pogo
quote:
Originally posted by Law Student:
[b]You're comparing income tax with consumption tax. The income tax system seeks to avoid double income tax, not double tax as a result of income tax and consumption tax.[/b]
Well as I said earlier I consider inheritance taxes to be wealth taxes and not income taxes. Does the tax god allow this?
Fri, 2007-11-09 09:57
#37
quote:
Originally posted by Law Student:
[b]You're comparing income tax with consumption tax. The income tax system seeks to avoid double income tax, not double tax as a result of income tax and consumption tax.[/b]
"Double taxation" is double talk. When I earn $1000, I pay income tax on it. When I hire you to do something for me and pay you with my remaining $700, you pay income tax on that. The same money gets taxed over and over again.
If someone earns lots of money, s/he should enjoy it. If they give it to someone who hasn't earned it (other than a dependent family member who hasn't got independent earning power), it should be grabbed by the state (or most of it) and used for the common good.
We all accept that political power should not be passed from parent to child. Why is economic power any different?
(Hey, I like that.)
Fri, 2007-11-09 09:59
#38
What's with the attitude Pogo? I've kept my posts civil. No need for sarcastic name calling.
Fri, 2007-11-09 10:08
#39
He didn't call you names.
Maybe read the policy you agreed to when you signed up for this forum. Read especially the part about who we created this forum to serve. If you don't like your right-wing, capitalist ideas challenged, sometimes with a very slight bit of sarcasm, then you're on the wrong forum.
Fri, 2007-11-09 10:21
#40
Lard Tunderin Jeezus
Personally, I'd take it as a compliment if someone called [b]me[/b] the "tax god". I so seldom feel godlike these days.
Fri, 2007-11-09 10:23
#41
Pogo
My apologies the sarcasm is not intended at you, but at the way double taxation is played with.
Tax fairness should look at where the taxpayer is left after the tax is collected. If we have to 'double tax' people, because that is the most efficient and fair way then we should 'double tax' them.
In BC there was a high income surtax (5% - eliminated by the Campbell Liberals). This was a secondary calculation after the intitial taxes were calculated. Was this double taxation? Perhaps. Was it fair? I think so.
Fri, 2007-11-09 11:13
#42
[b]Unionist:[/b] I once heard that very question asked to a professor. I don't recall his replay, but it involved viewing the employee as an end user. At the moment, I admit I don't have an answer on your first point.
On your second, we don't allow inherited political power because we are a democracy. I fail to see how if I inherited a significant sum (unfortunately for me, this is a hypothetical) it is undemocratic. I guess the distinction I would make is that society is harmed by unelected persons assuming political office. Society is not harmed, though not made better off either, by inherited wealth. If public good depends on this then maybe (and I can't believe I'm saying this) it was not taxed sufficiently when earned by the person that accumulated it through work or investments.
[b]Pogo[/b], no worries, I realize I was a bit touchy, had just received an anticipated-but-dreaded email that resulted in a great deal of annoyance. In any case, I wouldn't call a surtax a double tax, just an increase in the marginal rates. I agree tax fairness should look at the end result, but I suppose interpretation of this is clouded by ideology on both ends.
And [b]Michelle[/b], my apologies. There are few places to debate such policy issues online, even if I take the opposite approach as your readers. I just thought some might find a soon-to-be tax practitioner point of view relevant, and frankly I like talking about this stuff.
Anyways, thanks for humouring me, it made a lazy Friday a bit more interesting. For anyone interested in tax policy, and it seems some of you are, you might find information on the Norwegian dual income tax an entertaining read. Flat rate on capital/investment income, progressive rate on employment income. Or maybe I have that backwards. Anyways, it has an inheritance tax. [img]biggrin.gif" border="0[/img]
Fri, 2007-11-09 11:49
#43
Unionist:
quote:
If someone earns lots of money, s/he should enjoy it. If they give it to someone who hasn't earned it (other than a dependent family member who hasn't got independent earning power), it should be grabbed by the state (or most of it) and used for the common good.
My family (extended family) has a cabin that has been handed down since it was built by a great great grandfather of mine, staying in the family through one relative or another (though the entire extended family makes use of it... So shared use). 20 years ago, it wasn't exactly worth too much... Put in some soaring land and housing prices, and suddenly this cabin is worth quite a bit than it used to be... Though there is no intention of selling it (multi-person use/ownership).
Are you suggesting this long time family owned vacation spot should be taken from our family and 'used for the greater good' when my grandmother passes on?
Inheritance tax is a touchy subject... Yes the wealthy pass on much more than most, but even us not so wealthy have family possesions that are passed from generation to generation. How would you like to pawn a grandparents heirloom because you couldn't afford the 45% tax on it?
added: Ty for the contributions in this thread, oh soon to be future tax practitioner [img]wink.gif" border="0[/img] it's been an informative thread
[ 09 November 2007: Message edited by: Noise ]
Fri, 2007-11-09 12:16
#44
I think if you die with money left over, that means you lost the game.
Fri, 2007-11-09 14:12
#45
Pogo
quote:
Originally posted by Noise:
[b]Are you suggesting this long time family owned vacation spot should be taken from our family and 'used for the greater good' when my grandmother passes on?
[/b]
How much is the cabin worth? I think most plans have a pretty high dollar value that is untaxed. I think the NDP's kicked in at $1,000,000 dollars. If your cabin is worth more than 1 million dollars then I think the people inheriting should be willing to pay the tax (on the amount over $1M).
Fri, 2007-11-09 14:59
#46
quote:
Originally posted by Noise:
[b]How would you like to pawn a grandparents heirloom because you couldn't afford the 45% tax on it?[/b]
You apparently missed my prescription:
quote:
the sooner we tax estates ([b]progressively[/b] and significantly), the better
If your great-great-grandfather's cabin is worth $10 million, I think it's time to share a huge chunk of that with the "common good". If it's worth $200,000, a far lesser percentage. But why exactly should you get it for free, when you have never lifted a finger to create it? You wouldn't want to inherit your great-great-grandfather's position as Mayor, or CEO of a corporation, just because you emerged from the right womb...
Or would you?
Fri, 2007-11-09 15:06
#47
I don't know it seemed to be good enough for that poverty fighter Paul Martin.
Fri, 2007-11-09 15:11
#48
Noise, to add to my previous reply: I didn't intend to say you should have to pawn your heirloom. Perhaps it could be tax-free while you continue to use it for your own private ends. Once you earn money off it, or sell it, that's when you should cough up a fortune to the state.
There, I feel better now.
Fri, 2007-11-09 16:16
#49
To return to Marc Lee's paper. This is an important piece of work, and I will be greatly saddened if it turns out to be nothing more than a 24-hour media cycle event. We generally think that the tax system is progressive: not progressive enough, perhaps, but progressive. This turns out not to be the case. So the next time someone trots out a proposal for a flat tax system, the appropriate progressive response is to say 'yes, yes, yes', because it would be an improvement on what we have now.
Another reason why I like it so much is that Marc repeats many of the points I raised in my talk at the 'Taxation and social democracy' session sponsored by the PEF at the CEA meetings last summer. (For those of you who haven't yet seen it, the slides are [url=http://worthwhile.typepad.com/worthwhile_canadian_initi/2007/06/doing-it....)
Here are the last few paragraphs from the conclusion to Marc's paper:
quote:
[T]he real-world experience of the Nordic countries is illustrative. They show it is possible to have much higher overall levels of taxation in order to pay for more expansive public programs and greater social cohesion (lower poverty and inequality). The big question is whether we, as a society, want to go there. Economics is not the obstacle, but political challenges and moral objections are bigger barriers.Notwithstanding the potential for raising top income tax rates, in order to raise Canadian tax revenues from one-third of GDP to Sweden's one-half, a large portion of this increase would likely need to come from consumption taxes. The challenge would be to ensure that revenues are spent in a highly progressive manner, so that any regressive taxation impacts are more than offset. This is more consistent with the message of the tax mix literature than the simplistic notion that income taxes should be replaced by consumption taxes (with rather large inequality impacts as the pattern of spending would remain unchanged). Claims that Canada relies too much on personal income taxes do not really hold up when we add the Nordic to the comparison.
An essential point for Canada is that there is scope for raising income taxes at the top of the distribution so that the overall tax incidence becomes, minimally, proportional, and, ideally, progressive. While there may be some theoretical limit to how progressive upper rates can be, we are not close to rates that would have adverse economic consequences. There is still ample room for raising income taxes on the most affluent by raising the top rate or through the addition of new top tax brackets. Similarly, the preferential treatment of capital gains is unwarranted, and should be taxes as fully as any other form of income.
A potentially divisive matter is corporate taxes. The historical example of the Nordics is that capital is taxes relatively lightly to avoid flights from small, open economies. So on one hand, we should be careful of knee-jerk responses that aim to rely on higher corporate taxes to boost fiscal capacity. On the other hand, it is not at all obvious that reducing Canadian corporate taxes would stimulate economic activity in Canada. In Canada, we mostly need to be mindful of US rates, and because US corporations get a deduction for taxes paid in other jurisdictions, Canadian corporate tax cuts may simply be a transfer from the Canadian Treasury to the US Treasury.
So while tax mix matters in getting to Nordic levels of social services and income transfers, the immediate challenge raised by this study is the need to restore the progressivity of Canada's tax system for those income earners at the upper end. There is scope for higher income taxes on top incomes, and for measures that would reduce regressive taxes that have been weighing down Canadians at the bottom of the income distribution. These simple measures would go a long way towards restoring tax fairness to Canada's tax system.
[ 09 November 2007: Message edited by: Stephen Gordon ]
Fri, 2007-11-09 17:51
#50
quote:
Originally posted by unionist:
[b]If your great-great-grandfather's cabin is worth $10 million, I think it's time to share a huge chunk of that with the "common good". If it's worth $200,000, a far lesser percentage. But why exactly should you get it for free, when you have never lifted a finger to create it? You wouldn't want to inherit your great-great-grandfather's position as Mayor, or CEO of a corporation, just because you emerged from the right womb...
Or would you?[/b]
And this is the point that Law Student missed-- that there are estates that were for the most part created generations ago. These estates get passed on with only the portion of the estate that was added in this last generation that did not get cashed or reinvested (and had capital gains realized) taxed in the estate. Then as you read later that capital gain is only 50% taxed at whichever rate is used. With our top rate siting at 29% this means 14.5%.
Wealth is a common good -- in that the country pays money and infrastructure to maintain that wealth and protect it and allows the person with this priviledge to have greater access to the nation's wealth and services. Having this wealth allows you to function in society easily giving you a leg up to make more money that someone who has no head start financially does not have. The cost to society and the advantage to the person of having wealth are supported by the public.
I have never supported the idea that 100% of inheritences should be taxed exactly like other income but they should not pass at next to no tax from generation to generation.
I actually do not agree with the use of a capital gains tax at death. It means less to me what your grandaddy paid for the property that is falling into your hands for no effort of your own. We could simply this by removing that capital gain issue at death. If there is a tax on ALL wealth that is transfered we do not need to distinguish- it would also make estates more simple to probate and more predictable. The double tax idea is nuts-- the same dollar gets taxed many times as it is earned and spent and transferred in society. Take that loonie out of your pocket and imagine how many times it has been taxed. The issue is as money comes in that is new to the individual it should be taxed-- regardless of where it came from or how many people have had it or been taxed on it before.
At present the government only taxes 50% of the capital gain as income- a measure the Liberals brought in (I think it was 26% before they started and they raised it twice up to the current 50% exemption-- good deal for Paul Martin's kids now wasn't it?) So whichever number you use you can divide it by two. The top federal rate is 29% so half of that is less than 15%-- and the top rate will only apply to income over that bracket floor. You are right, Lawstudent, I did make a mistake-- this 15% applies to ALL capital gains not just real estate. So you are looking at less than 15% of the appreciated portion of the estate (the principal would not be a capital gain). Interesting that people are talking about how the government limited severely the personal exemption for capital gains. What was cute about it is they removed the litle bit of progressivity that existed among the wealthier people. So If you had a $200,000 excemption (I don't remember what it was right off) and you had an inheritance of $200,000 you would have paid nothing in the old system but would now pay $100,000 but if you had an inheritance of 2,000,0000 in the old system you would have paid tax on 1,800,000 of it but now would pay tax on 1,000,0000. So you see how this change was not to raise more money for us working stiffs it was to direct the money even further up the chain than ever before. It was to make sure that if the middle class got a house they would be taxed on it more so that the rich people that owned, say a steam ship line (just for example) would get less tax. Now does this make more sense?
The idea that most wealth is a capital gain is absurd- If someone made a 100% increase in the value of an asset they purchased it would come out to 50%. Many wealthy people move their investments around at times in their lives-- happy with 30% income here or 20% there-- at the time of death the assumption that the entire value of property that is not cash would have appreciated by at least double is quite unrealistic.
So after some of this, I feel like saying Law Student should go back to school...
BTW here is a link to the news about the 2002 change to only tax capital gains at 50%:
[url=http://www.fin.gc.ca/toce/2002/cgtc_e.html]http://www.fin.gc.ca/toce/200...
Now another point- that seems lost on our right wing friends-- The US DOES have a capital gains and it is 15% on real estate- this is over and above inheritence taxes-- the only thing is they do not consider gains to be realized when you die so-- all your life you will pay this on assets you sell and then when you die your estate that may have paid several times a capital gains tax will be taxed at the inheritence rate for the State and the Estate tax rate for the Federal US government. Even with the loopholes US wealth is taxed more than Canadas. How else do you think they can afford trillions to spend on war? In Canada we don't tax wealth like this-- and this is why we have to hit our middle and lower income residents harder than the US does on their incomes.
In short in the US to some degree what you do matters more than who you are so less tax on your earnings but in Canada's colonial income tax system who you are matters more so that we punish people trying to make a living to reward the upper class that inherits-- the old family compact-- who were the authors of our tax system that we have to this day.
Right Wing Friends, you should enjoy this because this is the only area in all Canadian public policy where Canada is much more regressive and much more right wing than the US of A. You should be proud as generations of working Canadians have been royally (pun intended) ripped off for generations. But we can keep your secret so that you can pretend to the people who are struggling that it is the welfare Moms who take the bus and buy what little food and shelter they can afford that are really between them and all the wealth of the upper class. This is a scam that makes the Nigeria internet scams look like friendly arrangements.
[ 09 November 2007: Message edited by: Sean in Ottawa ]
Sat, 2007-11-10 00:51
#51
I believe inheritance taxes should be harsh unless it represents a business which is tied up in working capital that employs people and cannot be liquidated to buy a Bentley.
Free money is soul-destroying as much as unemployment in poverty. Having the money tells you that you do not need to work. This is a cancer on the common wealth. No work = no benefit.
As a Libertarian I object to something for nothing. Having been a sperm is next to nothing.