More on taxation

I haven’t read the white paper yet on proposed tax reform in New Brunswick but, notwithstanding, two points as a follow on to my previous post on this.

1. They are talking about shifting around the tax burden, not reducing the overall tax burden. To do the latter, you would have to either a) have a source of new revenue or b) massively cut spending. They don’t/won’t do a) or b). So you have to ask yourself whether or not you want to pay more HST and less income tax, more carbon tax, less income tax, etc. The only shift might be to move some revenue generation from corporations to individuals (by dropping the corporate rate). But as I said before, that would be minimal impact. One point added to the HST and you could wipe out all corporate income tax from small biz and big biz. And they are not talking about doing that.

2. The CFIB wants the 5% small biz rate cut to zero. I think you run into the problem we talked about earlier. The bulk of small businesses are onesy and twosy professionals – doctors, lawyers, consultants (ahem) and others that aren’t about to grow beyond the local service area. You really should be looking to extract a reasonable amount of income tax out of these folks. I don’t want to start a firestorm but does it make sense to have a $250,000/year doctor with a marginal tax rate below the poor working stiff making $75k/year?

I am starting to smell a whiff of my socialist leanings (just kidding). But I do think that – in general – those with a greater ability to pay – should pay a little more.

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0 Responses to More on taxation

  1. mikel says:

    If there was ANY evidence this would be successful then they would have just made the proposal. This is meant to confuse people and make it ‘seem’ like they are doing something. The only intended effect, I suspect, is to mask the real agenda, which is to lower corporate interest rates. I don’t think ANY jurisdiction in Canada has lowered it to 5%, that number was put in so that when they lower it by two or three percent then people will say its a good compromise.

    As we’ve discussed before, corporations don’t invest in areas based on taxes. But the corporations, and not just doctors, will make a killing off this. Of course since the media rarely reports on the distribution of income then that won’t be known, at least for years.

    Quite frankly, this is nuts. I’ve said it elsewhere-if you want to change to beneficial taxation, you make the wealthier pay more, not less.

    One other effect you didn’t mention-raise the HST and consumptive taxes and people by necessity buy less, and one of the most important economic engines-consumer spending…goes down. If the tories don’t start railing about this and the uranium mining and education then you KNOW you’ve got a one party system.

  2. Anonymous says:

    It is not one party system. It is more “STUPIDOCRASY”. It is incredible that the World went through an economic boom from 1996 – 2008 and we have little to show other than Public Sector Growth, here in N.B. I sure hope and pray that we can manage the oncoming economic contraction. Seeing the assembled talent in our “Public Service Department aka Politicians” over the last 8 years, I don’t hold out any hope.

  3. Anonymous says:

    It’s a bit misleading to say doctors “make $250,000/year” they have to keep an office, secretary etc.

  4. David Campbell says:

    I don’t want to pick on doctors, they provide a valuable service and their salaries are mostly set by market forces. My point is that after some threshold, $125k? $140k? It makes far more economic sense from a tax perspective to set up as a corporation than take a salary from an organization.

  5. nbt says:

    You said, “I am starting to smell a whiff of my socialist leanings (just kidding). But I do think that – in general – those with a greater ability to pay – should pay a little more.”

    Spinks said, “BTW, expect a lot of vilifying of the more wealthy among us in the coming days and weeks over the flat tax proposal. It might sound great to tax the highest earners to the nth degree but the problem is the wealthy are the most mobile. If they leave for more tax friendly areas, we middle class and the poor are left picking up the tab. There’s got to be a happy medium balance. Seriously, we need the rich people too.”

    See what I said regarding Ireland’s situation (page 21-22). They are “mobile” like he said and they shouldn’t be punished for earning more. And really, do you really want the middle class and the poor to shoulder the burden b/c the rich chose to shelter their earnings offshore since it doesn’t pay to claim it in a jurisdiction where they are being gouged to death via high taxes.

    I know I don’t.

  6. richard says:

    “the wealthy are the most mobile. “

    More brilliant insight! Track out-migration from NB over the past two decades. Is the ‘wealthy’ who move moved out in a greater proportion? A little data often serves to puncture the balloons of blogdom.

  7. nbt says:

    It doesn’t weaken my argument b/c the two are completely different. The young and educated (with diploma in hand) are hungry and looking for the best opportunities. To me, when you think of outmigration in New Brunswick, that demographic comes to mind.

    Plus, how do students factor into an argument about the province’s most wealthy being taxed? Are there an overabundance of millionaires going to STU, MTA and UNB that I don’t know about?

  8. mikel says:

    We don’t know much about outmigration except that its a lot. But I’ll repeat my rebuttle to spinks, you can’t stop them being mobile, but you can take control of their resources. IRving can leave, and their ‘wealth’ pretty much has, but they can’t take their land, pulp mills, LNG refineries an gas terminals with them. The problem is simply that the wealthy ARE allowed to move their wealth away (which they ALL do), while continuing to extract the wealth from consumers and taxpayers.

    By the way, the days of low and middle classes going to university in abundance are running out, in large part those university students ARE the wealthier.

  9. Anonymous says:

    Your comment about this less of a reform and more about shifting around burden is bang on.

    The best one could hope for is the closing up of some loop holes until new ones are found.

  10. nbt says:

    Oh yes they can, UPM did as they took enough of our money with them to offset the losses of equipment and land.

    Too bad the government didn’t have the guts to sign a loan agreement with strong default clauses. I guess they figured forgivable government loans are the only way companies like UPM will relocate to our province. Funny that, since they left for a larger private investment in a region that boast a “flat tax.”

  11. mikel says:

    Here we go again, SINCE UPM left New Brunswick it MUST be because the province hasn’t got a flat tax! Here’s from the company:

    The record strong Canadian dollar has made the export of Miramichi paper to the
    United States market unprofitable. The Canadian currency has gained 25% this
    year. The increasing cost of essential raw materials such as wood and chemicals
    has offset the benefit of price increase for magazine paper. Demand for magazine
    paper grades in North America has been stable, but globally, there continues to
    be overcapacity in magazine papers.

    UPM has permanently ceased production of 980,000 tonnes of coated magazine paper
    in 2006-2007 to reduce the structural overcapacity and improve profitability of
    the business.
    Near Miramichi, UPM operates two sawmills in the communities of Blackville and
    Bathurst, and manages woodlands under Crown forest licenses. The future of these
    operations is under consideration.

    UPM’s North American customers will continue to be served by the Company’s
    coated groundwood paper mill in Blandin, Minnesota, USA, and UPM’s paper mills
    in Europe.

    One final point, neither Minnesota or the european countries that provide paper have a flat tax.

  12. mikel says:

    Oh yeah, one more thing for Dave-Minnesota HAS entered into an agreement to buy cheap power from Manitoba.