Fairness in Taxation

 (reproduction of email message sent March 24, 2013)

I am writing with regard to your column in the Vancouver Sun, based on yet another study by the Fraser Institute, apparently pointing out the growing unfairness in the Canadian tax system. 

These guys never give up do they?  Even in this case, where, ironically, apparently some Canadians are actually benefiting from one of the Fraser Institute mantras of ensuring that Canadians pay a minimum of tax.

I have to say that I was immediately troubled by the conclusions echoed in your column, about the potentially problematic nature of the percentages offered.  Mostly, the very notion that up to 37% of Canadian tax filers face no liability due to tax credits and deductions.  Up from 32% a decade previously.  Clearly "takers" not "payers".  Ne'r-do-wells.  Shirkers.

The interesting thing is that the report itself states even larger ratios:

"The share of non-contributors to taxes as well as the increase in the ratio over time is more stark for lower income groups. The ratio of non-con tributors to total tax-filers for the lowest income group ($1–$10,000 in earnings) increased from 88.0% in 2000 to 99.2% in 2010. The lower-income groupwith the largest increase in its non-contributor ratio was the group of those earning $20,000 to $25,000 per year. From 2000 to 2010, the ratio of non-contributors to total tax-filers increased 572.4%, from 5.2% of total tax-filers in 2000 to 34.8% in 2010. The ratio increased from almost half (48.8%) for those earning between $10,000 and $15,000 to 83.5%, an increase of 70.9%.  More markedly, the ratio of non-contributors to total tax-filers increased from 14.1% to 64.9% for those earning between $15,000 and $20,000, an increase of 359.9%."

These percentage increases look even more dramatic. 

That is until we look at the income categories.  We are talking about tax brackets that top out at $25,000/year!

So, on the basis of the above data alone, a different kind of headline might be:

"Employers have sufficiently beggared their employees that this might be a serious issue for democracy.  Canadians with lower or stagnant levels of income increasingly depend on tax deductions and credits in order to maintain a livable net income."

H-m-m-m.  Who might be in these brackets:

Single parents forced to be employed part time, if they can work at paid employment at all,

Seniors who have only basic, government-sponsored pension plans,

Students not yet fully in the employment field (and often paid minimum wage)

Employees who can no longer find full-time work and have to work at two or more minimum-wage jobs.

I don't do such research, but before I wanted to conclude that such categories of income earners in Canada are "takers", I would want to know a lot more about why more Canadians are finding themselves in these lower tax bracket groups.  And I am willing to bet that it has a lot to do with policies that my friends at the Fraser Institute actually prefer (such as being cranky about recent raises to the BC minimum wage).

Aside from all that ideological stuff, I frankly would have a good deal of trouble arguing that folks in the income bracket of $25,000/year or less ought to have deductions clawed back or their marginal tax rates raised so as to make their proportion of tax to population numbers more in line with Canada's top 20% of income earners who apparently earn about 47% of the income and apparently pay a 'disproportionate' 54.3% of the taxes, "when the calculation included only total federal taxes" (p.41 of the report).

I hope that people who earn a lot do, in fact, pay a lot of taxes.  I do not begrudge the taxes that I and my wife pay, and we are in a tax bracket considerably higher than $25,000.  I value the public services I get and would actually like more.  But I would not like to get these additional services on the backs of most people taking home less than $25,000/year.

What is missing from a report like this is full exploration of all the tax loopholes that exist for that group in the top 20% of income earners, like the CEO of Canadian Pacific, mentioned on the page before your column. 

Apparently in 2012 the CP CEO earned more than $49 million.  At my marginal tax rate, his tax return for this year would be about $13 million.  Not to pick on him, but I would be very surprised if his income tax return for 2012, shows a tax liability anywhere approaching $13 million dollars.  If it does, he ought to get a new tax accountant.  I just hope that he is paying more dollars than I am.  And all other considerations aside, I hope that his political influence is exactly the same as mine -- one vote.