Taxes are Essential but Justin's Race To The Bottom is a Rip-Off for 99% of Canadians!

148 posts / 0 new
Last post
Sean in Ottawa

Rev Pesky wrote:

From WWWTT:

thats already in place on the most expensive thing people are likely to own, real estate. Sounds like you’re suggesting an increase. 

If you read my piece, you would have seen I suggested a $5 million deductible, which would mean most people who own homes wouldn't pay tax on that asset. House prices are high, but very few people own homes worth more than $5 million. So for those people there would be no increase.

Of course, while for the average citizen the family home is probably the most expensive thing they're likely to own, for the very wealthy the family home is only a small part of their wealth. They may own stocks, bonds, factories, etc. 

Remember the figure I posted up thread, showing a very small group of people own 50% of the wealth of the world. Obviously that's more than family homes.

Here's some information, in a Huffington Post story about a report from the CCPA:

Wealth Inequality trumps Income Inequality

The report by the left-leaning Canadian Centre for Policy Alternatives shows that the country's 86 richest individuals and families — or 0.002 per cent of the total population — are getting exponentially richer and now have accumulated as much wealth as the country's poorest 11.4 million.

...The point of the exercise, says economist and author David Macdonald, who used Statistics Canada data and research from Canadian Business magazine, is to show that if income inequality is a policy and social justice concern — wealth inequality is worse.

In fact, the super-rich list of Canadian residents has little to do with income in the traditional sense, he said. None of the 86 are company CEOs — often the poster children of the Occupy crowd for their unseemly salaries and bonuses.

..."We often focus on income inequality but that's a socialist paradise compared to wealth inequality," said Macdonald.

"The top 20 per cent only get half of all the income, but in terms of wealth inequality, the top 20 per cent have 70 per cent of all wealth. It's much more extreme...

Which is why it's really important to be clear about the difference between the top 1% of income earners, and the top 1% of wealth owners.

Top 20% only half the income. Well yes, you can draw lines here you want to say what you want. but the gap in incomes is dramatic and growing.

It is also important to understand why right wingers like to point to wealth rather than wage inequality: you can do something about the second more easily. Also if you disregrad sources of incomes (like inheritences) you can minimize the issue. At the end of the day anyone who understand business knows that wealth is retained earnings plus capital. Wealth largely equals: Retained earnings + gifts + inheritences. What are inheritences from? Well retained earnigns are wealth, which includes the retained earnings of the previous generation.

To ignore gaps in income is to misunderstand the cumulative nature of them. You need to address wealth largely becuase previous generations did not address income differences and this adds up over time. Income differences look minor when you compare them in the span of a year, less so when you consider how wealth is accumulated. Even less so when you truly understand income and cost of living. If you consider net income as an amount over the cost of living you would see just how significant the gaps in wages that lead to significant wealth actually are. This approach to income is like a business: it pays tax on its profit after costs. If we were to look at an after living costs income you would see how dramatic the inequality is.

Quotes:

  • Canada gets a “C” grade and ranks 12th out of 17 peer countries.
  • Income inequality in Canada has increased over the past 20 years.
  • Since 1990, the richest group of Canadians has increased its share of total national income, while the poorest and middle-income groups has lost share.

Income inequality is higher in Canada than in 11 of its peers. Although Canada’s wealth is distributed more equally than in the U.S., Canada’s 12th-place ranking suggests it is doing a mediocre job of ensuring income equality. Canada gets a “C” grade on this indicator.

 

Income inequality in Canada has increased over the past 20 years. Canada reduced inequality in the 1980s, with the Gini coefficient reaching a low of 0.281 in 1989. Income inequality rose in the 1990s, but has remained around 0.32 in the 2000s.

 

The richest 1 per cent of Canadians took almost a third of all income gains from 1997 to 2007—the decade with the fastest-growing incomes in this generation, according to a 2010 study by Armine Yalnizyan.

http://www.conferenceboard.ca/hcp/Details/society/income-inequality.aspx...

Sean in Ottawa

WWWTT wrote:

It almost sounds like you want to retroactively tax wealth that wasn't fairly taxed from the start?

On this I have to say -- please consider what is wrong with that. I want an emphasis on both for exactly this reason. Fair taxes to not grow the problem and wealth taxes to deal with in part the accumulated problem of not having done it earlier.

I think people who address wealth are missing that this wealth accumulated in part due to a lack in reasonable taxes when it was earned.

However, the other issue is that when you die, should a person who did not earn it get all your money tax free just becuase you want them to. A tax on inheritences would leave them the ability to get much but not all of it. It is not about justice to say that you should be rich becuase your great grandparents earned it and another person should not be becuase their great grandparents did not.

cco

Is whether it was "earned" the big consideration? Don't get me wrong, I support inheritance taxes, but it seems to me that we don't tax unearned income from the lottery or stock dividends at a higher rate than income from shoveling driveways. There's just an assumption that whatever money an individual came into via legal means, that money was "earned".

Sean in Ottawa

Rev Pesky wrote:

From WWWTT:

Corporate tax rates must go up!

It is a bit of a truism that corporations don't pay taxes, they collect taxes. But it's close enough to the truth.

For the most part, when companies have to pay more tax, they raise their prices to account for the tax increase. So whoever is the consumer of the output of the corporation is paying the tax. If the company is in an export business, it is consumers elsewhere who will pay the tax, but it's also true that most often offshore consumers have the option of buying from someone else who isn't paying the higher rate of tax.

Higher rates of corporate tax don't necessarily increase revenue, nor decrease inequality.

Actually that might be a falsism (if there is such a word).

Corporations do not pay taxes in income.

They pay taxes on profit. Income less expenses = profit.

Profit is a function of price x volume - expenses.

Companies maximize profit as it is -- in other words they charge as much as possible - holding costs down as low as possible and multiply that by volume. They understand that if you increase the price you reduce your sales volume and so an increase in price does not produce more profit to cover higher taxes.

They say this becuase they want to scare people and governments from imposing taxes but the level of taxation on profit does not significantly affect the price. It only affects the retained earnings (profit after tax).

Profitable companies look to market share and volume at the maximum price the market will bear without a reduction in volume in order to produce profit. To do this busienss looks to stability and access to markets.

In a society where a reasonable tax is paid on profit that reduces income taxes on individuals, individuals have more money to spend that is more potential profit for business. concentration of wealth is bad for an economy becuase there are not customers.

Newsflash:

This argument in favour of dropping taxes on business is not in the interest of business.

The business seeks to grow and be stable. No tax on profit encourages a company to declare profite (and redistribute it to capital). High tax on profit encourages capitalists to grow the actual busiens, make it more stable and invest.

This argument you here about low taxes being good for business is made not by businesses but by those who capitalize them and want to extract from them what they can. Investors may run businesses but they are not business, they are capital owners, and they are not always aligned with business.

Take for example the investor who makes money by liquidation. That is extreme. But when you take profit, you are in part liquidating that power of the business to grow. You might let the business get smaller, let people go, to take a bigger profit. Good for the investor not the business.

So -- taking a smaller profit returning some capital in taxes to liquify the buyers who can then purchase more to keep the business going is good for business. The business wants stability, security and a fairness among competitors. And if it underwstood what it needed it would want customers with disposable money.

Governemnts buy the load sold by investors -- those who capitalize business so they can get their money out at a profit. The biggest profit at least tax possible and if the business is dead they will suck the life out of another.

Now, I know it is more complicated than that but I am at least trying to level the argument from the one-sided arguemnt we normally hear.

By the way -- there are some prominent billionaires who say the same thing.

Sean in Ottawa

cco wrote:

Is whether it was "earned" the big consideration? Don't get me wrong, I support inheritance taxes, but it seems to me that we don't tax unearned income from the lottery or stock dividends at a higher rate than income from shoveling driveways. There's just an assumption that whatever money an individual came into via legal means, that money was "earned".

Unearned income (non wage) tends to be taxed at a lower rate if at all.

Pogo Pogo's picture

Inheritance taxes are currently ran as probate fees which are low but not insignificant.  The other tax event that happens is a realization of any capital gains (which of course can often be avoided with wise estate planning).  This is almost unique to Canada - most other places have a proper inheritance tax.  But given the unique nature of the calculation it is very hard to insist on an exact match to income tax rates.

Rev Pesky

Re: Corporate tax. Corporations are just collections of people. Corporations don't pay tax. The people who own the corporations pay tax. That might include, by the way, your pension fund. Again, everything else being equal, including prices and wages (which are both put under stress by increased taxation), a rise in taxes makes the company worth less money.  Which might mean the shares held by your pension fund decrease in value, causing, perhaps, less indexing of your pension down the line.

Re: Inheritance taxes: Most of the 'estates' of middle income people consists of assets that were purchased with after tax money. What's the moral argument for taxing that money again, under specific circumstance? By that, I mean you would tax it if it was passed on to inheritors, but not if it was given as a gift to a stranger.

The very wealthy are more likely to set up family trusts, which avoids probate altogether.

Pogo Pogo's picture

Why wouldn't we tax money again and again and again.  We already do this.  You get your wages and they tax it.  You buy your gas and there is a transit tax built into it, then you pay for it and they put a consumption tax on it.

Sean in Ottawa

Rev Pesky wrote:

Re: Corporate tax. Corporations are just collections of people. Corporations don't pay tax. The people who own the corporations pay tax. That might include, by the way, your pension fund. Again, everything else being equal, including prices and wages (which are both put under stress by increased taxation), a rise in taxes makes the company worth less money.  Which might mean the shares held by your pension fund decrease in value, causing, perhaps, less indexing of your pension down the line.

Re: Inheritance taxes: Most of the 'estates' of middle income people consists of assets that were purchased with after tax money. What's the moral argument for taxing that money again, under specific circumstance? By that, I mean you would tax it if it was passed on to inheritors, but not if it was given as a gift to a stranger.

The very wealthy are more likely to set up family trusts, which avoids probate altogether.

Your argument that Corporations do not pay tax is not true not matter how often you repeat it. It is something they want you to think but it is false.

Inheritence taxes -- the argument against the idea that you do not tax the same money is also propaganda you are falling for. Money circulates and is taxed when it does -- except when it isn't. Typically when it flows into new hands it is taxed. Why it shoudl not be juest because you did not earn it is a prejudice against earned income. There is no reason for it not to be. Governments can tax anything they decide to and there is no argument not to tax this one.

The rules for family trust are not the rules of nature but options for government.

 

Pogo Pogo's picture

I do have some sympathy for people who through industry and thrift save money and are taxed for it, compared to people who either don't work as long/hard or in the same circumstance choose to spend rather than save.  That is why my preferred system is to replace our income tax system with a universal consumption+wealth tax. Unfortunately I think I am a party of one on this idea.

Sean in Ottawa

Pogo wrote:

I do have some sympathy for people who through industry and thrift save money and are taxed for it, compared to people who either don't work as long/hard or in the same circumstance choose to spend rather than save.  That is why my preferred system is to replace our income tax system with a universal consumption+wealth tax. Unfortunately I think I am a party of one on this idea.

There are issues with your idea.

First those who earn more and spend it outside the country will not accumulate wealth or spend enough in Canada to be taxed fairly. A lot of wealth can be hard to see as not al is property and stocks. The encouragement here would be to place your wealth in diamonds and the like and place it in safety deposit boxes -- or off shore.

The second is that this would be very regressive. This point can be mitigated at the bottom with a high enough universal basic income plan but without the progressive tax system beyond the lowest part, it would be hard to pay for it.

The last problem is a structural, national problem. Taxing income, wealth and transaction is a combination that is stable. Taxing wealth is a harder thing to pin down as values change in an economy.

The enforcement is a major problem and the need to assess changing value on many things difficult. Consider with real estate which is far easier to determine a value on and yet very controversial.

WWWTT

Sean in Ottawa wrote:

WWWTT wrote:

It almost sounds like you want to retroactively tax wealth that wasn't fairly taxed from the start?

On this I have to say -- please consider what is wrong with that. I want an emphasis on both for exactly this reason. Fair taxes to not grow the problem and wealth taxes to deal with in part the accumulated problem of not having done it earlier.

I think people who address wealth are missing that this wealth accumulated in part due to a lack in reasonable taxes when it was earned.

However, the other issue is that when you die, should a person who did not earn it get all your money tax free just becuase you want them to. A tax on inheritences would leave them the ability to get much but not all of it. It is not about justice to say that you should be rich becuase your great grandparents earned it and another person should not be becuase their great grandparents did not.

Well to retroactively tax wealth that was not fairly taxed when earned I can see becoming very problematic and unfair. Now as far as a inheritance tax of say 10% may be a little higher up there? Or perhaps a ladder formula? 1% on the first mill. 2% on everything between 1-2mill. 3% on everything from 2-3mill etc etc. Or something like this perhaps? I know Portugal has a 10% inheritance tax, but there's a big BUT! Property taxes in Portugal are famously very low!

Sean in Ottawa

WWWTT wrote:

Sean in Ottawa wrote:

WWWTT wrote:

It almost sounds like you want to retroactively tax wealth that wasn't fairly taxed from the start?

On this I have to say -- please consider what is wrong with that. I want an emphasis on both for exactly this reason. Fair taxes to not grow the problem and wealth taxes to deal with in part the accumulated problem of not having done it earlier.

I think people who address wealth are missing that this wealth accumulated in part due to a lack in reasonable taxes when it was earned.

However, the other issue is that when you die, should a person who did not earn it get all your money tax free just becuase you want them to. A tax on inheritences would leave them the ability to get much but not all of it. It is not about justice to say that you should be rich becuase your great grandparents earned it and another person should not be becuase their great grandparents did not.

Well to retroactively tax wealth that was not fairly taxed when earned I can see becoming very problematic and unfair. Now as far as a inheritance tax of say 10% may be a little higher up there? Or perhaps a ladder formula? 1% on the first mill. 2% on everything between 1-2mill. 3% on everything from 2-3mill etc etc. Or something like this perhaps? I know Portugal has a 10% inheritance tax, but there's a big BUT! Property taxes in Portugal are famously very low!

And this may be the reason.

What is unfair about a policy designed to correct a wrong? There is nothing unfair about that. Governments have the right to tax wealth or anything else and of all the things yo9u culd tax this does not seem to be unfair.

Pogo Pogo's picture

Sean in Ottawa wrote:

 

There are issues with your idea.

First those who earn more and spend it outside the country will not accumulate wealth or spend enough in Canada to be taxed fairly. A lot of wealth can be hard to see as not al is property and stocks. The encouragement here would be to place your wealth in diamonds and the like and place it in safety deposit boxes -- or off shore.

The second is that this would be very regressive. This point can be mitigated at the bottom with a high enough universal basic income plan but without the progressive tax system beyond the lowest part, it would be hard to pay for it.

Sorry but you don't grasp the difference between a point of sale consumption tax and a universal consumption tax.  A universal consumption tax operates very similiar to income tax in that you fill out a form, show your revenue and pay a tax.  The difference is that a consumption tax allows exclusions for savings (we already have a moderate version in the tax free savings plan deduction).  Doesn't matter what jurisdiction you spent it, the system just sees that you did not save it. 

A universal system allows for a progressive tax rate to a limit.  After a certain level of income savings will dwarf consumption expenditures almost by definition.  That is why there is a need for a periodic wealth tax.  Yes calculating wealth is messy and a moving target, but other jurisdictions do it so it is not impossible.

The benefit of a consumption tax is that it adds a premium on expenditures, where an income tax punishes 'work' (the more you work the more you pay). The added benefit is that the developed world needs to use less things in general to reduce our carbon footprint (not just switch to some magic pain free energy source) and a tax that zero's in on consumption is ideal for this. From a purely national perspective also, a country of people who save more and are not disadvantaged for industry will be at a competitive advantage.

Sean in Ottawa

Pogo wrote:

Sean in Ottawa wrote:

 

There are issues with your idea.

First those who earn more and spend it outside the country will not accumulate wealth or spend enough in Canada to be taxed fairly. A lot of wealth can be hard to see as not al is property and stocks. The encouragement here would be to place your wealth in diamonds and the like and place it in safety deposit boxes -- or off shore.

The second is that this would be very regressive. This point can be mitigated at the bottom with a high enough universal basic income plan but without the progressive tax system beyond the lowest part, it would be hard to pay for it.

Sorry but you don't grasp the difference between a point of sale consumption tax and a universal consumption tax.  A universal consumption tax operates very similiar to income tax in that you fill out a form, show your revenue and pay a tax.  The difference is that a consumption tax allows exclusions for savings (we already have a moderate version in the tax free savings plan deduction).  Doesn't matter what jurisdiction you spent it, the system just sees that you did not save it. 

A universal system allows for a progressive tax rate to a limit.  After a certain level of income savings will dwarf consumption expenditures almost by definition.  That is why there is a need for a periodic wealth tax.  Yes calculating wealth is messy and a moving target, but other jurisdictions do it so it is not impossible.

A consumption tax is that it adds a premium on expenditures, where an income tax punishes 'work' (the more you work the more you pay). The added benefit is that the developed world needs to use less things in general to reduce our carbon footprint (not just switch to some magic pain free energy source) and a tax that zero's in on consumption is ideal for this. From a purely national perspective also, a country of people who save more and are not disadvantaged for industry will be at a competitive advantage.

I was not familiar with that kind of consumption tax.

Yes, I was annoyed by you saying I do not grasp. I had not heard of it -- and according to google it is not that common a discussion topic outside of libertarian and conservative discussion boards. Saying someone does not grasp something when it has not been introduced and is a bit obscude really is a bit rude -- don't you think?

Having looked it up I am still not okay with it at all. However, your model still does not come across as fair. You brush off the issue of issues with enforcement on the wealth side. By treating all expenditure the same you raise many issues of injustice. Some people's lives for medical or dependency issues cost more. You would have to equalize all essential expenditures or have the state pay for them. This is why the UCT is popular among the extreme right. They simply do not care.

Pogo Pogo's picture

I said did not grasp because you were involved in a similar thread about a month ago.  The Tax Free Savings Plan is a sign that this is not being discussed but implimented.  There are simple ways to make it progressive.  But the easiest way to make it regressive is to ignore it.

NorthReport

What a beautiful jesture by Premier John Horgan, Minister of Health Adrian Dix, and the BC NDP!

This is why I love taxes and why it is very discouraging to see the Trudeau Liberals continue to allow all those one percenters put their money offshore to avoid paying Canadian income taxes. Justin should be ashamed of himself.

 

B.C. to cover $700,000 drug for rare disease on case-by-case basis, health minister says

The drug Soliris treats symptoms for atypical hemolytic uremic syndrome, a rare disease that can damage vital organs.

B.C. Health Minister Adrian Dix, shown in this file photo, said he can’t comment on individual cases, but adds an expensive drugs advisory committee will now review requests for the drug for individuals and make funding recommendations to the ministry.

B.C. Health Minister Adrian Dix, shown in this file photo, said he can’t comment on individual cases, but adds an expensive drugs advisory committee will now review requests for the drug for individuals and make funding recommendations to the ministry.  (DARRYL DYCK / THE CANADIAN PRESS)  

https://www.thestar.com/news/canada/2017/11/21/bc-to-cover-700000-drug-f...

 

NorthReport

The Toronto Star did their usual dirty political work running this beautiful story above without once mentioning the NDP. 

Rev Pesky

From Pogo:

Yes calculating wealth is messy and a moving target, but other jurisdictions do it so it is not impossible.

The first part of this statement is not really true. Every public company in the world does a balance sheet, every year. In most countries it is required by law. Even private companies, if a partnership, have to do a balance sheet. The only exceptions might be single owner/manager companies, which would almost certainly be relatively small enterprises.

Rev Pesky

From Sean in Ottawa:

What is unfair about a policy designed to correct a wrong?

What 'wrong' are you talking about?

Mr. Magoo Mr. Magoo's picture

Quote:
The Toronto Star did their usual dirty political work running this beautiful story above without once mentioning the NDP.

Do you mean "without once congratulating the NDP" or "without once giving a special shout-out to the NDP" or what?

They mentioned Dix, yes?  Should they have reminded everyone that he's from the NDP?

Maybe a Toronto paper wasn't as touched as you are, seeing as Ontario did basically the same thing two years ago

Notice, too, how that paper mentioned Eric Hoskins, but failed to mention the Liberals.  Huh.

Sean in Ottawa

Rev Pesky wrote:

From Pogo:

Yes calculating wealth is messy and a moving target, but other jurisdictions do it so it is not impossible.

The first part of this statement is not really true. Every public company in the world does a balance sheet, every year. In most countries it is required by law. Even private companies, if a partnership, have to do a balance sheet. The only exceptions might be single owner/manager companies, which would almost certainly be relatively small enterprises.

We are speaking of individuals not companies here.

Sean in Ottawa

Rev Pesky wrote:

From Sean in Ottawa:

What is unfair about a policy designed to correct a wrong?

What 'wrong' are you talking about?

The correction of years of under taxing higher incomes creates more retained income - wealth/ A wealth tax corrects a previous policy error to some degree.

Sean in Ottawa

Mr. Magoo wrote:

Quote:
The Toronto Star did their usual dirty political work running this beautiful story above without once mentioning the NDP.

Do you mean "without once congratulating the NDP" or "without once giving a special shout-out to the NDP" or what?

They mentioned Dix, yes?  Should they have reminded everyone that he's from the NDP?

Maybe a Toronto paper wasn't as touched as you are, seeing as Ontario did basically the same thing two years ago

Notice, too, how that paper mentioned Eric Hoskins, but failed to mention the Liberals.  Huh.

Look at the photo.

Mr. Magoo Mr. Magoo's picture

Quote:
Look at the photo.

Good catch!  Clearly the Star blurred the background so it appears to say "HOP" in green letters on an orange field.

Pogo Pogo's picture

Sean in Ottawa wrote:

Rev Pesky wrote:

From Pogo:

Yes calculating wealth is messy and a moving target, but other jurisdictions do it so it is not impossible.

The first part of this statement is not really true. Every public company in the world does a balance sheet, every year. In most countries it is required by law. Even private companies, if a partnership, have to do a balance sheet. The only exceptions might be single owner/manager companies, which would almost certainly be relatively small enterprises.

We are speaking of individuals not companies here.

A balance sheet is only as good as the information that is used to build it. Companies can do many things to achieve a range of results.  Inventory is just one area.

  • The inventory valuation is calculated at the fiscal yearend and projected over the year.  But more times than not this inventory is a fiction.  Stocking decisions will be managed so that goods arrive in the new year. A low inventory indicates a high number of turns and a higher return on capital.
  • Inventory in a manufacturing setting will be valued at different rates depending on where it is in the production cycle. Usually product needs to be acknowledged as moving along the cycle.  If you want a low dollar inventory - less taxes you hold things back, if you want a higher inventory you move product into more finished good categories where possible.
  • Distressed (damaged) and dead stock are often arbitrary decisions. Making that decision can often take 90% of the value of the goods off the table (who wants to buy a new something with a problem),

In my years working I have found that businesses are more and more ran to meet accounting goals. Making numbers that suit the banker, the stock market or the taxman.

Rev Pesky

From Pogo:

In my years working I have found that businesses are more and more ran to meet accounting goals. Making numbers that suit the banker, the stock market or the taxman.

What you were describing in that post was not a balance sheet. It's true that companies manipulate inventory, to change their outlook. So changing the inventory figure can alter the way the financial statement looks. But it doesn't really alter the balance sheet. That's because inventory costs money. The less inventory you have, the greater  cash on hand you have (or some other asset), and vice versa.

Most large companies follow some generally accepted accounting standards, like GAAP. There is also an international standard which is receiving ever greater acceptance.

To put it another way, a company whose financial statements are suspect suffers by having a lower valutation than they would if they reported properly.

Pogo Pogo's picture

Are you say inventory on hand is not part of a balance sheet? The point is that there is incredible wriggle room for companies to express a number.  Yes in the long run things have to be shown.  If you are making money at some point it hits the balance sheet, but the ability to choose when it hits is what I was pointing out.

 

Pogo Pogo's picture

An example. You buy a product and it turns out to be defective. It is adjusted in the accounting system to B-grade and move it to the quarantined area for such product. Automatically the value of this product takes a hit.  So yes you paid $1000 and $100 fdb for a landed cost of $1100, but the accounting will now say it worth 40% of its purchased value or $440 (because the ability to sell it is deemed to be severely reduced).  That changes the number on the balance sheet.  How undervalued is the product actually? Is it fixable?  Those are human decisions.

It happens all the time.  When it is a big number the papers will talk about X company ​deciding​ to take a writeoff.

NorthReport

Bill Morneau’s ethical challenges and scary pension reform

 

 @Bill_Morneau/Twitter

The House of Commons is back from its Remembrance Day week off and both opposition parties have Finance Minister Bill Morneau in their sights.

The subject, in this case, is pensions, federally regulated pensions to be precise. The finance minister is the sponsor of the now notorious Bill C-27, which would allow federal agencies and crown corporations, such as the CBC and Canada Post, to set up a new kind of pension system for their employees.

In place of guaranteed regular, and often inflation-adjusted payments to retirees, based on years of service and cumulative contributions, federal entities would now be allowed to set up what are called targeted benefit pensions. These are hybrid plans, somewhere between the current plans and defined contribution plans, which are, in essence, glorified retirement savings plans. Defined contribution plans give employees zero guarantees as to how much they will receive once they retire. They only know how much they must contribute while they work.

Targeted benefit plans would provide a measure of assurance to retirees that they would receive a certain level of pension payout. But their pensions would not be 100 per cent guaranteed. Payouts could vary, depending on investment performance and the employer's financial situation.

Morneau's onetime company would benefit

A transition to such a system would be a bonanza for private-sector companies such as Morneau Shepell. The finance minister's former company specializes in managing pension and benefit plans. Targeted benefit plans are complicated affairs and would require high-level expertise. Morneau Shepell has that expertise.

For the federal government, the targeted benefit idea is not new. In 2014, the Harper government held consultations on targeted benefit plans, but never got around to presenting legislation to make them happen. At the time, Morneau Shepell was an enthusiastic booster of this new sort of pension scheme.

In a letter accompanying a submission to the Conservative government's associate minister of finance, Kevin Sorenson, two senior Morneau Shepell people said: "We believe that targeted benefit plans represent an important step forward in the evolution of pension-plan design and we want to ensure that they are implemented as effectively as possible."

A careful reading of Morneau Shepell's submission shows that the company fully understands the purpose of this new kind of pension plan. It is, at bottom, to weaken employers' obligations and push more risk onto employees and pensioners.

In Morneau Shepell's words: "The sponsor [i.e. the employer/company/agency] and employees share risks, which could include adjustments to both contributions and benefits, the latter which affect employees only [emphasis added]"

In the House on Monday, both opposition parties focused on the fact that Ethics Commissioner Mary Dawson has opened an investigation into Morneau. Dawson is concerned that at the time he drafted and presented Bill C-27, the finance minister had not divested himself of shares in his company -- a company that openly favours, and could handsomely profit from, the goals of the legislation.

The NDP's Nathan Cullen put it this way:

"Bill C-27 is not only a clear attack on workers' pensions, it is also a massive conflict of interest… The Ethics Commissioner is speaking about it. She has launched an official investigation into this minister and this bill. Therefore, will the Prime Minister maybe update his hear no evil, see no evil, speak no evil ethics code?"

Neither the prime minister nor the finance minister would engage on the substance of the matter. They kept repeating the mantra that they respect non-partisan officers of parliament, such as the ethics commissioner. They pledge to, in the prime minister's words, "work with her."

The finance minister was particularly hapless during Monday's grilling. He could do nothing more than assert, repeatedly, that he cares about Canadian workers and retirees, and reaffirm that he has, belatedly, sold all of his shares in Morneau Shepell.

His response to Conservative MP Candice Bergen was typical.

"I will continue to work to assure Canadians can retire in dignity. I will continue to work with the Ethics Commissioner to make sure that her examination is complete. Now that I have sold all my Morneau Shepell shares and made a large donation to charity, I am looking forward to continuing these efforts on behalf of Canadians."

Ethics is not the only issue; C-27 is part of a race to the bottom

It is important to note a distinction here between the two opposition parties.

The NDP opposes C-27, and wants to see existing defined benefit plans continued. The party is, as a rule, in favour of enhancing rather that reducing rights for retired workers.

It was the NDP's pensions critic, Scott Duvall, who presented a private members bill, earlier this month, which would protect pensioners in the case of bankruptcies such as those of Nortel and Sears Canada.

Liberal cabinet ministers expressed sympathy for pensioners left out in the cold, but not much else. They make the point that legislation such as that proposed by the NDP could discourage big money institutions from financing Canadian companies. Major institutional lenders always want assurance they will be first in line if a company goes bust, ahead of everyone else, especially employees and pensioners.

As for the Conservatives, they are primarily concerned about Morneau's sketchy ethical situation. On the principle of C-27, that of reducing employers' responsibility for their retirees, the Conservatives are, generally, on the record as being in favour. 

Many who have no job security or pension plan will think this debate is not relevant to them. And it is true that fewer and fewer private sector companies provide what are now seen as "gold-plated," defined benefit, "cash-for-life" pension plans -- not to mention the complete lack of any benefits in the gig economy. But that is exactly why the union movement and the NDP are fighting any erosion in the pension benefits currently enjoyed by, say, Canada Post's employees.

The goal of labour unions and the NDP is to ramp up and improve the pension system for everyone. During the last election campaign, the Liberals said they favoured such a course of action. To their credit, they did keep their word as far as enhancement of the Canada Pension Plan is concerned. However, Bill C-27, and all it entails, was not in Justin Trudeau's electoral bag of promises.

And so, if you think the C-27 fight is only about preserving privileges for a minority of workers, consider the following. If the federal public sector ultimately abandons its longstanding pension arrangements, it will be almost impossible to convince other sectors to do better by their retirees.

The race to the bottom will be on, full steam. 

 

http://rabble.ca/news/2017/11/bill-morneau%E2%80%99s-ethical-challenges-...

Pogo Pogo's picture

I was hoping this thread would look at the Liberal Governments proposed tax changes for small business.  In particular the myths that are put forward by opponents.  

  1. That Small business is a great job creator.
  2. That Entrepreneurs need to be compensated for their extraordinary sacrifice.
  3. We have to provide a good return to entrepreneurs or they won't make the sacrafice and creat jobs.

It is amazing that the left does not engage people when they spout these myths.

 

Sean in Ottawa

Pogo wrote:

I was hoping this thread would look at the Liberal Governments proposed tax changes for small business.  In particular the myths that are put forward by opponents.  

  1. That Small business is a great job creator.
  2. That Entrepreneurs need to be compensated for their extraordinary sacrifice.
  3. We have to provide a good return to entrepreneurs or they won't make the sacrafice and creat jobs.

It is amazing that the left does not engage people when they spout these myths.

 

 

Yes, quite right.

Also the definition of small business includes such a range that there is little in common between the real small businesses and the upper part of that range that sucks in a lot of benefits designed for what most people consider as truly small.

progressive17 progressive17's picture

The huge hole in the taxation system is the ease of transferring money to jurisdictions where the tax rates are considerably lower than in Canada. 

Perhaps we could force the banks to charge a withholding tax of 20% (or perhaps a schedule on a country-by-country basis) on any funds destined for tax havens. This would not prevent business from investing in other countries where tax rates are more or less similar.

It is extremely telling that the amount estimated to be offshore in the possession of wealthy Canadians is roughly equal to the Canadian national debt.

Pogo Pogo's picture

I have had the opportunity to work with a number of people who have created their own businesses.  Some very successful and others not so much. What is common among them is that they have a strong urge to build their own business. The tax rates that they pay on profits would never make them choose a different career path or their work level.

On the other hand I have often heard wage earners turn down overtime and say that they didn't want to pay the extra taxes. I consider this view to be not well thought out, but regardless I can say I have heard it numerous times.

While I acknowledge that my information is anecdotal, the point remains that if government is worried about people being dissuaded from work by tax rates it is not the business class, but rather the wage labour sector.  Saying that we need to give entrepreneurs a tax break to keep them working is just wrong.

Sean in Ottawa

progressive17 wrote:

The huge hole in the taxation system is the ease of transferring money to jurisdictions where the tax rates are considerably lower than in Canada. 

Perhaps we could force the banks to charge a withholding tax of 20% (or perhaps a schedule on a country-by-country basis) on any funds destined for tax havens. This would not prevent business from investing in other countries where tax rates are more or less similar.

It is extremely telling that the amount estimated to be offshore in the possession of wealthy Canadians is roughly equal to the Canadian national debt.

Very interesting idea.

Sean in Ottawa

Pogo wrote:

I have had the opportunity to work with a number of people who have created their own businesses.  Some very successful and others not so much. What is common among them is that they have a strong urge to build their own business. The tax rates that they pay on profits would never make them choose a different career path or their work level.

On the other hand I have often heard wage earners turn down overtime and say that they didn't want to pay the extra taxes. I consider this view to be not well thought out, but regardless I can say I have heard it numerous times.

While I acknowledge that my information is anecdotal, the point remains that if government is worried about people being dissuaded from work by tax rates it is not the business class, but rather the wage labour sector.  Saying that we need to give entrepreneurs a tax break to keep them working is just wrong.

I have heard the same thing. I have also been both a wage earner and a business person.

I am not certain that this distinction is not well founded. The holy grail for a business startup is making the thing, the success and when it comes to profit -- making some. What happens after is less motivating since you know you do not keep any of the losses. When you think of business as a stratup you are thinking that the source of the profit is the idea -- much less than the work. You are often driven by the idea or concept you have created. Business income is not limited in the way wages are. Ideas can be multiplied, the wages used towards profit may come from others, along with other investment etc.

A wage earner has a limit of time, their personal working time, they pay a greater amount of tax for the value of their efforts than does a business. It is rational to see diminishing returns and decide the extra effort is not worth it and tehy could apply that to some other pursuit. This is true when the person already has enough money to be happy and they may make the choice that rather than make more money to buy things to make them happy they would instead spend that time directly with what they can already buy. It is a rational choice given happiness rather than income as a goal.

Now there is another motivation, which is one of ignorance. Many people do not understand tax brackets and it is a popular thought that if you make enough to go into a higher tax bracket that you are taxed more on the income below that cut -off. The idea that you could come up with less by working harder. It is mostly untrue. There is only one example in the tax system where I live where it actually is true. That is the health care payments in Ontario -- if you go one dollar over into the next bracket, your tax bill could go up by several hundred. But this is rare.

NorthReport
swansong

Rev Pesky wrote:

swansong said:

You worry about inflation but aren't aware of the amount of loss of buying power of a dollar over the last 40 years?

I wonder where you found the word 'inflation' in my post? I can't see it there, and I swear I didn't edit it out.

​So, the question is, if there is a limiting factor to how much money the government can create, what is it? If there is no limiting factor, why not just create several trillions of dollars and hand them out?

 

Nope you didn't use the word inflation but you intimated that the creation of large amounts of money to be handed out to the citizens would be a bad thing. Why would it be a bad thing? Inflation, perhaps?

The question was answered.

At least if a gov did begin overspending you would have the opportunity to vote them out and replace them with someone more fiscally responsible. What options do you have with major banks that butcher the economy and raise inflation? I think we know the answer to that.

No modern nation can exist without currency to expedite the exchange of goods and services. For the most part that is all currency is since it has no real "value" of it's own. You can't eat it...wear it or build a house out of it. In that sense money is as integral to the proper functioning of a nation as food or water. It belongs to us. It is not something we (should) have to "borrow" from others.

It doesn't matter who creates currency. The possibility of over creation would exist no matter the system. But a debt based economy where new currency is created through borrowing it into existence is obviously (to anyone with a functioning mind) far more beneficial to the lenders than the borrowers.

The Finance Minister and the BoC have a mandate to be the sole creators of currency in Canada. They long ago abdicated that right to private/for profit banks. It's long past time that was reversed.

The US didn't even need an income tax until the Fed was created. Even at it's inception the income tax was never meant to be applied to the fruits of one's labour. It was designed for profits through investments. The notion that anyone has the right to part of one's compensation due to their labour is ludicrous.

Now it's your turn. Why is a debt based economy where money is borrowed into existence with debt attached better than the alternative that served us well for decades? Furthermore...how does a debt get repaid if the only way to obtain the amount required to pay the interest is to create it by borrowing it into existence at interest?

Rev Pesky

From Swansong:

Nope you didn't use the word inflation but you intimated that the creation of large amounts of money to be handed out to the citizens would be a bad thing.

I said no such thing. All I did was ask a question. That is, if there is a limiting factor to the government printing money, what is it?

You're allowed to answer that there is no limiting factor. 

Sean in Ottawa

Rev Pesky wrote:

From Swansong:

Nope you didn't use the word inflation but you intimated that the creation of large amounts of money to be handed out to the citizens would be a bad thing.

I said no such thing. All I did was ask a question. That is, if there is a limiting factor to the government printing money, what is it?

You're allowed to answer that there is no limiting factor. 

There certainly is a limiting factor when it comes to practical matters: currency relies on confidence.

There are two questions though that sound more related than they are:

The first is the money supply -- there is a limit to how much supply you can create based on the value of the economy itself. The number is not fixed as dilution is possible so think of it as a fuzzy rather than solid line.

The second is how that supply is created and by whom. The retreat by the government in the proportion of supply it will create has been dramatic and there are many books on this over a few decades. The argument is that this has made government indepted when they should not have been and that the supply of money has been privatized to the point the government has lost important levers.

Pogo Pogo's picture

There are lots of examples in history how money creation unrelated to general growth have create havoc in economies.  It is not even a left/right issue, who wouldn't create money if there was no ill effects.

As for it being used for infrastructure, we already have that in a roundabout way, where government pile up debt in crown corporations.

Mr. Magoo Mr. Magoo's picture

Quote:
The Finance Minister and the BoC have a mandate to be the sole creators of currency in Canada. They long ago abdicated that right to private/for profit banks. It's long past time that was reversed.

Ya, I'm no expert, but it seems as though no private bank or lender could exist without "creating" money, so it's not clear how or why the BoC could have been given that task exclusively.

Also, it would appear that while money created physically (banknotes, coins) is persistent, the imaginary money created by a bank loan gradually disappears as that loan is repaid.

If the point is that only the BoC can order the printing of a boatload of new $100 bills, that makes sense.  The last time I tried to print my own I got a very stern letter from Mark Carney asking me to knock it off.

Rev Pesky

Probably more to the point is the fact that when a dollar is created, the economy owes the holder of it a dollars worth of goods or services. The only way you can have debt free money is if the money is not put into the economy.

Something very close to the outright printing of money is going on with 'quantative easing'. That's basically the plan, the government creates money in one pocket, then loans it to another pocket, from whence it is distributed to the economy as a whole. So far it hasn't solved a lot of problems.

Pogo Pogo's picture

I do agree with the general point that about wealth creation projects and an increased money supply.  The bigger the economy the more currency it justifies.  However the bigger economy has to come first.  You can't just print money build a bunch of things and say the economy is bigger necessarily so everything is fine (aside form the point that it is not a one to one match).

Sean in Ottawa

Mr. Magoo wrote:

Also, it would appear that while money created physically (banknotes, coins) is persistent, the imaginary money created by a bank loan gradually disappears as that loan is repaid.

Actually no, it is does not disappear. It goes on balance sheets for depositors, lenders and banks.

The mechanism that controls this always was the requirement that a bank hold x% of government issued money or gold for each $ on deposit. This reserve the bank would need to have declined over time and in all countries. By having a lower requirement of real money the banks ended up having the ability to create more and more of the money supply.

In 1994 the Mulroney government eliminated the then 8% requirement and no specific requirement exists today.

This explains money creation:

http://www.taxpayer.com/blog/why-can-private-banks-create-money

You will see it speaks of money being destroyed -- If you and others take out more than the bank expects it must tighten money supply. It can reduce loans and charge more for them for example, it can call loans.

But the growth of private money is about the banks creating more money in loans and accounts propotionate to the requirement of what they need to have on hand.

From another source you can see this take on money creation.

http://www.sustainwellbeing.net/money_creation.html

Another point is that the government does regulate good practice of banks but if it or they make a mistake a too-big-to-fail bank (pretty much all of them in Canada) gets bailed out. Depositers are individually insured to I think 100k per institution.

In otrher words it is all about confidence. And if that is lost the coutry is in trouble.

In this mix is real estate. Real properties are significant becuase they have fairly liquid, stable and easy to evaluate values. A market bubble and crash changes all that which is why the results are catastrophic in a bubble even if lending practices were not originally irresponsible  as they were in the US.

 

 

 

progressive17 progressive17's picture

Bank reserves consist of money on deposit and share capital. Banks operate in the interests of their shareholders, who receive dividends. Bank dividends are the welfare system for the Canadian 1%, and also the bulk of the income enjoyed by pension plans such as Teachers', QPP, CPP, the Caisse, etc. They range from 3.8% to 5.6% depending on the bank. A bank with higher expected growth generally enjoys a premium over a bank with more sluggish prospects, hence a lower price:dividend ratio. 

If you are contributing to a pension plan, you are probably buying bank shares in there somewhere, and if you are receiving pension payments, you are probably receiving bank dividends somewhere. No matter how much one might think the banks are part of an international Rothschild Illuminati criminal consipracy.

Canada's population always goes up through our aggressive immigration policy and our own fecundity. This alone puts an upward pressure on housing prices. Governments and people always have to borrow money.

As a result, bank profits always increase. Bank dividends have never gone down. Not even during the Great Depression and during the recent banking crisis. Financial industry profits are the lion's share of corporate profits.

Mr. Magoo Mr. Magoo's picture

Quote:
Actually no, it is does not disappear. It goes on balance sheets for depositors, lenders and banks.

Well, first of all, thanks for those two illustrative links.  I'm kind of still getting my head around this.

But it seems to me that they basically agree -- as does Wikipedia, if I'm reading right -- that while "imaginary" money is created when money above and beyond physical currency holdings is lent, that money is replaced by real, non-imaginary money when the loan is repaid, and ceases to be "new" imaginary money.

Example: 

I deposit $1000, from the sale of my antique harpsichord, in my bank account.  The bank, hopefully reasonably, figures I won't ask for more than $500 of it in tangible notes and coins, and proceeds to lend the other $500 to Bob.

So now I appear to have $1000 still in my bank account, and yet Bob suddenly has $500 in his, too!  So money just got created!  There's now a total of $1500, where one might say there should only be $1000.

But as Bob pays off that loan, using money from the sale of his comic book collection, eventually there's only $1000 left (assuming I haven't withdrawn or transferred or spent any).  Where did that extra $500 go?  Sure, it's still written down in a ledger somewhere, or otherwise recorded for posterity, but who can access it?  How is it part of "broad money"?  Hasn't it basically disappeared?

Of course, meanwhile, the bank probably lent Susan $500 from your last deposit, so there's still imaginary money, but it's really not the same imaginary money.

Is the gold-from-lead in the form of the interest?  I don't see how even that is imaginary money.  Isn't the interest just the profit margin from lending?  If I grow a pumpkin for $1.00, and sell it for $1.50, this doesn't "create money", does it?  That fifty cents (along with the dollar) still comes from the labour or goods of the person who bought the pumpkin, yes?

Pages