Kim Moody: Canada needs to be attempting to draw extra high-income earners and rich folks
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“Tax the wealthy” has been a preferred rallying cry for many individuals who really feel victimized, entitled or have a weak understanding of how Canada and different international locations tax their residents and redistribute revenue.
The phrase has for many years been good politics for a lot of left-leaning politicians and political events who use it, or one thing related, to capitalize on the above group of individuals for his or her votes. Such a phrase is intellectually lazy regardless of its political attraction.
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Given Canada’s progressive taxation system, the so-called “wealthy” already pay a disproportionate share of their revenue in taxation. For instance, in 2020, the highest 0.01 per cent of revenue tax filers represented a bunch of people that earned $2,829,000 or extra. There have been solely 2,885 of these taxpayers for that 12 months, however they paid 2.6 per cent of all of the federal and provincial revenue taxes collected throughout 2020.
The highest one per cent (representing the 288,400 taxpayers incomes $253,900 or extra) paid 21.1 per cent of the federal and provincial revenue taxes collected that 12 months. The highest 5 per cent (representing the greater than 1.4 million taxpayers incomes $132,300 or extra) paid 40.1 per cent. The highest 10 per cent (representing the virtually 2.9 million taxpayers incomes $102,400 or extra) paid 53 per cent.
The underside 50 per cent (representing the greater than 14.4 million taxpayers who earned $40,700 or much less) paid 6.5 per cent, which clearly reveals the highest 50 per cent of revenue earners paid 93.5 per cent of all federal and provincial revenue taxes paid. All this info is out there from Statistics Canada.
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Take in that for a second. The highest revenue earners are clearly paying a disproportionate quantity of the collected revenue tax. And, once more, that’s what you count on from a progressive revenue tax system like Canada has.
However how a lot is an excessive amount of? Is there room to “tax the wealthy” extra when the highest 5 per cent, for instance, are already paying 40.1 per cent of total tax revenues?
Mix the above info with some left-leaning think-tanks and political events which have been calling for Canada to introduce a wealth tax (apparently to resolve “revenue/wealth inequality” with the Prime Minister’s Workplace additionally not too long ago reviewing this chance) and the chance for behavioural responses amongst these folks that contribute probably the most to Canada’s funds is excessive. I see it in my follow, notably up to now six or so years.
My two cents is that the federal authorities has put itself in a difficult spot. Deficits have been ongoing and big. Value management is definitely not on the agenda. With the intention to fund continued out-of-control spending, there’ll must be tax-rate will increase, continued assaults on high-income earners/rich folks and/or new types of taxation launched. The trick is to do that with out having too many wealthy folks depart Canada or exit the taxing system.
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A few of my pals who don’t respect the disproportionate share that high-income earners already contribute reply by persevering with to say “tax the wealthy,” or “simply go get the cash that the wealthy are hiding offshore” (this can be a actually misinformed remark), or “the wealthy have all of the tax loopholes whereas the common individual doesn’t” (once more that is very misinformed and never correct).
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It’s disheartening to listen to such responses since constructive dialogue on how Canada’s taxation system could possibly be improved total is badly wanted. Bringing strongly held and flawed ideologies to the dialogue desk isn’t useful.
Total, Canada needs to be attempting to draw extra high-income earners and rich folks. They contribute enormously to our nation’s total taxation receipts that assist fund social applications and infrastructure.
Kim Moody, FCPA, FCA, TEP, is the founding father of Moodys Tax/Moodys Personal Consumer, a former chair of the Canadian Tax Basis, former chair of the Society of Property Practitioners (Canada) and has held many different management positions within the Canadian tax group. He will be reached at kgcm@kimgcmoody.com and his LinkedIn profile is www.linkedin.com/in/kimmoody.
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