The flat tax

[heep223]

If we can save the royalties and accumulate enough capital we can fund part of our operating budget with investment returns managed by AIMCO. This is far more sustainable than just using the royalties to pay for services directly every year. Would mean a few lean years though. More like a lean decade but our kids would thank us.

In the meantime get rid of the flat tax and introduce a progressive structure. The income inequality is a big issue.

I am an ardent capitalist and consider myself right wing when it comes to the economy and markets but the flat tax is just plain ridiculous.

[CaptainYooh]

Those that proclaim any one tax solution as the only one available have zero understanding of how economy works. Introducing progressive tax on wealthy is always attractive politically (easy to get popular support) but never one-sided. It only works in jurisdictions that are a choice living arrangement for the super-wealthy due to the distinctive living benefits not offered in other jurisdictions (i.e. Manhattan, London etc.). In other words, when super-wealthy get disadvantaged financially, they have substantially more leverage and ability to recover from the disadvantage than the governments introducing the tax disadvantage. Bronfman's half-billion family trust moving to Barbados under Chretien/Martin's full knowledge and assistance a few days prior to the introduction of the legislation prohibiting such moves is just one example. Alberta (or Calgary) does not offer unique living advantages to the super-rich. It's cold, busy and not overly entertaining here. They can easily move their living somewhere else.

[Flash Walken]

Originally Posted by CaptainYooh

Those that proclaim any one tax solution as the only one available have zero understanding of how economy works. Introducing progressive tax on wealthy is always attractive politically (easy to get popular support) but never one-sided. It only works in jurisdictions that are a choice living arrangement for the super-wealthy due to the distinctive living benefits not offered in other jurisdictions (i.e. Manhattan, London etc.). In other words, when super-wealthy get disadvantaged financially, they have substantially more leverage and ability to recover from the disadvantage than the governments introducing the tax disadvantage. Bronfman's half-billion family trust moving to Barbados under Chretien/Martin's full knowledge and assistance a few days prior to the introduction of the legislation prohibiting such moves is just one example. Alberta (or Calgary) does not offer unique living advantages to the super-rich. It's cold, busy and not overly entertaining here. They can easily move their living somewhere else.

Well, I don't agree with this.

Sure, it applies to the super rich, but it doesn't apply to the wealthy who rely on the energy sector for their income.

The guy making a couple hundred K managing a sector of wellheads or whatever doesn't have the luxury to just move to barbados, because his income is reliant on his geography.

Calgary offers unique living advantages because it serves as the headquarters for Canada's energy economy.

[Azure]

Originally Posted by Slava

The real Alberta Advantage would be a straight consumption tax and no income tax at all. Its feasible, efficient and far more effective. The problem is that no one will trust politicians and we can't have an adult conversation about it.

What kind of percentage are we looking at to replace the income tax completely?

[CaptainYooh]

Originally Posted by Flash Walken

...
The guy making a couple hundred K managing a sector of wellheads or whatever doesn't have the luxury to just move to barbados, because his income is reliant on his geography...

Exactly. So these guys and their families making only 30-40% of the total wealth would be hit hardest contributing almost 80-90% of the actual progressive tax contribution, since the super-wealthy making the 50% of the total wealth would be easily able to avoid it through modified residency.

[Flash Walken]

Originally Posted by CaptainYooh

Exactly. So these guys and their families making only 30-40% of the total wealth would be hit hardest contributing almost 80-90% of the actual progressive tax contribution, since the super-wealthy making the 50% of the total wealth would be easily able to avoid it through modified residency change.

So then you come up with an alternative for also taxing the ultra wealthy.

Sports team owners tax. Land owners above ____ hectares tax. Puffy Director Pants Tax.

The guys making 30-40% of the total wealth are still wealthy. The discussion here is an inequality gap between the lower classes and the upper, not between the rich and the ultra rich.

[CaptainYooh]

Originally Posted by Flash Walken

...The discussion here is an inequality gap between the lower classes and the upper, not between the rich and the ultra rich.

No, the discussion here is about the potential impact of introducing a progressive tax on wealth in Alberta.

Sports team owners tax. Land owners above ____ hectares tax. Puffy Director Pants Tax.

An NDP-er?

[Flash Walken]

Originally Posted by CaptainYooh

No, the discussion here is about the potential impact of introducing a progressive tax on wealth in Alberta.


An NDP-er?

The thread was started partially based on the reported income inequality in Alberta being worse than in the United States, and that the fluctuating and falling price of energy has and will create budget deficits for Alberta if there aren't attempts to introduce a form of progressive taxation to recoup the dollars lots in the budget to declining oil prices.

You responded by saying any single application of a solution will not work because the wealthy will leave. By inference, you are advocating a multi-solution proposal that by association, would preclude a flat tax as it is not working (as per the original post and articles linked)

I don't get it.

You're saying you can't have a progressive tax system in alberta because the wealthy people will move their wealth, but the flat tax also isn't working because the ultra wealthy aren't paying their share.

What is the alternative? Continue to use royalty payments as part of the general budget and ignore the growing income inequality in the province and the increasing size of budget deficits?

What's your proposal?

[CaptainYooh]

Originally Posted by Flash Walken

The thread was started partially based on the reported income inequality in Alberta being worse than in the United States, and that the fluctuating and falling price of energy has and will create budget deficits for Alberta if there aren't attempts to introduce a form of progressive taxation to recoup the dollars lots in the budget to declining oil prices.

You responded by saying any single application of a solution will not work because the wealthy will leave. By inference, you are advocating a multi-solution proposal that by association, would preclude a flat tax as it is not working (as per the original post and articles linked)

I don't get it.

You're saying you can't have a progressive tax system in alberta because the wealthy people will move their wealth, but the flat tax also isn't working because the ultra wealthy aren't paying their share.

What is the alternative? Continue to use royalty payments as part of the general budget and ignore the growing income inequality in the province and the increasing size of budget deficits?

What's your proposal?

Well, we have two key issues here before we get to taxation. First one: should we reduce provincial spending budgets in-sync with reducing royalty revenues (living within means) or do we find other funding sources to keep spending at the same level (or higher)? Second issue: if we don't want to be frugal and live within our means by reducing spending, how do we fund that same level of spending? The answers to the latter inevitably include more direct and indirect taxes, more borrowing, diversifying revenue sources and/or combination of the above.

Increased taxation has well-known and well-documented economic drawbacks. My post was pretty specific about how the super-wealthy would be able to avoid contributing to the progressive tax increase; due to their ability to manipulate residency requirements. Hence, my point: applying one primitive tax tool as a panacea to finding more money always has unintended bad consequences for all stakeholders involved.

Solution to finding more revenue is complex. I think it should be a combination of the revised royalty regime, changed guidelines to government investment in private business and taxpayer-owned corporations, user fees, introduction of municipal bond financing, sale of non-productive government assets. Nothing too easy, unfortunately.

[Slava]

Originally Posted by Azure

What kind of percentage are we looking at to replace the income tax completely?

Well someone would have to figure it out, but say 13-17%? I think that at the economic summit that Redford held a couple years ago one of the speakers said it could be done for about 11%, and frankly if that's the case I'm even more in favour. Its something that could be calculated though, although I don't have the information to do that.

[Bunk]

Originally Posted by Slava

Well someone would have to figure it out, but say 13-17%? I think that at the economic summit that Redford held a couple years ago one of the speakers said it could be done for about 11%, and frankly if that's the case I'm even more in favour. Its something that could be calculated though, although I don't have the information to do that.

Wouldn't that drive a lot of out of province spending, especially on big items like automobiles?

Also, isn't a consumption tax system (without income taxes) regressive in the sense that it places a disproportionate burden on those that don't/can't save a lot (low income?). Low income earners have to consume large proportion of their incomes just on necessities of life. Wouldn't a lowered income tax rate and no (or low) consumption tax help them more?

[Slava]

Originally Posted by Bunk

Wouldn't that drive a lot of out of province spending, especially on big items like automobiles?

Also, isn't a consumption tax system (without income taxes) regressive in the sense that it places a disproportionate burden on those that don't/can't save a lot (low income?). Low income earners have to consume large proportion of their incomes just on necessities of life. Wouldn't a lowered income tax rate and no (or low) consumption tax help them more?

Well there could be some people who will buy big ticket items out of province, so that is a potential issue. It depends where and what of course. Some of this goes on anyway from time to time.

As far as the regressive part, this can be dealt with. We do this with the GST already where necessities aren't taxed and other items are. So if you're spending most of your income on food, you won't have the extra burden. People buying video games or TVs or Cars though would have the extra taxes.

Its important to note that this wouldn't increase taxes; the point is to offset the current tax collected and that's it. In other words citizens are paying the same amount of tax as before only under a different system of collecting those taxes.

[GP_Matt]

Originally Posted by Bunk

Wouldn't that drive a lot of out of province spending, especially on big items like automobiles?

Also, isn't a consumption tax system (without income taxes) regressive in the sense that it places a disproportionate burden on those that don't/can't save a lot (low income?). Low income earners have to consume large proportion of their incomes just on necessities of life. Wouldn't a lowered income tax rate and no (or low) consumption tax help them more?

Auto's are exempt because they have to be registered in the province that you drive them in and will have to pay the taxes when you register.

For your second point, it would have to be done with something similar to the GST rebate for low income people.

It could also be made progressive by eliminating the tax on necessities like food and rent which is a significantly higher portion of a low income persons spending.

[oilyfan]

A Sales Tax is the answer. It doesn't punish any economic group punitively. It will provide a long term stable source of revenue. The revenue stream flexes with population increases much faster than other kinds of taxes, thereby helping one of the big issues we have: infrastructure deficits because of the population influx

The argument around driving away sales from the province is spurious, there isn't any large province in Canada that doesn't have a PST

[CaptainYooh]

Again, Sales/Consumption tax is just another tax, like every other tax. It will hit those who spend regardless for why they spend and avoid those who don't regardless of why they don't. Wealthy seniors, that have paid out their homes and cars don't spend much at all, yet they are a part of the biggest drag on capital budgets through health care costs.

If there is one "fair" tax, it could be the tax on corporate and personal assets located in the municipality, province and country. Canada has been avoiding this tax for the fear of aggravating the super-wealthy but that's the only one the super-wealthy really cannot avoid effectively.

[Flash Walken]

Originally Posted by CaptainYooh

Again, Sales/Consumption tax is just another tax, like every other tax. It will hit those who spend regardless for why they spend and avoid those who don't regardless of why they don't. Wealthy seniors, that have paid out their homes and cars don't spend much at all, yet they are a part of the biggest drag on capital budgets through health care costs.

If there is one "fair" tax, it could be the tax on corporate and personal assets located in the municipality, province and country. Canada has been avoiding this tax for the fear of aggravating the super-wealthy but that's the only one the super-wealthy really cannot avoid effectively.

ndp'er?

[oilyfan]

Wealthy seniors don't spend any money? In what world is that?

[GP_Matt]

I find the idea of a wealth tax interesting although probably hard to achieve.
The closest we have is property taxes which are based on the value of the property which is a large portion of the assets of most people. (Just not the super-rich).

[#-3]

Originally Posted by Slava

The real Alberta Advantage would be a straight consumption tax and no income tax at all. Its feasible, efficient and far more effective. The problem is that no one will trust politicians and we can't have an adult conversation about it.

Consumption tax is basically the opposite of a tiered tax system.

If you just institute 10% consumption tax on everything and get rid of income tax, everyone pays the 10% on what money they have to spend. It is likely the lower income people will spend a higher percentage net income on goods/services, ergo putting a higher percentage of their income into the consumption taxes. While High income people are more likely to have money in savings/investments that would not go to consuming anything, ergo avoiding the consumption tax.

This is the problem that always defeats trickle down economics. Just because you make/have more does not always equate to spending more.

[McG]

What are the income levels we are talking about? I am just trying to understand the numbers...

In my experience, the tax can start at the very top level, but the tax limits always seem to slide downwards to include a larger group...