The flat tax

[Ashartus]

Maybe we need an inheritance tax. Instead of taxing production or consumption, tax the dead. It would need to be combined with laws to prevent people from giving their wealth to their kids to get around it. The bonus would be reducing the growth of oligarchy. Maybe it wouldn't work, I'm not an economics or tax expert, but to me at least looking seriously at different ways of generating revenue is worthwhile.

[Bend it like Bourgeois]

So the mayor wants income tax powers now? Kidding

Whether or not taxes are progressive is only barely related to whether there is more than 1 tax bracket. And taxing the rich in Alberta won't solve income inequality at all. That's a way, way broader issue.

In Alberta this is always just about wanting to tax and spend more. And who better to pay than 'the rich'. Sounds good until you realize 'the rich' are mostly just ordinary people.

That said I think albertans wouldn't mind paying more taxes if it's a to reduce dependence on royalties and spend smarter, not more. If it's ideological or all about throwing more money at problems I don't think it'll fly.

[CaptainYooh]

Originally Posted by Flash Walken

ndp'er?

Hardly.

You've asked for an alternative solution, did you not? Wealth tax is the only tax that could be applied fairly to the entire population and it is practically impossible to manipulate. If you want to live, work and own assets in this country/province/municipality - pay a fair share based on what you own as a person (or as a legal entity), not on some fictitious amount you can concoct through creative tax accounting.

Canada's national wealth is estimated at $7.5T. 2014 Canadian income tax revenue is estimated at $225B, roughly 3% of the above amount. Coincidentally, my 2013 family income tax was roughly 3% of our total assets. To prevent free-riding, the taxation system can call for a higher of (% of your total asset value or % your gross income). So, in order to pay no taxes at all, one would have to own no assets and make little or no money (children, poor, disabled). This system would have to be based on the assumption that wealth growth rate exceeds the rate of wealth taxation.

Canadian taxation system is not yet broken but could use a few adjustments. It just leans a bit too heavily on the working middle class.

[darklord700]

Originally Posted by #-3

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.

The other problem is that a, say, flat 10% consumption tax can easily be defeated by shopping at BC or SK. Also, how do you not deter purchasing from out of AB guests, be in from the US or other provinces or Canada?

[oilyfan]

BC has a PST of 7%, Sakatchewan has a PST of 5%. Most of the U.S. states have some sort of state sales tax.

I say keep the income tax and put in a 5% PST.

[Slava]

Originally Posted by #-3

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.

Well that's why certain items are not taxable. It keeps the playing field level on those items and on the unnecessary items you charge the tax. So things like food in a grocery store, which is fairly obvious, would not be taxed.

Originally Posted by darklord700

The other problem is that a, say, flat 10% consumption tax can easily be defeated by shopping at BC or SK. Also, how do you not deter purchasing from out of AB guests, be in from the US or other provinces or Canada?

People still spend money. How many of us travel and in the US and buy things without even realizing if there is a sales tax in the particular county or how much that tax is? Will some people make major purchases across the boarder of a particular jurisdiction? Sure. But I wouldn't drive from Calgary to Great Falls to save 10% on a $500 TV. Maybe if I was going anyway and saving that I might add it on, but that's likely the same behaviour as today anyway.

[GP_Matt]

Do some states have wealth taxes? I wonder how wealth is calculated?
Total real property and investments or would cars and art collections have to be included as well?

[blankall]

Originally Posted by CaptainYooh

Hardly.

You've asked for an alternative solution, did you not? Wealth tax is the only tax that could be applied fairly to the entire population and it is practically impossible to manipulate. If you want to live, work and own assets in this country/province/municipality - pay a fair share based on what you own as a person (or as a legal entity), not on some fictitious amount you can concoct through creative tax accounting.

Canada's national wealth is estimated at $7.5T. 2014 Canadian income tax revenue is estimated at $225B, roughly 3% of the above amount. Coincidentally, my 2013 family income tax was roughly 3% of our total assets. To prevent free-riding, the taxation system can call for a higher of (% of your total asset value or % your gross income). So, in order to pay no taxes at all, one would have to own no assets and make little or no money (children, poor, disabled). This system would have to be based on the assumption that wealth growth rate exceeds the rate of wealth taxation.

Canadian taxation system is not yet broken but could use a few adjustments. It just leans a bit too heavily on the working middle class.

You'd have to combine it with heavy consumption tax to avoid punishing people for saving vs spending.

[opendoor]

Originally Posted by CaptainYooh

Hardly.

You've asked for an alternative solution, did you not? Wealth tax is the only tax that could be applied fairly to the entire population and it is practically impossible to manipulate. If you want to live, work and own assets in this country/province/municipality - pay a fair share based on what you own as a person (or as a legal entity), not on some fictitious amount you can concoct through creative tax accounting.

Canada's national wealth is estimated at $7.5T. 2014 Canadian income tax revenue is estimated at $225B, roughly 3% of the above amount. Coincidentally, my 2013 family income tax was roughly 3% of our total assets. To prevent free-riding, the taxation system can call for a higher of (% of your total asset value or % your gross income). So, in order to pay no taxes at all, one would have to own no assets and make little or no money (children, poor, disabled). This system would have to be based on the assumption that wealth growth rate exceeds the rate of wealth taxation.

Canadian taxation system is not yet broken but could use a few adjustments. It just leans a bit too heavily on the working middle class.

There are many ways it can be manipulated (moving assets out of the country is one example) and that, combined with the massive amount of bureaucratic effort required to accurately assess tens of millions of peoples' net worth is why this type of taxation is generally being phased out where it does exist.

[CaptainYooh]

Originally Posted by opendoor

There are many ways it can be manipulated (moving assets out of the country is one example) and that, combined with the massive amount of bureaucratic effort required to accurately assess tens of millions of peoples' net worth is why this type of taxation is generally being phased out where it does exist.

Not really. You can't move an oil&gas or mining asset from Alberta. You can't move real estate. You can BUY assets in another country and that's OK, because you have to report these foreign assets to CRA anyway under current regulations. You can also move your corporate headquarters or personal residency out of Alberta (or Canada) but the assets would still be located and taxed here.

As for the "difficulty" in estimating someone's wealth, this list seems to handle it just fine:
http://en.wikipedia.org/wiki/List_of...s_by_net_worth

[opendoor]

Originally Posted by CaptainYooh

Not really. You can't move an oil&gas or mining asset from Alberta. You can't move real estate. You can BUY assets in another country and that's OK, because you have to report these foreign assets to CRA anyway under current regulations. You can also move your corporate headquarters or personal residency out of Alberta (or Canada) but the assets would still be located and taxed here.

Any liquid assets can be moved, and any non essential local assets can potentially be owned elsewhere. It happens in Europe all the time. Many rich French people have their money in Swiss bank accounts while others left the country entirely.

And wealth taxes invariably have loopholes in them to mitigate the impact on lower earners which can be exploited. For instance, in some European countries savings accounts and certain types of bonds were exempted from wealth taxes so people would often put their money into those instead of areas that might be more productive for the economy.

A similar thing happened with real estate. Because real estate was taxed lower than other assets (in order to help middle class home owners), it just led to more money being directed there and less into other areas.

As for the "difficulty" in estimating someone's wealth, this list seems to handle it just fine:
http://en.wikipedia.org/wiki/List_of...s_by_net_worth

Yeah, and I'm sure none of those billionaires would have lawyers and accountants who'd appeal those estimates and would tie up the government's resources trying to prove the actual value of their assets.

Not to mention the difficulty for everyone else. What about a small business owner? Who decides what the business is worth? People intimately involved with the enterprise probably don't really know exactly how much it's worth so how is the government going to determine that? It's not like property taxes where it's a single type of asset that is bought and sold all the time.

And who is going to go through everyone's property and determine appreciation and depreciation of various assets? Are individuals expected to take that on themselves?

When you factor in the costs of running such a complex system it is really one of the least efficient methods of taxation.

[CaptainYooh]

You are thinking of many issues that would have to be resolved and I appreciate it. There will be challenges for sure. I noted earlier that the tax payable amount could be "the higher of" to close at least some of the loopholes. I see the biggest advantage of the wealth tax in removal of unequal treatment of super-reach and middle-class when it comes to their respective ability to avoid taxation. No matter the liquid assets, which I agree would be in a grey area, it's the major real assets that are local in nature and non-removable.

If you follow the flow of posts you'd notice that I am not a fan of using taxation as the sole source of fixing government's budgetary problems. Wealth tax is just an idea that I believe could work more effectively than progressive tax.

[Ahuch]

Unless my math was wrong (too lazy to double check)



Looks like I'd be better off in BC, at least strictly from an income tax perspective. Obviously there are other taxes there as well.

[CaptainYooh]

BC has real estate transfer tax, AB – doesn't. This is a huge deal.

[GP_Matt]

Your math is wrong.
You missed the basic personal exemption in Alberta. No one pays provincial tax on the first $18000 earned.
On $37606 you pay $1743 in Alberta, $1403 in BC
On $75213 you pay $5408 in Alberta, $4299 in BC
On $86351 you pay $6522 in Alberta, $5469 in BC
On $104858 you pay $8373 in Alberta, $7743 in BC
On $150000 you pay $12887 in Alberta, $14379 in BC

Then throw in the Health Care premiums of $1800 a year for a family in BC and the P.S.T. Alberta comes out with significantly lower taxes.

[craigwd]

If revenue is a problem, can't the flat tax just be raised to 11 or 12%? Then add to the personal exemption to avoid hardship on the poor?