Canadian Federal Politics Thread v5

[bizaro86]

Originally Posted by iggy_oi

What are you taking about? I was clarifying that the tongue in cheek comment I made was in jest, I stand by the other part of what I said. Read my response to Fuzz.

Sorry if your “gotcha” post didn’t turn out as you had intended, but I have faith that you’ll bounce back from this.

Doubling down on being wrong, alrighty then.

That $14,000 income earner who pays no income tax. Let's assume they spend a total of $500/month on rent (clearly with roommates etc). That's pretty frugal, and uses up $6k per year.

According to a Dalhousie study (https://cdn.dal.ca/content/dam/dalho...23_Digital.pdf)

A Canadian woman aged 19-30 spent $3564 on average on groceries in 2022. Food price inflation has been high so I'd expect 2023 to be more, but we're assuming someone who is both low income and very frugal on zero-rated items here, so lets assume only $3000/year of groceries. That gets our hypothetical low income person to $9k per year in zero rated/exempt supplies.

I'm also neglecting possible expenses that are exempt or zero rated in other categories (public transit, feminine hygiene products, bank fees) that would bump that number up.

That leaves them with $5k per year to spend on taxable goods and services, on which they'd spend $250 in GST and receive the $467 rebate.

If the GST doubled, they'd spend (at most) $500 in GST and receive a $934 rebate, being better off per year by $217. An extra $217 matters to someone at that income bracket.

In terms of interest, if we assume they borrowed to pay the first quarters GST at the maximum legal rate of 32% and then used the first quarters rebate to pay the second quarters GST and so on, they'd have $125 of high interest debt in perpetuity. That would add $40 in annual costs, making the net benefit to that person $177 per year.

Anyway, I'm curious which of my assumptions you think are wrong here to justify someone at this income level being worse off under a higher consumption tax/lower income tax regime? Because I can't see how spending less on food and shelter is very likely...

[PepsiFree]

Originally Posted by iggy_oi

If you think that your job is going to be made obsolete you’re probably better off maximizing what you can make while you still have the job since you can’t really force an employer to create jobs, no?

I’m reasonably confident that their collective agreement likely already has some language in it that would protect them from being terminated if other jobs they can do exist at the time when their job is obsolete.



I really can’t get on board with UBI, too many long term problems with it. Also I think the estimates people are making regarding job elimination at the CRA as a result of AI are pretty high.

To a point, sure. But “maximizing what you can make” doesn’t always mean maximizing salary. If they get a 20% raise and are out of a job in 5 years instead of 8 then they’ve significantly reduced their take home (for any long term employees, obviously). It really only benefits the transient workers or those already on their way out before cost/benefit balance dictates they get moved out anyway.

And whether it’s UBI or something different, there needs to be a solution, because “give people jobs just because” isn’t going to be one. AI could eliminate 90% of CRA jobs today. And that is not an exaggeration. The estimates are based mostly on governments moving at a glacial pace in regards to change.

[iggy_oi]

Originally Posted by Fuzz

That's the same line dragged out by people against the carbon tax rebate, even though it is pre-paid. But it's paid out quarterly as well, so I find this argument kind of silly. You qualify at 19, and maybe start getting it then. I'm sure most people do. As you earn more, you stop qualifying. If you earn less, you qualify. So at times you are getting it while not deserving it. But I'd imagine in general those getting it have never not got it(other than retirees?) for the most part? The reality is, with the quarterly payment the worst you would ever be is out ~$116 over 3 months, but that would apply to very few people.

I don't think any working poor would be upset about getting a bigger rebate than they pay out, which is probably almost universally the case, unless you can show a financial illustration where it is not that would apply to more than 10 people.

Originally Posted by bizaro86

Doubling down on being wrong, alrighty then.

That $14,000 income earner who pays no income tax. Let's assume they spend a total of $500/month on rent (clearly with roommates etc). That's pretty frugal, and uses up $6k per year.

According to a Dalhousie study (https://cdn.dal.ca/content/dam/dalho...23_Digital.pdf)

A Canadian woman aged 19-30 spent $3564 on average on groceries in 2022. Food price inflation has been high so I'd expect 2023 to be more, but we're assuming someone who is both low income and very frugal on zero-rated items here, so lets assume only $3000/year of groceries. That gets our hypothetical low income person to $9k per year in zero rated/exempt supplies.

I'm also neglecting possible expenses that are exempt or zero rated in other categories (public transit, feminine hygiene products, bank fees) that would bump that number up.

That leaves them with $5k per year to spend on taxable goods and services, on which they'd spend $250 in GST and receive the $467 rebate.

If the GST doubled, they'd spend (at most) $500 in GST and receive a $934 rebate, being better off per year by $217. An extra $217 matters to someone at that income bracket.

In terms of interest, if we assume they borrowed to pay the first quarters GST at the maximum legal rate of 32% and then used the first quarters rebate to pay the second quarters GST and so on, they'd have $125 of high interest debt in perpetuity. That would add $40 in annual costs, making the net benefit to that person $177 per year.

Anyway, I'm curious which of my assumptions you think are wrong here to justify someone at this income level being worse off under a higher consumption tax/lower income tax regime? Because I can't see how spending less on food and shelter is very likely...

Fuzz touches on part of the issue in his first post, but firstly you don’t start getting these rebates right out of the gate when you enter the workforce. This puts low income earners behind to start. While I’d agree that the number of people who would be negatively impacted by this would not make up the majority of people who collect GST rebates, those people who are affected are societies most vulnerable and in my opinion any discussion around policies to help lower income Canadians should focus on them first.

Bizaro86 your math, while being well presented, is overly simplified as you do not take into account additional spending of non taxable income received through things like government programs. For example a single mother with a baby and an income of $14k would receive roughly an additional $11,000 to spend. If they spend only half of that on taxable items(which seems conservatively low considering the annual costs of raising a child) adding an additional 5% to GST would cost them an additional $275/year. According to your math bizaro86, that would put them at a loss would it not? I’m happy to read any of your takes in response but given that you’ve accused me of being wrong multiple times now I hope you’re at least willing to answer that question.

[PeteMoss]

One of the problems with a consumption tax replacing income tax is you incentivize people to save money (or spend it somewhere else). Money that sits in someone's bank account or in investments doesn't help as much as people spending that money in the economy.

The vast majority of the benefit goes to the rich people (like us) who can travel around and spend elsewhere or throw a bunch of our income into investments.

[opendoor]

Yeah, most industrialized countries with high VATs don't use it so much to replace income tax; they do it so they can have high tax revenue without taxing income at 60-70%. It's a supplement and not a replacement.

If switching to consumption based taxes was the no brainer that some people like to present it as, you'd think some country would have done it successfully.

[bizaro86]

Originally Posted by iggy_oi

Fuzz touches on part of the issue in his first post, but firstly you don’t start getting these rebates right out of the gate when you enter the workforce. This puts low income earners behind to start. While I’d agree that the number of people who would be negatively impacted by this would not make up the majority of people who collect GST rebates, those people who are affected are societies most vulnerable and in my opinion any discussion around policies to help lower income Canadians should focus on them first.

Bizaro86 your math, while being well presented, is overly simplified as you do not take into account additional spending of non taxable income received through things like government programs. For example a single mother with a baby and an income of $14k would receive roughly an additional $11,000 to spend. If they spend only half of that on taxable items(which seems conservatively low considering the annual costs of raising a child) adding an additional 5% to GST would cost them an additional $275/year. According to your math bizaro86, that would put them at a loss would it not? I’m happy to read any of your takes in response but given that you’ve accused me of being wrong multiple times now I hope you’re at least willing to answer that question.

Sure - that would definitely get them closer - any non-taxable number you add to spending makes higher consumption taxes less favorable. I'd comment that the GST rebate actually goes up with a child. I'll go throught the math again and see whether that makes a big enough difference to swing the result.

I found the same benefit calculator I think it's likely you used to determine that number, and of the $11k per year $205.25 per quarter is a GST rebate, or $821/year, so I'll use that for the GST rebate portion.

So let's re-run the numbers for your scenario. $14k+11k tax benefits is $25k total cash. Now we have a kid involved, which probably makes it harder to find shared accommodations at $500/month. Let's be very aggressive and assume we're still sharing rent somehow at $500/month. I think this is almost certainly going to be higher but a lower number benefits your side of the argument so I'll assume the roommates were cool with having the kid stay for no extra rent split. So keep the same $6k.

To get that level of subsidy the child has to be under 6 years old (the subsidy goes down once the gov't assumes they're in school). So lets take our $3k/year food cost and add a single child from the ages 1-3 category from the report I linked above, rounding down to $2200. This is generous to your cause, as both younger and older groups are more expensive according to the report. That gets us to $5200/year in food.

So a total of $11,200/year of exempt/zero rated spending. You've specified a single mom so some of the other exempt categories almost certainly apply eg feminine hygiene products, but we'll assume zero for those (could be a single dad), transit, bank fees, medical, etc as well to benefit your case.

That leaves $25k - $11.2k = $13,8000 of spending that attracts GST, or $690 of GST paid. Still less than the $821 GST rebate per year, so this hypothetical person with all assumptions maximized in favor of this not working still benefits from a doubling in GST/GST credits.

Basically, I still think you're wrong and while I took the time to go through the math on what is likely the most favorable situation to your opinion I don't think you can get there (and my rent assumption especially is pretty generous I think - I suspect a single mom+toddler would have a very hard time finding something at $500/month).

I actually think this is symptomatic of a major problem in our public discourse. Many people on the left care about people but haven't reliably costed their ideas to see whether they'll actually benefit the people they're trying to help. And many on the right are good at math but don't give a #### about people, especially poor people. I really believe that when you're considering public policy change how it quantitatively affects the most vulnerable in society over the long term should be a key factor, and I think higher consumption taxes paired with increased tax credits would absolutely help that demographic.

[iggy_oi]

Originally Posted by PepsiFree

To a point, sure. But “maximizing what you can make” doesn’t always mean maximizing salary. If they get a 20% raise and are out of a job in 5 years instead of 8 then they’ve significantly reduced their take home (for any long term employees, obviously). It really only benefits the transient workers or those already on their way out before cost/benefit balance dictates they get moved out anyway.

You’re entire position here is predicated on the idea that someone can guarantee a job for themselves. You could agree to an 8 year collective agreement but if your position is eliminated in year 5 of that deal you’re not coming out ahead.

And whether it’s UBI or something different, there needs to be a solution, because “give people jobs just because” isn’t going to be one. AI could eliminate 90% of CRA jobs today. And that is not an exaggeration. The estimates are based mostly on governments moving at a glacial pace in regards to change.

Because you said it’s not an exaggeration can you provide anything to support your claim that 90% could be eliminated today? Out of 155,000 workers in the bargaining units affected by this dispute from what I’ve read only 120,000 are able to go on strike because the rest(well over 20%) are deemed essential. One would think that it’d be more sensible to eliminate those positions at this time if it were possible, if for no other reason than to put pressure on the rest of the unit to settle.

Maybe maximizing earnings for people who are actually working now would give them more disposable income and help create jobs now to help mitigate the effects of job losses from automation.

[bizaro86]

Originally Posted by opendoor

Yeah, most industrialized countries with high VATs don't use it so much to replace income tax; they do it so they can have high tax revenue without taxing income at 60-70%. It's a supplement and not a replacement.

If switching to consumption based taxes was the no brainer that some people like to present it as, you'd think some country would have done it successfully.

I meant, there are sort of two separate questions - how much government spending does your society want and what's the best way to raise that money. I think you can look at them separately. I think Canada would optimally have a higher mix of consumption taxes as compared to income taxes.

[Fuzz]

Originally Posted by PeteMoss

One of the problems with a consumption tax replacing income tax is you incentivize people to save money (or spend it somewhere else). Money that sits in someone's bank account or in investments doesn't help as much as people spending that money in the economy.

The vast majority of the benefit goes to the rich people (like us) who can travel around and spend elsewhere or throw a bunch of our income into investments.

That's actually a good thing. While buying pointless junk is great for the economy, it's bad for most other things. Just guessing here, but I'd imagine countries with high VAT's have less waste, recycling costs, fuel use(emmisions!), etc.

[PeteMoss]

Originally Posted by Fuzz

That's actually a good thing. While buying pointless junk is great for the economy, it's bad for most other things. Just guessing here, but I'd imagine countries with high VAT's have less waste, recycling costs, fuel use(emmisions!), etc.

Its good if you're ok with people not having jobs.

[PeteMoss]

Originally Posted by bizaro86

I meant, there are sort of two separate questions - how much government spending does your society want and what's the best way to raise that money. I think you can look at them separately. I think Canada would optimally have a higher mix of consumption taxes as compared to income taxes.

At least in Europe - they have high VAT rates (25% in Sweden) but not much lower (or higher) income tax rates.

What country follows your model?

[Slava]

Originally Posted by PeteMoss

At least in Europe - they have high VAT rates (25% in Sweden) but not much lower (or higher) income tax rates.

What country follows your model?

I don't know about a country (maybe there is one and maybe there are none?), but there are several US states that have no income tax and only consumption taxes. It seems like that would be trickier because people could shop across the state border and kind of arbitrage. For example, I have a family member who lived in Vancouver Washington and shopped in Portland Oregon. No income tax in Washington and no consumption tax in Oregon.

Anyway...there are real world examples there this is in operation. I don't know if there are countries, and I don't know if it would work in Canada. But consumption taxes are pretty widely acknowledged as being more efficient than income taxes.

[Fuzz]

Originally Posted by PeteMoss

Its good if you're ok with people not having jobs.

Eh, off topic, I just think a society built on consumption for the sake of consumption, while good for GDP and employment has a lot of drawbacks.

[bizaro86]

Originally Posted by PeteMoss

At least in Europe - they have high VAT rates (25% in Sweden) but not much lower (or higher) income tax rates.

What country follows your model?

Not many. Monaco has no income tax and high VAT, but they're so small/wealthy they aren't a good comparable.

Some other countries (Bulgaria, Uruguay) have a tax system where the rates for VAT are much higher than Canada and income tax are much lower than Canada. Hungary has VAT of 27% against income tax of 15%.

I don't think "nobody else is doing it that way" is necessarily a good argument though, especially if that's the primary/only argument.

To be clear, VAT without credits is very regressive, which is why I think the Canadian system (exemptions on basic necessities + refundable credits) is quite a good one.

[chedder]

Shouldn't we be embarrassed (though not surprised) that this is a thing?

Prime Minister says Canada will never meet its NATO obligations.

https://www.washingtonpost.com/natio...ked-documents/

Prime Minister Justin Trudeau has told NATO officials privately that Canada will never meet the military alliance’s defense spending target, according to a leaked secret Pentagon assessment obtained by The Washington Post. The document’s anonymous authors say Canada’s “widespread” military deficiencies are harming ties with security partners and allies.

[TKB]

Originally Posted by chedder

Shouldn't we be embarrassed (though not surprised) that this is a thing?

Prime Minister says Canada will never meet its NATO obligations.

https://www.washingtonpost.com/natio...ked-documents/

Prime Minister Justin Trudeau has told NATO officials privately that Canada will never meet the military alliance’s defense spending target, according to a leaked secret Pentagon assessment obtained by The Washington Post. The document’s anonymous authors say Canada’s “widespread” military deficiencies are harming ties with security partners and allies.

It’s absolutely embarrassing and pathetic.

[belsarius]

Originally Posted by chedder

Shouldn't we be embarrassed (though not surprised) that this is a thing?

Prime Minister says Canada will never meet its NATO obligations.

https://www.washingtonpost.com/natio...ked-documents/

Prime Minister Justin Trudeau has told NATO officials privately that Canada will never meet the military alliance’s defense spending target, according to a leaked secret Pentagon assessment obtained by The Washington Post. The document’s anonymous authors say Canada’s “widespread” military deficiencies are harming ties with security partners and allies.

Considering the last time we actually met the target was when Mulroney was the PM, is he wrong?

[chedder]

Originally Posted by belsarius

Considering the last time we actually met the target was when Mulroney was the PM, is he wrong?

Oh for sure. I wasn't meaning this as a dig on our current Prime Minister or ruling party. I guess the honesty is something.

I haven't looked into how much deficit we have currently vs the past, but is there just no political will from anyone to actually pull our weight on this?

[Fuzz]

Does spending money on all these ships, planes etc not come close to meeting the 2% spending obligations? The seem really expensive.

[Wormius]

Is this even a priority at all? Are we worried that Russia or China is going to send troops through Alaska and attack us?