How the Rich Avoid Paying Taxes

[the_only_turek_fan]

Originally Posted by Leondros

They are - I have personally seen the tax filings that we prepare.

As I said before - in my mind the largest tax we are missing out on is the transfer of wealth from one generation to the next which is a massively lost opportunity. If we taxed the wealth transfer at a relatively high amount, this could allow for way more tax dollars. For example, if you are a high worth individual with an estate worth $400M in Alberta, and you leave that to your children, and have completed a high level of tax planning (estate freezing, step-ups, etc.) then upon death you are paying very little tax and the transfer to your beneficiaries are also nominal. Whereas if you transferred that $400M at 40%, $160M would go back in taxes.

My big issue with this is the 400M estate is already after tax money and therefore should not be taxed again.

[DoubleF]

There's some strange ideas going on here.

The Canada and US tax rules are COMPLETELY different.

I honestly wouldn't be completely confident in betting on 50% direct similarities for both sides. The foundation on the tax rules that both countries are written are totally different. Canada taxes are also based on a concept called residence for tax purposes. It's also principles based vs rules based. It principle based can help to address tax avoidance based on intention rather than the written rule.

Canada has rules designed to grab taxes a bit earlier than the US and has implemented rules to reduce the ability to defer taxes in excess of certain time periods (so that they collect taxes more evenly over the life of an individual). The US often taxes at the beginning and end. This design helps many in the US to accumulate wealth as the bigger majority of taxes will occur upon death (ie: Estate tax). In both cases, the tax rules are supposed to be based on a concept that in the end, the government will fully tax certain incomes and increases in value of assets.


There's two main sets of income taxation. Personal tax which is essentially taxed on the cash basis (ie: Not taxed till received) and Corporate tax which is essentially taxed on the accrual basis.

Personal taxes have non-refundable tax credits and there are other items which are ground down and reduced if your income exceeds a threshold (ie: GST, OAS). Corporate taxes have things such as SBD, RDTOH, GRIP, SRED, CDA etc. They are very different.

Sometimes when looking at the whole transaction (ie: Income/earnings in a corporation flow through to the individual share holders) you need to know which of the two you're looking at.

[gasman]

Originally Posted by rubecube

Except we know that by studying how production has increased while wages have stagnated, that the capital class are pulling more out of the system than they're putting in. If we can't force them to pay higher wages, how else do you propose that workers start seeing more of the wealth they're creating?

I will admit I haven't studied how production has increased while wages have stagnated. I did look into average weekly wage in Alberta over the past 20 years, and it looks like from 2001-2019 the average weekly wage in Alberta increased approximately 2.8% and 2.7%/year (depending on salary vs hourly)which has exceeded inflation which averaged 2.0% in Alberta (based on CPI) over the same time period. Indicating that the average person in Alberta is better off than they were 20 years ago.

I am total fine with the average person being better off, and I understand there will be winners and there will be losers. We have some safety nets in place, but in the end the Wage gap is not something I see as concerning.

I feel the same way about schooling. Sometimes kids need to be left behind. We can't govern to make sure we pick everyone up at the expense of those that exceed expectations. but that's a whole other thread

[Cappy]

Originally Posted by CliffFletcher

The countries that have managed to foster more egalitarian societies - I mean have actually done it, not theorized about socialist utopias on reddit or twitter - have a fairly straightforward model.

* Attract private business with a healthy and educated workforce and moderate corporate tax rates.

* Tax the population working for these business with high income taxes across the board and high sales taxes.

* Use the government revenue generated from those taxes to fund strong public education and healthcare systems.

The key is high taxes across the board. The 1 per cent are too small in number to fund high levels of services. Taxes have to be high at all income levels to raise the kind of money Scandinavian public services cost.

That approach has never been pursued in the Anglosphere because our politics are more divisive, and the left tell people they can have dramatically better lives if only the rich would pay their share. Nobody has the courage or honesty to run on a platform of higher taxes for all. The whole collective ethos of the Northern European approach is missing.

Cliff is 100% correct in this. I could truly care less if the billionaires leave Canada for some tax haven or corrupt country. Most of their "income" is largely non-taxed as those people are most likely panama paper headliners.

I still remember Boris Johnson (as London Mayor) bragging about having the most billionaires in the world.

The issue is billionaires taking their money AND their business/investment to greener pastures; but, if the country keeps corporate-friendly policies, the rationale for corporate exodus is nearly eliminated.

The nordic model (and many other countries like the Netherlands) promotes private enterprise and jobs while also limiting wealth inequality through personal taxes. It's the truest form of pro-business governance

[Patek23]

Tax the rich is just a nice buzz phrase that helps people who like big government sleep easy at night. Dreaming of a time when someone else will pay for all of the programs theyd like to be offered to them. If you took half of all billionaires amassed wealth it wouldnt run government more then a couple months, if that. And then what?

I do agree theres alot of loop holes that need fixing. And everyone wants the rich to pay their fair share myseld included. However the impact of doing so would barely make a dent into anything that helps anyone. And isnt exactly at the top of whats going to solve any or our problems within the country.

[GGG]

Originally Posted by the_only_turek_fan

My big issue with this is the 400M estate is already after tax money and therefore should not be taxed again.

Why shouldn’t it be taxed again?

Saying we will never tax things twice is just an arbitrary rule.

To prevent the long term concentration of wealth under capitalism you have to be willing to tax twice otherwise wealth concentration is inevitable.

[GGG]

Originally Posted by gasman

I will admit I haven't studied how production has increased while wages have stagnated. I did look into average weekly wage in Alberta over the past 20 years, and it looks like from 2001-2019 the average weekly wage in Alberta increased approximately 2.8% and 2.7%/year (depending on salary vs hourly)which has exceeded inflation which averaged 2.0% in Alberta (based on CPI) over the same time period. Indicating that the average person in Alberta is better off than they were 20 years ago.

I am total fine with the average person being better off, and I understand there will be winners and there will be losers. We have some safety nets in place, but in the end the Wage gap is not something I see as concerning.

I feel the same way about schooling. Sometimes kids need to be left behind. We can't govern to make sure we pick everyone up at the expense of those that exceed expectations. but that's a whole other thread

I’m not sure Alberta is the best example. Or perhaps given the explosive wave growth in Alberta in the 2000s that other jurisdictions or Canada as a whole should be used. I suspect out 20% real increase in earnings is an outlier.

[Mathgod]

Originally Posted by RichieRich

The number of “rich” people is a fraction of the middle class, who, arguably, have more disposable income than the “poor” class. Tax the very rich it’s a relatively small Piece of the pie compared to taxing the massive middle class. For example adding 1% extra tax to 10 million people gains more income than an extra 1% from 100,000 Uber wealthy PLUS those Uber wealthy may just pick up all their marbles and move.
What is NOT politically correct to talk about perhaps are…. Er… never mind. I’ll get shot if I mention tax on the low income earners when they see substantial societal handouts from the government.
What can be done? Like others have suggested is generational tax on estates. Also moreso is the concept of consumption and luxury taxes - aka voluntary tax. For example on high end equipment, cars, homes, certain non essential consumables, etc…

Originally Posted by Jason14h

All these things have already had taxes paid on them when the money was initially earned, or have tax payed at some point. So you want to double tax them indefinitely.

Also - Most of the 'loopholes' or tax deferral benefit the average investor, retirement savings, small businesses, etc. So I guess we also want different rules at a certain point for all scenarios because that is 'fair'

You basically just want to take from the 'Rich' and give to the 'Poor' for no other reason then "They have more, and I want some"

If everyone should pay their "fair share" there should be no marginal tax rates and everyone should pay the same amount. (Actually should just be a consumption tax and no income tax but good luck explaining that to the average voter )And guess what - The rich would stay be rich, and even more so. The lowest earners pay ZERO. They are net takers from the economy/world. The 'Rich' are net contributors.

The rich pay more % wise. Maybe not every year, but over the long run to death they will. They pay more real $$ wise - Exponentially more.

It isn't a fair share you want anyone to pay - Because you cant even define what is 'fair' - fair is a construct of opinions

Its a share you deem people should pay because effectively, you want more $$ (Well for the government to provide you services) and want to take it from people who are not you

Maybe you should go into your neighbours backyard next time he's having a BBQ and take his steak off the grill because it's unfair that you only had hot dogs on your grill.

If you think having Jeff Bezos pay a bit more in taxes when the US economy is currently at a 2.06 TRILLION deficit through the first 8 months of this year is going to make a difference to your standard of living or the price of housing you are out to left field.

Honest question - Have you ever taken an entry level economics course or read any economic books? Because taxing the rich solves zero of the problems you are complaining about

Sure, ignore pretty much everything I said and trot out a bunch of right wing talking points.

Did you miss the part where the world's billionaires got $5.5 TRILLION richer during the pandemic? That's enough to cover off the ENTIRE 2020 (and part of 2021) budget deficits for the US and Canada combined.

Most of all, what you two don't seem to be getting is that most workers are essentially paying a tax every day, in the form of underpaid labour. The worker must work or starve, and therefore will accept arrangements that they would not otherwise accept in a non coercive environment. The taxes that the rich are being asked to pay, are a drop in the bucket compared to all the wealth they extracted from workers who had no other choice but to comply.

But yeah, let's ignore all that. When government prints money to pay for services that struggling families desperately need, or to pay for badly needed infrastructure, let's pretend that the deficits are the fault of everyday people, and not the fault of multimillionaires & billionaires who find creative ways of dancing around the tax laws while not technically breaking them. And let's definitely get all our answers from our obviously not biased textbooks that are obviously not designed to get people to think a particular way about things.

[gasman]

Originally Posted by GGG

I’m not sure Alberta is the best example. Or perhaps given the explosive wave growth in Alberta in the 2000s that other jurisdictions or Canada as a whole should be used. I suspect out 20% real increase in earnings is an outlier.

Ok. Across canada annual increase in weekly wage is 2.4% blended across all industries. Still ahead of inflation.

[The Yen Man]

I'm in full agreement of closing any tax loopholes that can be exploited, and making sure the rich are paying their share of the taxes properly. I'm just not in agreement of increasing already high tax rates to the rich people in order to get them to pay even more than what they're obligated to pay now currently. As I said, they've already paid many times more than the average person, so they are already being taxed more.

Want higher tax revenues? Increase the tax rate across the board for EVERYONE. It's always going to be the middle class you and I who bear even higher tax burdens to support most of society. It's not going to be the 1% ultra rich.

[gasman]

Originally Posted by Mathgod

Sure, ignore pretty much everything I said, and trot out a bunch of right wing talking points.

Did you miss the part where the world's billionaires got $5.5 TRILLION richer during the pandemic? That's enough to cover off the ENTIRE 2020 budget deficits for the US and Canada combined.

Most of all, what you two don't seem to be getting is that most workers are essentially paying a tax every day, in the form of underpaid labour. The worker must work or starve, and therefore will accept arrangements that they would not otherwise accept in a non coercive environment. The taxes that the rich are being asked to pay, are a drop in the bucket compared to all the wealth they extracted from workers who had no other choice but to comply.

But yeah, let's ignore all that. When government prints money to pay for services that struggling families desperately need, or to pay for badly needed infrastructure, let's pretend that the deficits are the fault of everyday people, and not the fault of millionaires & billionaires who find creative ways of dancing around the tax laws while not technically breaking them. And let's definitely get all our answers from our obviously not biased textbooks that are obviously not designed to get people to think a particular way about things.

According to Forbes there are 2035 Billionaires in the world, around 55 of them are Canadians (counted manually and may be off a couple either way. They have a combined Net Worth of approximately 230B.

The 2021 Budget projects spending of $650.3B

So if we took all of the Billionaires into a room, took all their money it would fund the government for almost 130days

I highly doubt we can write a strategic enough tax policy to get the billionaires in Dubai to chip into our $350Billion deficit

[Mathgod]

Originally Posted by gasman

According to Forbes there are 2035 Billionaires in the world, around 55 of them are Canadians (counted manually and may be off a couple either way. They have a combined Net Worth of approximately 230B.

The 2021 Budget projects spending of $650.3B

So if we took all of the Billionaires into a room, took all their money it would fund the government for almost 130days

I highly doubt we can write a strategic enough tax policy to get the billionaires in Dubai to chip into our $350Billion deficit

lol, I compared wealth gains by billionaires during the pandemic to government deficits, solely for the purpose of giving you perspective of how much money they've gained while the vast majority of us have struggled to make it through the pandemic let alone gain any wealth. I never suggested taking all their money.

True though, billionaires aren't the only ones who ought to be paying more in tax. You haven't taken into account all the wealth gained by millionaires during the pandemic. It's likely a big number too.

[The Yen Man]

Originally Posted by Mathgod

lol, I compared wealth gains by billionaires during the pandemic to government deficits, solely for the purpose of giving you perspective of how much money they've gained while the vast majority of us have struggled to make it through the pandemic let alone gain any wealth. I never suggested taking all their money.

True though, billionaires aren't the only ones who ought to be paying more in tax. You haven't taken into account all the wealth gained by millionaires during the pandemic. It's likely a big number too.

So... (and I'm making the assumption you're not a millionaire) raising the taxes of everyone making more than you?

If you are a millionaire, then as a non millionaire, I thank you for your generosity. Where can I send you my etransfer account?

[delayedreflex]

Originally Posted by Mathgod

From the 100 times in the Canadian Politics thread where I mentioned we need to get the rich to pay their fair share in taxes.

Yes we need to tax all citizens not just residents, but that's not my main gripe. The biggest problem with the system right now IMO is that those who own huge stock portfolios can secure massive loans at virtually zero interest, live lavishly off the loan money, and basically circumvent the tax law by not bringing in any of what's considered "income" for tax purposes. When the loans are due they can just get more loans to cover off the previous ones, and repeat the cycle indefinitely because the value of their assets increase way faster than their debts do.

And yes it's a big problem that in Canada right now there is no estate tax. In the US there is one, but the rich find sneaky ways around that too, so I'd hope those loopholes get closed if/when Canada implements an estate tax.

The conversation around capital gains tax is a complex one, because you don't want to gut punch small time investors and 401ks, but at the same time you do want to raise more revenue from the ultra wealthy.

That said, keeping tax rates low for the wealthy purely out of fear that they'll leave and go elsewhere, is a fool's errand. When all the countries of the world compete for investor dollars, it becomes a giant reverse-auction and a race to the bottom. In this game, everyone loses except the wealthy. The only way to avoid losing this rigged game is to not play it. I always chuckle when people complain about inflation because "there's too much money circulating in our economy" and then turn around and suggest that we should keep tax rates low to woo more investment dollars to Canada... to add more money to our economy. The bottom line is this: Canada is a beautiful country with great people and a stable economy; people want to live here. Will raising taxes on the rich cause some of the ultra-wealthy to leave? Perhaps. But that outcome is preferable to having a joke tax system where we leave all kinds of loopholes in it because of the misguided notion that wealthy investors are "job creators".

Look at this, the pandemic has caused billionaire wealth to soar while everyone else has been suffering:
https://ips-dc.org/global-billionair...-wealth-surge/

How can anyone not be upset by that? Ultimately, I think there needs to be some kind of shift in the way we tax; there needs to be more emphasis on taxing already accumulated wealth, and less emphasis on taxing income.

I agree especially with the bolded bit - it sure seems like a ridiculous way to circumvent income taxes while leveraging massive wealth. I do wonder if has become more attractive within the past decade because of the extended period of low interest rates that we've seen - if people had to pay 10%+ interest on these loans, for example, it may not be sustainable for them to keep rolling over their debt into new loans without eventually having to sell some of their assets (at that point paying taxes on them).

I do like the idea of a wealth tax but also feel like it could be quite tricky to implement in a fair way - forcing someone to sell their ownership in a company, for example, to pay wealth taxes could be problematic if it ends up causing someone to lose control of a company that they own (though perhaps that's an unrealistic situation, since there should be many ways for a company owner to leverage the value of their company to get money to pay taxes without having to give up control, whether that be through dividends, collateralized loans, etc.). Plus, property taxes exist so precedence obviously exists on taxing people just for owning something.

I would hope that a plus side of wealth taxes is that it might put some downward pressure on ridiculous stock valuations. Perhaps investors would be less interested in pumping so much money into stocks like TSLA or meme stocks if they knew they would have to pay taxes on companies with inflated value; stock prices might better reflect companies' inherent value.

[you&me]

Originally Posted by delayedreflex

... Plus, property taxes exist so precedence obviously exists on taxing people just for owning something.

Property tax is meant to support services that directly benefit the property.

Taxing an asset like equity in a company is not the same at all.

[delayedreflex]

Originally Posted by you&me

Property tax is meant to support services that directly benefit the property.

Taxing an asset like equity in a company is not the same at all.

It becomes more abstract, but why can a tax on an equity not be said to support the services that make operation of that company possible (ie. maintaining a civil society)?

Besides, property taxes as they currently exist rather poorly reflect what services are needed to support any particular property - a 1500sqft starter home on the edge of the city will pay a tiny fraction in property taxes of a 1500sqft penthouse apartment downtown, but the former requires a lot more supporting services than the latter. Property taxes certainly seem to be a very specific form of wealth tax, to me.

[GGG]

Originally Posted by gasman

Ok. Across canada annual increase in weekly wage is 2.4% blended across all industries. Still ahead of inflation.

Thanks,

That’s pretty impressive and certainly not what I would have expected.

[Azure]

Originally Posted by Mathgod

Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?

I think you focus too much on 'omg the wealthy have too much money, we should tax them more' without realizing that more tax doesn't mean more tax revenues, which is what the goal should be.

One thing we should tax a lot more, if something we have a lot more of than most people.

Real estate such as 2nd, 3rd or 4th home purchases, any kind of fund or fund management company buying real estate holdings (hedge funds buying entire housing lots), and land being bought by corporations that don't actually farm / manage it.

There are a variety of ways one could do this, but I personally see a lot of rich people drive up the amount of assets they own simply by buying more land.

[gasman]

Originally Posted by Mathgod

lol, I compared wealth gains by billionaires during the pandemic to government deficits, solely for the purpose of giving you perspective of how much money they've gained while the vast majority of us have struggled to make it through the pandemic let alone gain any wealth. I never suggested taking all their money.

True though, billionaires aren't the only ones who ought to be paying more in tax. You haven't taken into account all the wealth gained by millionaires during the pandemic. It's likely a big number too.

I guess I still don't see the connection between billionaires in the world and deficits in Canada

Canada can only influence Canadian tax policy, so I was pointing out that you could tax all the billionaires in Canada at 100% of their net worth and it still wouldn't touch our deficit let alone our expenses.

The amount of wealth out side of Canada is largely irrelevant to anything.

[GGG]

Originally Posted by Mathgod

Sure, ignore pretty much everything I said and trot out a bunch of right wing talking points.

Did you miss the part where the world's billionaires got $5.5 TRILLION richer during the pandemic? That's enough to cover off the ENTIRE 2020 (and part of 2021) budget deficits for the US and Canada combined.

Most of all, what you two don't seem to be getting is that most workers are essentially paying a tax every day, in the form of underpaid labour. The worker must work or starve, and therefore will accept arrangements that they would not otherwise accept in a non coercive environment. The taxes that the rich are being asked to pay, are a drop in the bucket compared to all the wealth they extracted from workers who had no other choice but to comply.

But yeah, let's ignore all that. When government prints money to pay for services that struggling families desperately need, or to pay for badly needed infrastructure, let's pretend that the deficits are the fault of everyday people, and not the fault of multimillionaires & billionaires who find creative ways of dancing around the tax laws while not technically breaking them. And let's definitely get all our answers from our obviously not biased textbooks that are obviously not designed to get people to think a particular way about things.

What problem are you trying to solve?

It seems your are equating government budget deficits with wealth inequality. I don’t think that the math works in Canada even ignoring the wealth flight affect.

The top .1% have an income of 1.6-2million so that’s about 25000 people maybe 30,000. So that’s about 60 billion in income. And in terms of funding programs income rather than wealth is what we need to tax. That’s really not enough to do anything with. Even looking at their wealth and taxing a portion of the 4% SWR you still aren’t moving the needle. The answer to the problem you seem to have is to tax wage earning employees at historic rates in order to offer historic levels of service.

How do you propose to tax and is it sustainable even assuming there is no capital flight?

Now if we want to look at wealth inequality that’s a different discussion but it’s idenoendant of funding government.