Taxes

This blog post is part of a series of posts that will be focusing on the tax avoidance by Canada’s most wealthy. This series was sparked by findings in the Paradise Papers — the latest leak that revealed the offshore tax haven activities of former Canadian elected officials and political insiders. Tax avoidance is wrong. It robs the Canadian government from paying for and maintaining our health and social programs; ones that work to improve the lives of all Canadians. A government crackdown on offshore tax havens is urgent and necessary.

“Tax Fairness” is a phrase being bandied about more and more lately. If I had a dollar for every time I’ve heard Liberals say “tax fairness” over the past 6 months, I would be very wealthy indeed. But for all the talk, where’s the action in addressing this terrible problem? A recent Environics poll shows that 90% of Canadians agree that using tax havens to avoid paying taxes is morally wrong, even if it’s legal.  And almost all agree that the law should be changed to make the use of tax havens illegal.

Social progress is made in curious ways.

Federal Minister of Finance Bill Morneau is to be commended for cracking down on very high income taxpayers using private corporations to avoid paying their fair share of tax. He should shrug off predictable and self-serving criticism from business lobby groups, and deepen his resolve to promote progressive tax reform. 

The so-called “middle class” tax cut promised by the newly elected Liberal government in the name of promoting greater fairness seems set to be quickly implemented for the 2016 tax year. Yet the distributional and revenue consequences of this measure are often misunderstood, and the proposed change merits reconsideration.

Currently there are four federal tax brackets: 15% on taxable incomes of less than $44,701; 22% on further income up to $89,401; 26% on further income up to $138,586; and 29% on income above that amount.  

Bill Scarth is a highly respected mainstream Canadian economist at McMaster University. In a piece just published by the C.D. Howe Institute, a generally conservative think-tank, he argues that the pace of federal deficit reduction should be slowed in order to lower unemployment.

His key point is that the economy still has a lot of slack which will not be quickly closed just by maintaining interest rates at their currently very low levels. 

Jennifer Robson / iPolitics.ca

In The National Post, Tasha Kheriddin critiques a recent study on income splitting by Tristat Resources for The Broadbent Institute. Kheriddin argues that income-splitting is just a matter of establishing fairness between families with kids and those without.

Tasha Kheiriddin / National Post

The issue of income-splitting — a tax policy whereby income is reattributed within a household from a higher-earning spouse to a lower-earning spouse — has been front of mind among tax experts, federal Conservative ministers and, most recently, the left-leaning Broadbent Institute. The practice advantages households in which income is predominantly earned by one spouse, since it allows a taxpayer in a high tax bracket to attribute income to a partner who pays at a lower marginal rate (or who earns nothing at all).

Editorial / The St. John's Telegram

If you don’t have the facts, it makes it that much easier to simply apply your own ideology.  But it doesn’t mean good results are on the way for everyone involved.

If Stephen Harper’s goal was to design a tax policy to make income inequality in this country even worse, he can pat himself on the back. That’s exactly what the Conservatives’ family income-splitting tax scheme will do.

Research from various organizations across the political spectrum has demonstrated already that this tax policy, projected to cost the federal treasury $3 billion in 2015, would be an expensive and inequitable tax giveaway.