NDP wealth tax a ‘bad move,’ Don Drummond says

Locutus

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Jun 18, 2007
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The NDP wealth tax in the provincial budget was a “bad move” and will struggle to reap even half the $470 million a year the minority Liberal government expects, says economist Don Drummond.

Ontario will be fortunate to collect between “$200 million and $300 million, tops,” the former TD Bank executive and author of a report on Ontario’s financial situation said Friday in his first public comments on Premier Dalton McGuinty’s fiscal blueprint.

Drummond delivered his massive report in February, urging 366 ways to cut costs and warning the province was on track to a $30 billion annual deficit in a few years if proper steps weren’t taken.

The tax of two percentage points on incomes above $500,000 was proposed by New Democrat Leader Andrea Horwath in exchange for help passing the budget this week, averting a summer election.

The problem is it’s “fairly straightforward” for an estimated 25,000 Ontarians making that much money and more to shelter it elsewhere and avoid the tax, Drummond said in an interview, echoing concerns raised in a recent report by the C.D. Howe Institute.

“People who make that much money typically do not have it as employment income. It’s typically from investment income . . . you create a trust account, you put it in Alberta,” where the top marginal income tax rates are lower, he added.

Horwath pitched the tax to narrow the widening income gap between rich and poor and wanted the revenues from it spent on social programs. But in her deal with McGuinty the cash will be used to reduce the deficit, slated to be $15 billion this year.

Drummond acknowledged the tax — popular according to a recent poll — is “fascinating” as a political phenomenon but said in the end “all they ended up with was a surtax . . . that’s a bad move.”

As for the budget as a whole, Drummond said “it is on the right track” but noted “the jury is still out” because the government must still restructure high-cost services like health care.

“If they accomplish the (public sector) compensation freeze … that gets a long way toward the balanced budget but it doesn’t get you a sustainable health-care system.”


http://www.thestar.com/news/canada/...-wealth-tax-a-bad-move-don-drummond-says?bn=1
 

jariax

Electoral Member
Jun 13, 2006
141
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The NDP wealth tax in the provincial budget was a “bad move” and will struggle to reap even half the $470 million a year the minority Liberal government expects, says economist Don Drummond.

Ontario will be fortunate to collect between “$200 million and $300 million, tops,” the former TD Bank executive and author of a report on Ontario’s financial situation said Friday in his first public comments on Premier Dalton McGuinty’s fiscal blueprint.

Drummond delivered his massive report in February, urging 366 ways to cut costs and warning the province was on track to a $30 billion annual deficit in a few years if proper steps weren’t taken.

The tax of two percentage points on incomes above $500,000 was proposed by New Democrat Leader Andrea Horwath in exchange for help passing the budget this week, averting a summer election.

The problem is it’s “fairly straightforward” for an estimated 25,000 Ontarians making that much money and more to shelter it elsewhere and avoid the tax, Drummond said in an interview, echoing concerns raised in a recent report by the C.D. Howe Institute.

“People who make that much money typically do not have it as employment income. It’s typically from investment income . . . you create a trust account, you put it in Alberta,” where the top marginal income tax rates are lower, he added.

Horwath pitched the tax to narrow the widening income gap between rich and poor and wanted the revenues from it spent on social programs. But in her deal with McGuinty the cash will be used to reduce the deficit, slated to be $15 billion this year.

Drummond acknowledged the tax — popular according to a recent poll — is “fascinating” as a political phenomenon but said in the end “all they ended up with was a surtax . . . that’s a bad move.”

As for the budget as a whole, Drummond said “it is on the right track” but noted “the jury is still out” because the government must still restructure high-cost services like health care.

“If they accomplish the (public sector) compensation freeze … that gets a long way toward the balanced budget but it doesn’t get you a sustainable health-care system.”


Canada News: NDP wealth tax a
How absurd. Don Draper seems to have more current thinking that the relic known as Don Drummond.

Rich people don't like paying taxes. That is true. But if they were able to avoid taxes, they would. A two percent increase on the amount that they pay over $500,000 is not going to be the catalyst.

The reverse argument of his bizarre statement would suggest that if we lower taxes for the rich, they will suddenly stop avoiding taxes, and move their money from offshore accounts, back to Canada. It's not going to happen.

Obviously, he has some pay masters that want him to be chief-economic-shill
 

captain morgan

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Mar 28, 2009
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Here's the motivation for those in Ontario (that make over $500k/year) to consider placing that money in a Trust in AB.

Ont Prov Tax Rate: 11.16% on the amount over $78,043

AB Prov Tax Rate: 10% of taxable income (regardless of amount).

Add on another 2% and the difference in taxes between the 2 provinces is $15k for every $500,000... Someone that makes say $2.5MM/year would 'save' $75,000 each year simply by setting a trust in AB.

The catch on this whole thing is that it would be the AB gvt that would get the benefit from the taxes as opposed to Ontario.

See the dilemma here?
 

jariax

Electoral Member
Jun 13, 2006
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Here's the motivation for those in Ontario (that make over $500k/year) to consider placing that money in a Trust in AB.

Ont Prov Tax Rate: 11.16% on the amount over $78,043

AB Prov Tax Rate: 10% of taxable income (regardless of amount).

Add on another 2% and the difference in taxes between the 2 provinces is $15k for every $500,000... Someone that makes say $2.5MM/year would 'save' $75,000 each year simply by setting a trust in AB.

The catch on this whole thing is that it would be the AB gvt that would get the benefit from the taxes as opposed to Ontario.

See the dilemma here?
Yes, it's a good example of the issue. It doesn't work for all income, but for trust income, as well as selling of assets that have increased in value, it can be a great loophole.

But let's look at that logic for a moment. We don't want to raise taxes, because people will cheat the system by moving wealth around to third parties. Why would they even pay Alberta tax? Who not Gibraltar or Cyprus? If they have rates of four percent, does that mean that we should lower all our taxes to four percent to compete?

There is a danger in always chasing the lowest common denominator. By constantly attempting to have one of the lowest tax rates, our tax base decreases resulting in......you guessed it...deficits. Faced with a deficit, governments have two choices - raise taxes, or cut services. This is what's happening all over the world right now - and even in Canada, we're cutting back EI eligibility, and raising the age to collect old age pensions, while not improving anything. The first world is moving backwards not forwards and this thinking is largely responsible for it.
 

damngrumpy

Executive Branch Member
Mar 16, 2005
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Quite simply it comes down to this, It is time that rich people paid taxes and their
share of taxes like everybody else. The world has revolved around rich people for
centuries and now they are being asked to pay their share.
i have also heard the argument, well rich people take the risk and therefore they
should be rewarded with tax breaks. I love it, when people buy fridges and trucks
and all kinds of other things they are also taking a risk so they should get a tax
break? If that was the case, no one would pay taxes.
The rich claim there is no free lunch, while they are eating one. Its time to pay up
before we all look like Greece.
 

captain morgan

Hall of Fame Member
Mar 28, 2009
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A Mouse Once Bit My Sister
Yes, it's a good example of the issue. It doesn't work for all income, but for trust income, as well as selling of assets that have increased in value, it can be a great loophole.

Once a Trust is set up, it is reasonably simply to move assets into (and out of) that platform and while active income from an individual is not suitable to include (to my knowledge), once the appropriate taxes have been paid, the money can be transferred into the trust as cash or other forms of income generating securities.

Regardless, if the objective of the individual is to accrue more wealth from these after tax dollars, the best way to do it is via a lower tax jurisdiction.

But let's look at that logic for a moment. We don't want to raise taxes, because people will cheat the system by moving wealth around to third parties.

Who says anyone is cheating the system? Fact is, the 'system' is changing the rules, not the other way around.

In any case, Drummond is stating nothing more than what is a reasonable response to the ad hoc changes in the system

There is a danger in always chasing the lowest common denominator. By constantly attempting to have one of the lowest tax rates, our tax base decreases resulting in......you guessed it...deficits. Faced with a deficit, governments have two choices - raise taxes, or cut services. This is what's happening all over the world right now - and even in Canada, we're cutting back EI eligibility, and raising the age to collect old age pensions, while not improving anything. The first world is moving backwards not forwards and this thinking is largely responsible for it.

Correction here: Deficits aren't created by chasing the lowest common denominator; they are created when the gvt (read: society at large) demands/accepts services that they can't afford to begin with.

Living beyond your means is not a right... You want to call the tune, then you had better be prepared to pay the piper
 

JLM

Hall of Fame Member
Nov 27, 2008
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Vernon, B.C.
Quite simply it comes down to this, It is time that rich people paid taxes and their
share of taxes like everybody else. The world has revolved around rich people for
centuries and now they are being asked to pay their share.
i have also heard the argument, well rich people take the risk and therefore they
should be rewarded with tax breaks. I love it, when people buy fridges and trucks
and all kinds of other things they are also taking a risk so they should get a tax
break? If that was the case, no one would pay taxes.
The rich claim there is no free lunch, while they are eating one. Its time to pay up
before we all look like Greece.

The system is already set up so the rich pay the bulk of the taxes. The more you earn the higher percentage of your earnings are taxed. What the N.D.P. advocate is nothing short of a money grab!
 

Cabbagesandking

Council Member
Apr 24, 2012
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Ontario
Correction here: Deficits aren't created by chasing the lowest common denominator; they are created when the gvt (read: society at large) demands/accepts services that they can't afford to begin with.

Living beyond your means is not a right... You want to call the tune, then you had better be prepared to pay the piper

I think that you have been seduced by the Right Wing agenda here. Deficits are created when the government does not have the revenue base to pay for the services. That is different than affordability.

There would be no problem with affording ay of the services we have built up against so much Right Wing resistance over the past several decades if Right leaning governments had not reduced Corporate taxes and consumption taxes as well as the taxes on the wealthy that have been reduced and shifted to lower income groups. The result is the greatest disparity in income and wealth distribution that has existed since the 1920s.

At a cost that is now the unnecessary shrinking of services. As for Drummond, this is a drum he has been beating for a couple of decades. His rhythm has not improved.
 

taxslave

Hall of Fame Member
Nov 25, 2008
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I think that you have been seduced by the Right Wing agenda here. Deficits are created when the government does not have the revenue base to pay for the services. That is different than affordability.

There would be no problem with affording ay of the services we have built up against so much Right Wing resistance over the past several decades if Right leaning governments had not reduced Corporate taxes and consumption taxes as well as the taxes on the wealthy that have been reduced and shifted to lower income groups. The result is the greatest disparity in income and wealth distribution that has existed since the 1920s.

At a cost that is now the unnecessary shrinking of services. As for Drummond, this is a drum he has been beating for a couple of decades. His rhythm has not improved.

YOU MANAGED TO GET THAT COMPLETELY BACKWARDS. Governments have been providing services they cannot afford in an effort to buy votes.
 

DurkaDurka

Internet Lawyer
Mar 15, 2006
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The system is already set up so the rich pay the bulk of the taxes. The more you earn the higher percentage of your earnings are taxed. What the N.D.P. advocate is nothing short of a money grab!

I don't think that is entirely correct, there are a lot more middle class paying 30-35% income tax then there is millionaires paying 40%+.
 

Goober

Hall of Fame Member
Jan 23, 2009
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I don't think that is entirely correct, there are a lot more middle class paying 30-35% income tax then there is millionaires paying 40%+.
I would gander a wild guess that the middle class - 60 to 100 k - is shrinking and their taxes are higher on a percentage that those starting at 100 k and up.
 

DurkaDurka

Internet Lawyer
Mar 15, 2006
10,385
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Toronto
I would gander a wild guess that the middle class - 60 to 100 k - is shrinking and their taxes are higher on a percentage that those starting at 100 k and up.

True. Generally, wealthy people (200k+) have more accessible ways to shelter money from the taxman opposed to the middle class. Personally, I think there should be a huge tax increase on any Canadian company which outsources Canadian jobs to China etc. Be damned if you can't handle a $5.00 increase for your ipod, clothing etc.