Penalized for working.

[JLM]

Oddly I agree with you.

Oddly, me too. I never did think it was quite right for the Gov't to turn a man's pockets inside out because he made a lot of money- for one thing it kills incentive and for another thing a man who has proven himself to be successful is a lot more likely to spend the money sensibly than the parasites at the trough.

 

[SirJosephPorter]

The fact of the matter is that of the $412.50 I earned, I was taxed $186.66, with the other deductions totalling $27.56. It is still a sh*t load of a tax burden we carry.

That represents a 45% tax rate. I think you are paying too much in the way of taxes; there are (legitimate) ways to reduce one’s taxes.

My wife has a powerful tool for tax reduction. She is incorporated, she is a corporation. As long as she leaves the money in the corporation, it is taxed at corporate tax rate, which is very low (around 15%). That results in huge tax deferral.

I don’t have that avenue open (I am an IT professional, and government does not let us incorporate). But there are other ways to reduce taxes.

Income splitting is a very effective way or reducing taxes. Perhaps talking to a good accountant may help. But there certainly are ways of reducing the tax paid. I don’t think anybody should pay more tax than they absolutely have to.

 

[Ron in Regina]

Talk to any economist that is objective and they will support the institution of a consumption tax. Even if there was a moderate tax rate >10% along with a consumption tax, the benefits to the community would be enormous.

As it stands right now, the middle income earners are in a grey-zone where earning more income ends up netting them only a slightly higher incremental net amount that it isn't worth the time or risk. On the high side of the income scale; tax shelters, offshore business' or outright physical relocation of the business, individual and capital to more tax-friendly jurisdictions makes a lot of sense.

The fall-out is that either less income tax is paid (relative to maximum potential) orthe money flees and pays into another community.

I had this conversation several years ago with a relative of mine. She made (makes)
a very nice income in a unionized field but in theory She only works part-time on-call,
but She's constantly called for overtime or extra shifts.

She would work eight shifts in a two week period normally without extra shifts. If she
worked eleven shifts, Her paycheque would actually net a bit more than if she worked
only eight shifts...but if she worked nine or ten shifts, She would actually net less than
if She only worked eight shifts. Crazy, eh?

That's the way it was at the time, & though Her income would have increased over
time, the conversation hasn't come up for a few years now, so I'm not sure where
She's at on that front now.

 

[ironsides]

About the CPP, those deductions work in a strange way. Again, let us take the example of somebody earning 10,000 $ per year. The monthly CPP installment comes to 495 $ per month. However, there is the maximum of around 2100 $ per year.
Incidentally, the Social Security payments in USA are much greater than our CPP payments.

Yes they are, the average worker used to get a couple of months off, but for the past 20+ years or so pay the full year.

 

[Slim Chance]

I had this conversation several years ago with a relative of mine. She made (makes)
a very nice income in a unionized field but in theory She only works part-time on-call,
but She's constantly called for overtime or extra shifts.

She would work eight shifts in a two week period normally without extra shifts. If she
worked eleven shifts, Her paycheque would actually net a bit more than if she worked
only eight shifts...but if she worked nine or ten shifts, She would actually net less than
if She only worked eight shifts. Crazy, eh?

That's the way it was at the time, & though Her income would have increased over
time, the conversation hasn't come up for a few years now, so I'm not sure where
She's at on that front now.

I've heard similar stories to that of your relative... The CRA is a weirdly complex group and when you factor-in payroll taxes, it complicates the issue further (to me at least). Sadly, this situation can degenerate into something that impairs everyone's ability to produce and generate more income for an individual or company.

Personally, I don't get CRA logic. Taxes are collected whenever (financial) transactions occur (in general). The more transactions,the more tax dollars. With this in mind, you'd think that any governmental tax system would want to encourage as many transactions as possible... Extend that base logic to encouraging as many people as possible to expand their depth of disposable income such that they will transact more often.

You get the picture of what I'm describing.

Coming back full circle to the tax issue, the more cash that the government takes through income taxes, the less disposable income and fewer possible transactions.

Clearly, there must be a balance, but when the combined provincial and federal income tax rates vary from a low of 39% to in excess of 50% (I believe those #'s are reasonably accurate), the balance is way out of whack.

 

[lone wolf]

If one really wants to find out what being penalized for working is all about, get hurt on the job

 

[El Barto]

I would think that after 40 hours / week work any hours past that should be declared but not taxed.
Some may argue there would be loss of U.I paid and Pension but I think it would really help the economy. Paying over time hurts a company and hiring extra help only plays with U.I. after the need is done . With the gst in place , the government would still get it's cut. Plus it would create more jobs .

But this would be too bold for a government to accept.:angryfire:

 

[petros]

Here is where the current system really fails the worker. If you labour all day to create something and you were paid $100 to do it, the item you made has a minimum value equivelant to your labour.

Now you get taxed and only have $65 to spend and can't even afford to buy what you made.

Are you getting your worth?

 

[Machjo]

Honestly, whenever we are facing national inflation, high interest rates and federal debt, there ought never be a disincentive for people to work. Now I realize the catch-22 here. If we have debt, inflation and high interest rates, the government must raise taxes to counter those. Yet people must also work harder to counter them too. So it must be done in such a way as to ensure the taxes do not encourage work and encourage saving. A consumption tax does solve both problems, though again more specifically a resource tax would be even more focussed.

 

[Avro]

Yes a consumption tax penalizes the poor, but there are ways around it. In Europe, they have high consumption taxes too, but then again in Germany they also have co-determination legislation, in some countries post-secondary education of some kind is free for all, etc. There can be various ways of counterbalancing this.

Like I said, if there was a way of a counter balance I would support it.

 

[Machjo]

Here is where the current system really fails the worker. If you labour all day to create something and you were paid $100 to do it, the item you made has a minimum value equivelant to your labour.

Now yiou get taxed and only have $65 to spend and can't even afford to buy what you made.

There's a flaw here. Over the course of a day, a week, a month, a year, you'll produce X amount of this $100 item and so get to keep X times 65$. Even without taxes you would not forever buy your own product. You produce it to sell to others so you can buy what you cannot produce yourself.

 

[petros]

There's a flaw here. Over the course of a day, a week, a month, a year, you'll produce X amount of this $100 item and so get to keep X times 65$. Even without taxes you would not forever buy your own product. You produce it to sell to others so you can buy what you cannot produce yourself.

You never get ahead because of the 35%

 

[petros]

You never get ahead because of the 35%

Then if you take a loan on the $35 you're short you now are 35% plus interest to catch up on.

 

[SirJosephPorter]

Yes they are, the average worker used to get a couple of months off, but for the past 20+ years or so pay the full year.

Also, I think your percentage deduction (for Social Security) is larger than CPP, and so is the maximum contribution (with CPP, the maximum you contribute in a year is around 2100).

 

[taxslave]

To put it another way:

Let's say I discover gold in the field right behind my house. Is it reasonable to tax the gold? Sure it is, since I put no work into 'producing' the gold. It was just there. Also, since it's on public land, that gold is a public resource and all have a right to benefit from it. So yes, it's fair to tax the gold.

But once I start digging, pulling the gold out of the ground, melting it down, building semiconductors and other electronic components out of it, marketing it, establishing a distribution network for it, etc. etc. etc. all of that is work and should not be taxed. A moderate income tax might be fair enough, but otherwise it should primarily be a resource tax.

And this is the difference between a resource tax and a consumption tax. A resource tax taxes the resource alone. A consumption tax taxes the work put into it too.

So to support a general consumption tax because you don't want your work to be taxed merely reveals you didn't put too much thought behind it. To prevent the tax from affecting work, then it must be on the resource itself.

How do you propose to tax imports then?
As taxes go consumption taxes are much more fair then income taxes.
I like money and work a lot of extra hours to make more. I see no reason why the government should get more of this than I do. This is a large part of the reason our productivity lags behind other countries. We have zero incentive, actually we are penalized for being ambitious. This theft by government also encourages the underground economy.
A simpler, more fair tax system would also reduce the need for so many none productive government workers at Revenue Canada as well as bean counters and tax lawyers who also produce nothing of value.

 

[JLM]

In 1966 maximum C.P.P. deductions were under $80 annually- there is a prime example of just how ridiculous inflation is. And I'm no economist. LOL

 

[Machjo]

How do you propose to tax imports then?

That would most assuredly require international agreements. Here's one solution I see:

Require all imports to identify the quantity of each resource used in the development of the product, and depending on the tax the producing country has charged on this product, we tax accordingly. This would be complicated since it would involve calculating the rate of each product at the source, and would require the other government to collaborate in enforcing this.

Alternatively, we require the other government to establish common taxation standards as ours if it wants free trade with us. Or again, we could simply not worry about it, which would mean that our own resource industries could suffer. However, owing to lower taxes on the service industry, our service industry would have a competitive advantage over those countries with lower resource taxes and higher income taxes.

But then again, if the concern is employment, we want people spending on work, not resources. I think the last option I presented (i.e. just don't worry about imports and let the market adjust on its own) is the one I'd go for. Sure our resource sector might suffer, but our service sector would benefit.