Canadian Tax Cuts Hurt all but Richest

Karlin

Council Member
Jun 27, 2004
1,275
2
38
"Trickle-up economics - The rich are getting richer — and we're all helping" http://www.straightgoods.ca/ViewFeature7.cfm?REF=508

K - Tax cuts might sound good, but actually they are putting the poorer Canadians further behind: The richest Canadians taxes dropped by 11%, but for the rest of us taxes dropped by only 1%, while government health and other program spending was slashed.


------article [from link above]:

by Hugh Mackenzie

On September 25, Statistics Canada released a new study looking at how the distribution of income in Canada has changed over the past 20 years and found the lion's share of income growth has been going to the richest of the rich — not to the rest of us.

Two days later, the Minister of Finance revealed the federal government surplus for 2006-07 was substantially higher than originally projected, and hinted broadly that his number one priority for the extra money was tax cuts.

What do these two things have to do with each other?

The Stats Can study confirmed what the Canadian Centre for Policy Alternatives found last spring: there is a large and growing income gap between the rich and the rest of us.

But by zeroing in on those at the top of the income scale, Statistics Canada also provided some eye-popping new detail.

It turns out that the growth in the share of income among the richest of Canadians is actually concentrated right at the top — among Canada's richest.

The share of personal income for the richest 5 percent of Canadians was stable from 1982 to 1992 — they took about 21 percent of Canada's total income pie.

But between 1992 and 2004, their share grew to 25.3 percent of the income pie.

That doesn't sound like much, but that's a 4.3 percentage point increase in the share of all income earned in Canada, in a statistic that usually doesn't change much.

And it turns out the higher the income scale you go, the more money the richest of Canadians made: More than 90 percent of the gain in income share among the richest 5 percent went to the richest 1 percent of Canadians. Half of that gain went to the richest 0.1 percent. And remarkably, 20 percent of the gain went to the richest of the rich, the millionaires sitting in the top 0.01 percent of Canada's income scale.

Now here's where the dots line up. The Statistics Canada study also looked at the effective tax rates paid by individual Canadians in each income group.

It found that the average effective tax rate declined by about one percentage point for 95 percent of Canadians between 1992 and 2004.

The average effective tax rate for the top 5 percent declined by about two percentage points.

But the effective tax rate for the richest of the rich dropped dramatically.

The top 0.01 percent, the millionaires sitting at the top of the heap, enjoyed an average effective tax rate drop of 11 percentage points.

What the Statistics Canada study tells us is that between 1992 and 2004, Canada's income tax system ceased to be progressive for the richest 5 percent of tax filers.

And what about the rest of us? For almost a decade, our provincial and federal governments have been talking tax cuts, but those cuts went into the pockets of the richest of the rich. And that tax break only bolstered the unprecedented growth in the share of income going to Canada's richest.

Canadians have paid dearly for the tax cut agenda of the past decade — with cuts in services like health care and education; with persistent poverty and homelessness despite economic prosperity; with deteriorating environmental quality; with cash-starved cities; with crumbling public infrastructure.

For what? For only the select few — the richest of the rich — to enjoy the winning combination of rising personal income and falling taxes while our public services suffer?

Soon, our federal government will return to Parliament with a Throne Speech expected to trumpet the benefits of tax cuts — 'putting more money in your pockets'. The problem with that statement is the evidence proves quite the opposite is at play.

The evidence should make all Canadians wonder whether it's truly in our best interests to vote for tax cuts at the expense of investments that could benefit everyone.

Tax cuts come at the expense of affordable university tuition, housing and childcare — three things Canadians tell Environics Research they'd like their governments to invest in.

The good news is that we have options. We can demand our governments invest our surplus in the things that benefit the majority of Canadians, rather than rewarding the few at the top. Because the rich are getting richer — and we're all helping.

Hugh Mackenzie is a research associate with the Canadian Centre for Policy Alternatives.
 

s243a

Council Member
Mar 9, 2007
1,352
15
38
Calgary
I think the article is misleading. Isn’t it talking about changes in after tax income rather then changes in the income tax rate?
 

jimmoyer

jimmoyer
Apr 3, 2005
5,101
22
38
68
Winchester Virginia
www.contactcorp.net
From Statistics Canada website:

http://www.taxtips.ca/statistics.htm#TaxPie



5. Federal personal income tax breakdown.
Statistics Canada recently published a study titled Federal Personal Income Tax: Slicing the Pie, which examines the breakdown of federal personal income taxes paid by high and low income earners in Canada, from 1990 to 2002. Income earners were divided into 3 groups for the study:


10% of taxpayers with the highest incomes This group included taxpayers earning:
over $48,700 in 1990
over $64,500 in 2002

50% of taxpayers with the lowest incomes This group included taxpayers earning:

$19,000 or less in 1990
$23,000 or less in 2002

40%, or remaining taxpayers, with intermediate incomes This group included taxpayers earning:

$19,001 to $48,700 in 1990
$23,001 to $64,500 in 2002

The following tables summarize the results of the study.
a. Share of federal personal income tax paid by the 3 groups of taxpayers in Canada

Income group % of federal personalincome taxes paid
............................................1990.. ........2002
50% with lowest incomes..............6.7%..........4.4%
40% with intermediate incomes.....47.3%........43.0%
10% with highest incomes............46.0%........52.6%

Other tables show much lower compliance
by lower taxpayers


All information in this article adapted from Statistics Canada publication No. 11-621-MIE2005024, April 22, 2005.

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Whenever there is any tax cut, those who pay the most taxes ALWAYS stand to reap the benefit.
Those who pay little or no tax HARDLY EVER benefit from a tax cut.

Go figure.

:)

RUFF !
 

MikeyDB

House Member
Jun 9, 2006
4,612
63
48
I remember a line a contributor used on another forum I participated in recently..."I never got a job from a poor man.."

When the taxes of a nation are divided to pay for infrastructure and services for the people, who gets the greater benefit from those taxes? Is it the poor family that can't afford to send their children to university? Is it the land developer who purchases land on spec and then has the municipality kick-in for paying for servicing that area so the developer can rake in windfall profits?

Who get's taxed what is only part of the equation...a part of the formula....

When taxes are apportioned for health care, is it the Belinda Stronachs who can afford to go anywhere in the world for their medical needs who benefit? When the provincial government sells-off a four-lane highway to a private consortium is it all the people who paid for that road who make the money and reap the advantages?

There's always been a cry for tax reform, but that cry and the issues have rarely ever looked at how the money is spent to determine if the expenditure of taxes benefits the majority rather than the wealthy minority.
 

jimmoyer

jimmoyer
Apr 3, 2005
5,101
22
38
68
Winchester Virginia
www.contactcorp.net
Actually in any discussion of tax burden, too few people are aware of the statistics showing
50 percent of the population pay less than 4-5 percent of all income tax collected.

This so staggers the average voter, that
1. they don't believe it
2. they immediately assume this tax burden does not parallel other taxes paid
3. they don't realize that any tax cut automatically favors those who pay more taxes (the rich)
4. they don't think through the fact that 50 percent of the population won't see much of a tax cut
because they don't pay as much taxes.

There is a clever flip side to all of this that favors the "bash the rich" class warfare crowd.

If the bottom 50 percent of earners pay only 4 to 5 percent of all income tax collected, then
it really shows how unequal this society is.
 

iARTthere4iam

Electoral Member
Jul 23, 2006
533
3
18
Pointy Rocks
Canadian Tax Cuts Hurt all but Richest would be better stated as tax cuts help those who pay taxes, do nothing for the poor.

Of course the poor don't support tax cuts, it does nothing for them. Anyone losing 50% of their income has a right to be concerned.
 

YoungJoonKim

Electoral Member
Aug 19, 2007
690
5
18
Yes, this is the reality of Corporati....I mean Conservative Party.
I love it when how this goes about~ Little by little, public services are cut and implementation of privatized mental hospital..which might cost thousands for working class...us...
 

Dexter Sinister

Unspecified Specialist
Oct 1, 2004
10,168
536
113
Regina, SK
I don't understand why the political far right keeps pushing the same agenda: tax cuts, deregulation, privatization, reduced social services, yadda yadda... That stuff all comes out of Milton Friedman's so-called Chicago School in the late 1960s and early 1970s, and there's currently a significant group of believers at the University of Calgary advising the current government of this country. In the few places it's actually been tried to any significant degree, it demonstrably doesn't work. Chile, Uruguay, Argentina, and Brazil, all tried it in varying degrees in the 1970s, with the detailed involvement of the Chicago School, after assorted CIA-backed military coups. What seems to happen is repression, corruption, violence, massive inflation, falling real incomes, the rich get richer and fewer, the poor get poorer and more numerous, and the middle class pretty much disappears. They'll all make the same claim the Marxists do about their program: it's never really been properly implemented so there haven't been any fair tests of it. BS. The program is morally bankrupt and intellectually sterile, and doesn't work in anybody's favour except large corporate interests.
 

YoungJoonKim

Electoral Member
Aug 19, 2007
690
5
18
For once, I want a with party with conservative view & lefti economic standing..
But...all Liberal, NDP, and Greenie..well...they are all liberals.
Better vote for Greenie then [woo]
 

Toro

Senate Member
I don't understand why the political far right keeps pushing the same agenda: tax cuts, deregulation, privatization, reduced social services, yadda yadda... That stuff all comes out of Milton Friedman's so-called Chicago School in the late 1960s and early 1970s, and there's currently a significant group of believers at the University of Calgary advising the current government of this country. In the few places it's actually been tried to any significant degree, it demonstrably doesn't work. Chile, Uruguay, Argentina, and Brazil, all tried it in varying degrees in the 1970s, with the detailed involvement of the Chicago School, after assorted CIA-backed military coups. What seems to happen is repression, corruption, violence, massive inflation, falling real incomes, the rich get richer and fewer, the poor get poorer and more numerous, and the middle class pretty much disappears. They'll all make the same claim the Marxists do about their program: it's never really been properly implemented so there haven't been any fair tests of it. BS. The program is morally bankrupt and intellectually sterile, and doesn't work in anybody's favour except large corporate interests.

Your history is off, Dex.

The only place in Latin America where any widespread free market reforms occurred was in Chile, and Chile has had the best economy in Latin America over the past 30 years. It is also, despite the repression of the times, the most stable country in Latin America today. Uruguay, Argentina and Brazil decidedly did not pursue such policies. Those countries, like much of Latin America, pursued populist, statist policies, designed for "the people" with utterly un-Chicago-like prescriptions, such as cranking the printing press. To say that most of Latin America pursued monetarist prescriptions and the result was 1000% inflation is utterly dead wrong. Its difficult for any knowledgeable commentator to ascribe quadruple-digit inflation to anything associated with Milton Friedman.

Perhaps you should go and have a beer with N, and see how gummed up the labour markets have been in Europe for the past 20 years, where unemployment has consistently been higher on the continent, economic growth weaker and job growth anemic.

As for the rhetoric about a "corporate agenda" perhaps you can explain how taxes have uniformly risen across the industrialized world the past 30 years, despite the era of Thatcher, Reagan, Mulroney and all these other straw/bogeymen of the Left? I'd be interested because it certainly seems the data simply doesn't match the rhetoric.



http://forums.canadiancontent.net/off-topic/68483-global-taxes-rise.html

As for "the poor getting poorer" and the "rich getting richer," here is one of many, many studies that refute this assertion.



http://www.imf.org/external/pubs/ft/fandd/2001/09/dollar.htm

I would also point you to the World Development Indicators, which have consistently documented the alleviation of poverty around the world the past 3 decades. The number of people living on absolute poverty has risen from 23% in 1980 to ~12% today.

http://www.worldbank.org/data/wdi

Here is one of many graphs you can find here.

http://runningofthebulls.typepad.com/toros_running_of_the_bull/2007/05/world_developme.html

 

Niflmir

A modern nomad
Dec 18, 2006
3,460
58
48
Leiden, the Netherlands
The first stage of the Washington Consensus, from the horse's mouth:
Drastic budget cuts and tax reform
Price liberalization
Trade and foreign investment liberalization
Private sector deregulation

These conditions were imposed on many of the Latin American countries in exchange for help form the IMF. They were also the policies that were the easiest to follow:

Thus, at the beginning of the decade [90's] an inordinate number of countries in different continents, each with a different development experience and with wildly varying economic structures and political systems, embarked on experiments with market reforms, all guided by their also wildly varying interpretations of the Washington Consensus.


Most countries advanced quite rapidly in the implementation of the "easy" prescriptions of the Consensus. Typically, these were the ones that were hard to decide but comparatively easy to implement. These reforms often required just a change in the macroeconomic rules of the game that could be accomplished by issuing a decree or some form of executive order. Dismantling currency controls and adopting a single exchange rate, eliminating price controls, lowering import tariffs, easing restrictions to foreign investment, or deregulating the financial sector are decisions with formidable consequences that many governments found relatively easy to implement in the early 1990s. This was especially true in the first stages of newly elected administrations that had to deal with disastrous legacies left by their predecessors in government. It became quite common under such circumstances for administrations to secure some form of extraordinary legal authority that enabled them to enact measures that, under normal circumstances, would have required congressional approval18.

Which shows that the reforms proposed above have in many cases led to economic turbulence, and it is now believed that is "might have been too reductionist".
 

Toro

Senate Member
The first stage of the Washington Consensus, from the horse's mouth:


These conditions were imposed on many of the Latin American countries in exchange for help form the IMF. They were also the policies that were the easiest to follow:



Which shows that the reforms proposed above have in many cases led to economic turbulence, and it is now believed that is "might have been too reductionist".

Absolutely.

The problem with "The Right" is that they often believe that all you need to do is cut taxes, de-regulate, lower trade barriers, etc. and BANG! you have growth for all. That is not always the case. Development and growth and far more complicated, and require many other factors having nothing to do with economic policy, i.e. stable institutions, rule of law, cultural issues, levels of education, etc.
 

Niflmir

A modern nomad
Dec 18, 2006
3,460
58
48
Leiden, the Netherlands
Absolutely.

The problem with "The Right" is that they often believe that all you need to do is cut taxes, de-regulate, lower trade barriers, etc. and BANG! you have growth for all. That is not always the case. Development and growth and far more complicated, and require many other factors having nothing to do with economic policy, i.e. stable institutions, rule of law, cultural issues, levels of education, etc.

But that is a frightening conclusion for the science of economics. If the outcomes of a national economy depends on so many factors, then in the words of John von Neumann, "With four parameters I can fit an elephant, and with five I can make him wiggle his trunk." Of course, engineers are used to working with way more than 4 or 5 degrees of freedom but I get the heeby geebies at about 2.

I of course come from the school of thought that sees nothing wrong per se with a company with a huge market share but I believe that they have the power to use that market share to allow it to compete in ways that have nothing to do with efficiency. Also, an inefficiently made safe product is better in some case than an efficiently made unsafe product. In any case I think any broad single sentence social reform is doomed to failure.
 

Toro

Senate Member
Indeed? I guess Naomi Klein and the dozen or so people whose reviews of The Shock Doctrine I've read in the last six weeks must all be shocking liars then.

Naomi Klein is your source?

Read some more reviews.

http://ipezone.blogspot.com/2007/09/i-dream-of-naomi-globophobe.html
http://observer.guardian.co.uk/review/story/0,,2174860,00.html
http://www.nysun.com/article/63867?page_no=1
http://hnn.us/blogs/entries/43376.html
http://www.economist.com/blogs/freeexchange/2007/10/naomi_klein_smackdown_roundup.cfm
http://www.johannorberg.net/?page=displayblog&month=10&year=2007#2377

Naomi Klein is not a serious commentator IMO.

Think of her as the equivalent of Rush Limbaugh, an extremely biased ideologue who fits facts to support her worldview.

A more legitimate critic is Joseph Stiglitz.

http://www2.gsb.columbia.edu/faculty/jstiglitz/index.cfm
http://en.wikipedia.org/wiki/Joseph_E._Stiglitz

Or Amartya Sen

http://en.wikipedia.org/wiki/Amartya_Sen