Opinion: There’s no such thing as a free lunch, especially with government spending

pgs

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When money going out grows at a pace larger than money coming in the end result is not difficult to predict. People are getting priced out of the housing market as we speak in BC's major centers.
People have always been priced out of the B.C. housing market . Wealth as you know is not static ,produce more , create more wealth , it is a simple concept . As well you always are on the corporations but forget the elephant that eats fifty plus percent of our labor . Why do you forget the government’s roll in this ?
 

Nick Danger

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Jul 21, 2013
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People have always been priced out of the B.C. housing market . Wealth as you know is not static ,produce more , create more wealth , it is a simple concept . As well you always are on the corporations but forget the elephant that eats fifty plus percent of our labor . Why do you forget the government’s roll in this ?
I haven't forgotten government's role, but as much as everyone likes to talk about reducing government spending thhings get real quiet when you ask what services we can do without. My question was pretty straightforward, why is the corporate tax rate today half of what it was in 1980, when the corporate sector was doing just as well as it is today ?
 

Tecumsehsbones

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I haven't forgotten government's role, but as much as everyone likes to talk about reducing government spending thhings get real quiet when you ask what services we can do without. My question was pretty straightforward, why is the corporate tax rate today half of what it was in 1980, when the corporate sector was doing just as well as it is today ?
True Dope's vacays?

Seriously, if I was in charge I'd force people out of government, requiring a permanent 10% reduction at every rank/pay level over a couple of years. Maybe more at the senior levels.

That's one idea.

I'd also set up a Fraud, Waste, and Abuse Task force. 30 people, six teams of five (or five of six), limited to 5 years in government and after that they can never work as employees or contractors for the government ever again. Turn 'em loose, self-tasked, and pay 'em at a low level plus a percentage of what they recover.

I'd also get outside analysts, maybe even foreign companies, to look at re-structuring, consolidating, and eliminating programmes.

We have a thing we call the Base Realignment and Closure Commission (BRACC). We came up with it because you can never close a military base. Congresscritters who have bases in their districts do an "I'll scratch your back, you scratch mine" to shoot down every individual closure. So once a year the BRACC comes up with a slate of closures and re-alignments, and Congress has to vote yea or nay on the whole slate.
 
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The_Foxer

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I haven't forgotten government's role, but as much as everyone likes to talk about reducing government spending thhings get real quiet when you ask what services we can do without. My question was pretty straightforward, why is the corporate tax rate today half of what it was in 1980, when the corporate sector was doing just as well as it is today ?
And it was answered.

As to gov't sercvices - if we're talking federally NOBODY is quiet. Certainly not the ones complaining about the overspending. How about the billions paid to corporations as part of the covid benefits? The 7 billion dollar gun "buy back" they're considering. Justin's month long flying around the country to tell children's stories to kids. The already failing daycare program. The completely bias CBC. The arrivecan app that's turned our border security people into tech support.

I could go on for quite a bit. But you get the idea i'm sure.
 
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pgs

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I haven't forgotten government's role, but as much as everyone likes to talk about reducing government spending thhings get real quiet when you ask what services we can do without. My question was pretty straightforward, why is the corporate tax rate today half of what it was in 1980, when the corporate sector was doing just as well as it is today ?
Was it ?
 

Nick Danger

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And it was answered.
To a point, and in the end it just brings up more questions. The booming success of the corporate sector over the past forty years ties directly back to a grocery list of tax and legislative changes that has made it easier for those who laready have lots of money to go on and make more. This is evidenced quite convincingly, for those who pay attention to such things, by the growing gap between the rich and the poor, and the distribution of available wealth within that spectrum. Maybe I live in a dream world, but I always thought that one of the more important functions of government is to see that the quality of life rises for all Canadians, not just a few at the top of the food chain.
 
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pgs

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To a point, and in the end it just brings up more questions. The booming success of the corporate sector over the past forty years ties directly back to a grocery list of tax and legislative changes that has made it easier for those who laready have lots of money to go on and make more. This is evidenced quite convincingly, for those who pay attention to such things, by the growing gap between the rich and the poor, and the distribution of available wealth within that spectrum. Maybe I live in a dream world, but I always thought that one of the more important functions of government is to see that the quality of life rises for all Canadians, not just a few at the top of the food chain.
The pie keeps growing . You can only reduce poverty by increasing wealth .
 

The_Foxer

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Very cogent arguments. Allow me to respond. Not disagreeing with you, just giving the other side.

For reasons that escape me, both of our legal systems have granted "personhood" to corporations. I would argue that this nullifies the pass-on nature of corporate revenues. And frankly, the large majority of the money that a natural person earns is "passed on" to the government in taxes, and to other persons, both natural and corporate, for goods and services (and loan servicing, which is kinda similar to corporations paying out dividends, the fee for use of somebody else's money).

Further, corporate "persons" benefit from government services at least as much as natural persons. Defence, policing, roads, regulation, law and justice, all these government functions benefit corporations as much or more as they do natural persons.

And three other classes of persons lining their pockets with corporate money exist. . . the 1%, corporate officers and directors (many or most of whom are the 1%) and the corporations themselves. When a corporation buys a million-dollar painting, whom does that benefit, aside from the asset value? The executive suite of the corporation, mostly.

Theories vary on the numbers, but they all agree that money in circulation has a far higher multiplier effect than money invested.

Your last point, I agree on completely.

Here's my simple alternative. . . tax corporations like individuals. 1/3 of all revenues (not profits). Then you can eliminate all other taxes. You may say corporations will simply pass on the cost, but that's true of ALL corporate costs. It would be simpler to administer (there are far fewer corporations than individuals), and while the corporations would pass on the costs, natural persons would also experience a large increase in take-home with no tax withheld.

Just some notions. As I said, I don't specifically disagree with any of your points, and I emphatically support the last of them.
Well, you raise good points of course but i think that a deeper dive shows that while the differences between an 'actual' person and the "person" status granted to corporations has some major differences.

First, the corps were granted 'person' status so that they could lawfully enter contracts, own property etc. Otherwise you'd need to literally have every 'owner' sign every contract etc.

BUT - while they DO enjoy many benefits same as regular persons they don't enjoy them all. They cannot vote for example. They will never benefit from gov't retirement pensions. They make no use of the medical system. Etc etc. In fact i'm sure they wish there wasn't a social medical system - getting all your health care benefits from your employer would tie employees to them even more firmly.

The biggest thing tho goes back to what i mentioned about not being the end user of money. The reason we switched to the current system where corporations pay taxes AND the shareholders ALSO pay taxes on the same money is that it incentivizes people to invest in businesses. And it's an effort to keep with the notion that money should never be double taxed - if we tax the corporation fully for it's profits then we can't tax the shareholders on dividends. You'd be taxing the money twice. So we split the burden between both.

At the end of the day the current model strikes a reasonable balance between making sure that corporations and their shareholders pay fair taxes and yet incentivizing business to grow and invest and for people and pension funds etc to invest in them. Which isn't to say the rates shouldn't be looked at or tweaked or the like from time to time. But taxing business isn't the same as taxing a real person. even tho there's similarities.
 

Tecumsehsbones

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Mais non, mon ami! Many natural persons cannot vote (leastways down hereabouts). Corporations never retire (one feature of corporations is "potentially infite life"). They make as much use of the medical system as anybody with kids (i.e., you pay for somebody else's treatment because it benefits you).

As to "double taxation," feh! All money is double taxed at least. You pay income tax. Then you pay property tax from money that's already been income-taxed. Or you pay sales tax on goods with money that has already been income-taxed. And if those goods are cigarettes or booze, in most U.S. states you'll pay the Federal excise tax, the state excise tax, and state sales tax on the already income-taxed money you buy the smokes and drinks with.
 

Taxslave2

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Aug 13, 2022
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A question that keeps pestering me is why our corporate tax rate today is half of what it was forty years ago, when businesses were every bit as profitable as today ? I grew up in the 60s/70s when a single middle class income paid the mortgage, a car payment, took the family on a summer vacation and maybe put a kid or two through college along the way. An alternative to cutting spending is to increase revenues, and a lot of that can be accomplished by ending the free lunch we've been handing to the corporate sector just to line their own pockets.
Any taxes inflicted on businesses are just passed on to the consumer in higher prices. A good argument could be made to do away with business tax altogether. Or do away with personal income tax and just tack on whatever the government wants to everything you buy. GST would then be around 24% instead of 7%
 

Taxslave2

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Yes, but wages have remained largely stagnant, in lower income classes not even keeping pace with the cost of living, even with two incomes where one used to suffice.
You can blame most of that on the amount of taxes multiple levels of government heap on us.
 

Tecumsehsbones

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Any taxes inflicted on businesses are just passed on to the consumer in higher prices. A good argument could be made to do away with business tax altogether. Or do away with personal income tax and just tack on whatever the government wants to everything you buy. GST would then be around 24% instead of 7%
Then what's wrong with my idea of taxing only corporations? They'll pass on the tax to consumers, consumers will suffer higher prices but no income taxes (or GST), and corporations will be powerfully motivated by good ol' market forces to set their profit margins to reasonable levels, lest the competition undercut them.
 

The_Foxer

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To a point, and in the end it just brings up more questions. The booming success of the corporate sector over the past forty years ties directly back to a grocery list of tax and legislative changes that has made it easier for those who laready have lots of money to go on and make more.
Does it? The fact is those with lots of money have never had a problem making buttloads more long before the corporate structure came along. They hardly needed to add a layer of complexity to make more or get taxed less.

In reality the corporate structure has allowed the middle class to enjoy partaking in the wealth creation that has traditionally been the exclusive realm of the wealthy. Anyone can buy a share in a company even as big as IBM or what have you. lets not forget that pension funds for teachers and healthcare workers are some of the biggest 'market players'.
This is evidenced quite convincingly, for those who pay attention to such things, by the growing gap between the rich and the poor, and the distribution of available wealth within that spectrum. Maybe I live in a dream world, but I always thought that one of the more important functions of government is to see that the quality of life rises for all Canadians, not just a few at the top of the food chain.
actually once again historically it's helped close the gap. But it's really not the corporate tax structure that's affecting the difference between the rich and the poor. And as you have claimed that this direct connection is evidenced - i'll have to ask you for your evidence. It really doesn't make sense on the face of it here in canada - individuals who collect dividends from the business must still pay tax on that money, and the business still has to pay tax on that money.

edit = hit return to soon: You will also have to explain what's wrong with the wealthy being wealthy. Unless you can demonstrate that their wealth is taken from the wealth that would have gone to others then they're creating economic activity which actually increases the wealth of the overall population. Gates may be a billionaire., but he made thousands of Microsoft millionaires as he got there and that made many thousands of good paying jobs for others both directly and indirecty. Nobody lost a cent and in fact benefited.

I'm afraid you're going to have to demonstrate that there's some sort of 'bad thing' about some people gaining wealth .
 

The_Foxer

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Then what's wrong with my idea of taxing only corporations? They'll pass on the tax to consumers, consumers will suffer higher prices but no income taxes (or GST), and corporations will be powerfully motivated by good ol' market forces to set their profit margins to reasonable levels, lest the competition undercut them.
So the self employed guy pays nothing?
 

Tecumsehsbones

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So the self employed guy pays nothing?
Right. Nor do wage-earners. They "pay" their taxes because the higher taxes on the corporations are "passed on" (like all corporate costs) to consumers.

Yes, you can expect an across-the-board price hike of 30-50% all at one go, but you won't be having the bite taken out of your paycheque or self-employment/sole proprietorship revenue.
 

The_Foxer

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But under that model a self employed person who makes something or delivers service pays no personal tax OR tax he leaves in the business. So nobody is paying taxes on those goods or services. All you would do is de-incentivize the corporate structure and that would have some pretty serious implications to how our economy would grow or work.

Further, you would be taxing people at the same rate. The poor single mom would be paying the same amount of taxes as the couple earning 200 k each. They'd pay the same amount for their heavily taxed loaf of bread. It would basically be creating a flat tax for people. While there are advocates for such things it's often seen as socially unfair, and at least there you can give people a basic personal exemption so they don't pay any tax on the basic amount. In fact the homeless would still have to pay the equivilant of 'income taxes' on anything they buy.

And considering the amount of tax you'd have to charge a business to make up for the income tax loss - income tax making up something like 80 percent of all gov't revenues currently - that impact on the lower classes would be insanely high.

You might offset that by some sort of gov't pay out or something but that's horribly inefficient - the average gov't payback system costs about 15-20 percent of the money it collects and redistributes.

Further, there would be no tax benefit for people to go to school or while they attend.

Not to mention the fact that it would just mean that businesses would run at zero profit all the time. Any profit is paid out in wages and not dividends so that they don't pay any tax.

Now having said that - it's not a novel idea. It would not be the first time canada had such a system. Pre ww1 there were no income taxes, just business taxes and such. Which was fine when we provided next to no gov't services. But i just don't see how that model could work today.
 

Tecumsehsbones

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But under that model a self employed person who makes something or delivers service pays no personal tax OR tax he leaves in the business. So nobody is paying taxes on those goods or services. All you would do is de-incentivize the corporate structure and that would have some pretty serious implications to how our economy would grow or work.

Further, you would be taxing people at the same rate. The poor single mom would be paying the same amount of taxes as the couple earning 200 k each. They'd pay the same amount for their heavily taxed loaf of bread. It would basically be creating a flat tax for people. While there are advocates for such things it's often seen as socially unfair, and at least there you can give people a basic personal exemption so they don't pay any tax on the basic amount. In fact the homeless would still have to pay the equivilant of 'income taxes' on anything they buy.

And considering the amount of tax you'd have to charge a business to make up for the income tax loss - income tax making up something like 80 percent of all gov't revenues currently - that impact on the lower classes would be insanely high.

You might offset that by some sort of gov't pay out or something but that's horribly inefficient - the average gov't payback system costs about 15-20 percent of the money it collects and redistributes.

Further, there would be no tax benefit for people to go to school or while they attend.

Not to mention the fact that it would just mean that businesses would run at zero profit all the time. Any profit is paid out in wages and not dividends so that they don't pay any tax.

Now having said that - it's not a novel idea. It would not be the first time canada had such a system. Pre ww1 there were no income taxes, just business taxes and such. Which was fine when we provided next to no gov't services. But i just don't see how that model could work today.
He got those goods from corporations, they were trucked in by a corporation or by an independent who pays a corporation for his fuel, maintenance, and for his truck in the first place. Plenty of tax is paid. It's also easier to administer (there are far fewer corporations than people), and you won't have to listen to morons bellyache about taxes. Corporations are already required to report their earnings, so there's plenty of data available on how much they made. The U.S. IRS and Revenue Canada could be reformed into much smaller agencies of skilled, smart, dedicated accountants and lawyers, and no more pissing and moaning about "my money" or "my rights." Corporations are created by the state, and the state can do as it pleases to them.

And this involves not taxing profits, but taxing revenues. That's the key. Corporations may choose to run at low or zero profit, but deliberately reducing revenue is corporate suicide.

Will there be fiddling to avoid tax? You bet. That's why the expert agency (IRS or Revenue Canada) should be given broad powers, so you don't have to go to Congress or Parliament to outlaw the latest trick.

The money is all the same, and in the stream of commerce, it comes from everybody except the tiny minority who live their lives on a non-cash basis. This just makes it easier to collect, and does away with all the trickery in A,B,C, and so on through X,Y, and Z taxes.

Your look at history is irrelevant. Back in the day most government revenues came from customs duties, and as you say, government was a much smaller share of GDP and provided very few services. Those days are gone. You can't run a 21st-century economy on 18th-century "do for yourself" principles. Get over it.
 

The_Foxer

Council Member
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He got? those goods from corporations,
Says who? What if he's a programmer? or a doctor? or an accountant who serves foreign national companies? All producing value but not buying any goods in any substantial amount.

So now you're ONLY focused on the goods producing sector, which would place such an incredible burden on them our country wouldn't have one pretty quick.

Not to mention you're violating one of the core principles of taxation, that you never tax a dollar twice. You're suggesting that the full price of the item be taxed when it goes to market and THEN taxed AGAIN when it's sold. So - if i buy an item to sell in my store that cost the seller 10 dolllars to make and sell, he's got to charge me more like 30 - 50 becuse of tax - and i have to charge the customer more like 60 - 100 just to break even. For a 10 dollar value. That doesn't work.
Plenty of tax is paid.
Well no, it isn't. Currently businesses pay about 15 percent of the total tax revenue federally. Persons pay about 50 percent. Now you're talking about reducing even the number of businesses paying - which means that unless businesses that were required to raised their prices by about 4 or 5 times the current level at least there would not be enough tax paid. So there's not 'plenty' of tax paid unless the rates are insanely high.

You'll have to show your calculations to suggest otherwise, At a glance the numbers make no sense. And considering that would have to apply to food as well the effect would be pretty catastrophic.

And this involves not taxing profits, but taxing revenues. That's the key. Corporations may choose to run at low or zero profit, but deliberately reducing revenue is corporate suicide.

So if i'm a larger corp. that builds houses for example, you're saying i can start up a company to make as much lumber as i want, hold on to it as long as i want, and pay no taxes - then i can collapse that company due to 'lack of sales' and buy the company and it's assets for next to nothing and own all that wood. Which i can use to build homes that i can sell at an unfair advantage to smaller groups and make buttloads of revenue on having paid much smaller taxes.

Or i guess i could just sell the wood at half price having paid no tax on it in the first place. The gov't still makes SOME tax but that's going to make it hard on the little guys.

Your idea is waaaaay too simplistic and easy to bypass. And it would lead to massive inconsistencies.

The money is all the same
The money might be but the customer isn't. A rich person making 150 k per year untaxed may not care that a loaf of bread is 10 dollars. But the single mom struggling by on 36 thousand a year is definitely going to care, even if she didn't pay tax.

Your look at history is irrelevant.

ahhh the battle cry of everyone destined to repeat it :) Of course it's relevant.

As you say we've moved to a level of govt and services that are different, and your idea simply doesn't work in that environment. I'm afraid it's you who's going to have to get over it. You want the services? You need to stick with a model that works.

Yours is less functional, just as complicated and easy to bypass, and represses the economy. And for what? how would it make things better? Even if you COULD collect the same amount of taxes, now the poor would be paying more of it and the rich less. How is THAT a benefit?

Sorry the whole idea just doesn't work on any level.
 

petros

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Then what's wrong with my idea of taxing only corporations? They'll pass on the tax to consumers, consumers will suffer higher prices but no income taxes (or GST), and corporations will be powerfully motivated by good ol' market forces to set their profit margins to reasonable levels, lest the competition undercut them.
In Canada a 1 person business is a Corporation
 
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Taxslave2

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Then what's wrong with my idea of taxing only corporations? They'll pass on the tax to consumers, consumers will suffer higher prices but no income taxes (or GST), and corporations will be powerfully motivated by good ol' market forces to set their profit margins to reasonable levels, lest the competition undercut them.
So basically a value added tax. What about the other levels of government that take from our wallets without asking?