It’s the time of year when income tax suddenly springs to mind. This year, the tax forms have a funny greenish colour when they make their way in their plastic sleeves into your mailbox. It’s strangely fitting: you’ll probably have a strangely greenish colour when you think about how much tax you pay.
There’s nothing implicitly wrong with taxes — they pay for the hospitals we use, the roads we drive on and the schools our children attend. Since the work has to be done and the bills have to be paid, about the best thing you can ask for is that the tax system fairly shares the burden amongst us all.
But right now, it doesn’t. (Bear in mind, this is a simplified take on a complex tax system.)
There’s been a lot in the media in the last few months about the latest changes to corporate tax rates.
The Harper government has continued to drive corporate taxes down, to the point that the federal share of corporate taxes is around 15 per cent, one of the lowest corporate tax rates in the developed world. With provincial taxes lumped in, the number rises to roughly 25 per cent across the nation, which sounds like a hefty percentage.
For example, that sounds sort of like the kind of number individual taxpayers ante up, too — if you have a taxable income of $42,000, for example, you pay about 19 per cent of your income in combined federal and provincial income taxes. If you’re at $60,000, you pay around 23 per cent of your income.
And that would only seem reasonable because, after all, corporations in this country are legally considered to be persons.
We’re all persons here — so we should be treated the same way.
Except there’s nothing quite as apples-and-oranges as the tax system. Corporations may be legal persons, but they’re very special persons indeed.
Functionally, income taxes (unless you’re self-employed) are based on your gross income, less some deductions — and those deductions are mostly for payments the government is taking from you anyway, like employment insurance premiums or Canada Pension Plan contributions.
Corporate taxes, meanwhile, are effectively based on a company’s net income, or profits.
Governments only take their cut from what’s left after all the costs are paid.
Imagine how little you’d pay if you were actually paying income taxes based on how profitable you were for the year.
What’s that? You weren’t profitable last year?
Exactly. Now, imagine if you were a corporation.
Before you even started paying tax, you’d be able to deduct the costs of doing business — in this case, the costs of doing your job.
Clothes? Clothes are not optional. If you want to work, you need clothes — their costs would be deducted from your employment income. Food? If you can’t eat, chances are you can’t work either. Housing? It’s not optional — and neither are insurance, utilities, city or town taxes or a host of other costs. Car? Bus fares? Tires for your bike? All of them are costs that come off before you set the bottom line. And the HST on those costs? Why, the HST would be gone as well — no more days of paying income tax on the money you’d have to use to pay other taxes, like fuel taxes.
Ah, you say, but what about luxuries, those little things that improve your life?
Hmm. Let’s consider that seriously. When was the last time you saw a manager or senior manager with the most basic cellphone available? How many corporate vehicles have you seen that are the cheapest ones on the lot? Exactly — since there’s wiggle-room built in for equipping staff at corporations, there should be wiggle room for all of us individual little “corporations” as well.
Just imagine if you had the choice — to either pay a fixed amount based on your income, or to pay 25 per cent of every dollar you had left at the end of the year.
It’s pretty obvious which one you’d pick, if you had that choice.
Which, of course, you don’t.
So when businesses cry about the rates they’ve been paying, remember that, compared to you, they’re crying crocodile tears — all the way to the bank.
Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at email@example.com.