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Brian Jones: Tax the people who have the money


In hindsight, there was never a possibility Premier Dwight Ball would do the smart thing and cancel the Muskrat Falls hydroelectric project, thus preventing the province’s populace from having to squander billions more dollars.

Brian Jones

The depth of the premier’s cowardice and cluelessness was revealed again this week when newly emplaced Finance Minister Tom Osborne mentioned to reporters that Ball doesn’t like the book tax.

Perhaps the premier doesn’t realize he is in charge. If he didn’t like the book tax, he could have told then-Finance minister Cathy Bennett, “I don’t like the book tax. We’re not going to tax books.”

Of course, tax-happy Bennett got her way, and Newfoundlanders were once again the laughingstock among Canadians by being the only province backward enough to implement a tax on books.

Osborne announced this week the book tax will be eliminated Jan. 1, 2018. He also mentioned he doesn’t like the so-called deficit-reduction levy, another of Bennett’s tax ideas that was revived from 15th-century thinking.

The book tax and the deficit-reduction levy should give Osborne a hint that he doesn’t really need a committee to review the province’s taxation system, which he announced Tuesday. What he needs is what his boss lacks: a spine, some backbone, a willingness to do what must obviously be done.

Related story:
N.L. government to kill the book tax

 

Hearing politicians whine about the state of the province’s — or country’s — finances is annoying, mainly because they consistently refuse to address the main problem with the current tax system or acknowledge there is a solution. That solution is basic and straightforward: tax the people who have the money.

A fair tax system is a value judgment. It does not require a committee. A government is either willing to tax the people who have the money, or it isn’t. Most governments aren’t.

The current graduated income tax system gives only the appearance of fairness. You look at a near-average wage earner with a $50,000-per-year salary who pays 26 per cent in taxes to the federal and provincial governments, and you look at someone making $300,000 per year who pays 43 per cent, and it is easy to conclude it’s fair and just.

The $50-K earner pays only $13,000 in total taxes, while the $300-K earner pays a whopping $127,000.

But tax fairness is more accurately arrived at by looking at the amounts people have left after they pay taxes, rather than the amount they pay in taxes.

In the above example, the higher earner pays almost 10 times as much in taxes as does the lower earner. Some people, such as conservatives and flat-tax supporters, claim this is unfair because the government is gouging hard-working, smart, successful people. I say it’s unfair because the higher earner could pay more and still enjoy a high standard of living.

The value of currency is relative. When you take a vacation in Mexico, say, or another Third World country, your Canadian dollars magically become more valuable, purchasing far more than they could at home.

A similar principle applies to taxes. The purchasing power of after-tax income is relative. A $50-K earner has $37,000 after taxes; a $300-K earner has $173,000. Consider, as an example, that each is sending a kid to Memorial University. It will cost the lower earner about 10 per cent of his/her after-tax income. It will cost the higher earner only about two per cent of his/her after-tax income.

Too bad, conservatives say. The economy rewards those who work hard, who are diligent, who strive to succeed, etc.

Fine. There’s a certain selfish logic to that point of view.

But those who take that stand should not, at the same time, whine about deficits and public debt. You can’t have it both ways. If you’re not willing to tax the people who own the vast majority of the economy’s wealth, at least be consistent and shut up about deficits and debt.

 

Brian Jones is a desk editor at The Telegram. He can be reached at bjones@thetelegram.com.

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