Future taxation

[Zmonkey]

Originally Posted by thurmas

I wish this means the end of boutique tax credits that make the tax code far more complicated costly and difficult to manage. I would prefer an increased GST to 7 or 8% to reduce the 2020 deficit inured over a 10 year span and streamlined tax brackets to just 3 levels that would be cheaper to administer and possibly provide a kick start to the economy.

We will never get rid of boutique tax credits since all the meaningful ones money-wise people want. Here is a list of our current tax credits:

-First time home buyers credit
-union dues
-interest on student loans
-child care deduction
-tuition expenses
-moving expenses
-expenses to support a disability
-northern and remote residents deduction
-personal age deductions
-dependant credit
-medical expense credit
-disability credit for home renovations
-textbook credit
-tradesperson tool deduction
-political contributions
-volunteer firefighter tax credit

Which ones are we getting rid of?

[p_xavier]

Good article on the subject. Basically do nothing could also be an option.
https://www.macleans.ca/economy/econ...epayment-fund/

[Zmonkey]

Originally Posted by J.OT13

I agree with this. I absolutely hate tax cuts. The Liberals cut taxes, increase services/programs then run deficits, while the Conservatives cut taxes and programs/services, and run slightly smaller deficits.

A couple hundred bucks won't do anything to help me financially but it sure will do a lot for the Government when multiplied by a few million.

Liberals cut some taxes and add in other ones.
Generally, Liberals have added income taxes to upper-middle class people Several provinces (Ontario, Quebec, BC) all have 52-54% top marginal rates for higher-income people. This is fairly new.

A decade ago when Ontario brought in HST we added a new tax to items that had no PST. For example, things like flying, lawyers, movie tickets, hydro (since removed) were all PST exempt but got the 8% tax when HST was brought in.

Then you have smaller fees, like increased CPP contributions, which business sees as a tax and things like the jet fuel tax in Ontario.

What really matters to me at least is how much money is being brought in. If we need 100 billion, tax the most efficient way to get there.

[ssiguy]

Never was there a more apt time for a thread on taxation.

The reality is that Canada's financial situation is rather poor. Yes Ottawa's debt level is still manageable but when combined high provincial debt, things are much worse. The economy could take years to fully recover especially tourism and real estate and God knows if oil will ever recover. The reality is that our taxes are going up.......way up. The issue is how we raise them and I think a once taboo subject is going to be a real debate, a wealth tax. Most Boomers are sitting pretty due to their wealth in real estate but as they start to die off, the younger voters {who are vastly poorer} are going to start to demand the services and especially standard of living that their parents and grandparents enjoyed.

I can see an inheritance tax and especially a substantial real estate transaction tax especially on properties over $1 million and secondary homes. This would also have the advantage of weaning Canada off it's unproductive real estate fueled economy. I also think we will see things such as OAS becoming income based and not just flat across the board. Hopefully Ottawa {and the provinces for that matter}also starts to get rid of it's politically motivated niche tax write-offs and choice business subsidies.

[lubicon]

Originally Posted by Zmonkey

We will never get rid of boutique tax credits since all the meaningful ones money-wise people want. Here is a list of our current tax credits:

-First time home buyers credit
-union dues
-interest on student loans
-child care deduction
-tuition expenses
-moving expenses
-expenses to support a disability
-northern and remote residents deduction
-personal age deductions
-dependant credit
-medical expense credit
-disability credit for home renovations
-textbook credit
-tradesperson tool deduction
-political contributions
-volunteer firefighter tax credit

Which ones are we getting rid of?

This one is already gone (Alberta).

I think we are likely to see an increased GST and probably a surcharge on income tax similar to what we had during the Chretien years when debt was threatening to run out of control.

Would also prefer to see the government do some serious belt tightening, particularly with the civil service but I don't think this will happen.

[CityTech]

I'd like to see a suite of broad temporary tax hikes (GST, income tax, business tax) that aim to raise $50B a year and expire after six years. That would raise $300B, enough to pay off COVID debts.

[wave46]

Originally Posted by Zmonkey

We will never get rid of boutique tax credits since all the meaningful ones money-wise people want. Here is a list of our current tax credits:

-First time home buyers credit
-union dues
-interest on student loans
-child care deduction
-tuition expenses
-moving expenses
-expenses to support a disability
-northern and remote residents deduction
-personal age deductions
-medical expense credit
-disability credit for home renovations
-textbook credit
-tradesperson tool deduction
-political contributions
-volunteer firefighter tax credit

Which ones are we getting rid of?

Everything except:

-dependent credit

This would be very unpopular, I know.

I'm more of the opinion that people rarely do things for the tax credit, so they're a bad way of setting up incentives. They're more of a way for governments to favour certain people.

Simple taxes are transparent, equal and hard to exploit.

I'd rather educational subsidies direct to someone (say, loan forgiveness or decreased tuition) to complete their education as opposed to a credit when they're already in the workforce. They need the money when in school, not when they're in the workforce.

Same with charitable donations. If you're donating money to a charity, you're doing it because you believe in the cause, not because it is going to get you a tax credit (I hope).

[theman23]

Originally Posted by J.OT13

I might not oppose privatizing VIA Rail. With the flying industry likely to suffer for years to come, possibly never recovering if this type of pandemic returns more frequently, a private company could swoop in and invest in a proper rail system to serve Canada's major urban centres from coast-to-coast (third cost might not be economically viable, beyond Churchill Manitoba).

Why would you take a train if youre afraid of covid?

[J.OT13]

Originally Posted by theman23

Why would you take a train if youre afraid of covid?

I'd take a train with elbow room before a tightly packed pressurized cabin of recycled air any day.

[ssiguy]

I think the days of the Zoomers & Boomers considering themselves the untouchable Patricians of society are finally coming to an end. They have enjoyed the highest wages, standard of living, and wealth accumulation in history and have used it to their political advantage exceptionally well. Now of course they are starting to kick the bucket and younger people are starting to get pissed off at governments treating Boomers with kid gloves while they struggle to pay rent and pay off their student loans.

I think many new taxes are going to be aimed at this very spoiled demographic as their political power starts to {finally} come to an end.

[someone123]

Originally Posted by ssiguy

I think many new taxes are going to be aimed at this very spoiled demographic as their political power starts to {finally} come to an end.

Maybe I'll be pleasantly surprised but my expectation is I'll be paying more income tax or GST while wealthy people who live primarily off of investments will continue to pay a very low effective tax rate.

I'm expecting the "eat the young (and productive)" trend to end only when Millennials get older. Which is the right thing to do but will result in cradle-to-grave generational inequity. But who knows?

[Truenorth00]

Originally Posted by CityTech

I'd like to see a suite of broad temporary tax hikes (GST, income tax, business tax) that aim to raise $50B a year and expire after six years. That would raise $300B, enough to pay off COVID debts.

First, there's no such thing as a "temporary tax hike". They have a way of becoming permanent.

Next, why do we need to pay off the debt? This is the discussion we need to have. There's opportunity cost to every fiscal decision. Are we better off paying off the debt or investing in infrastructure or cutting taxes to boost the economy. Let's say debt is held constant but the economy doubles in size over the next two decades. Now the debt is half as big a problem. This is how economists think about debt. With some nuance. It's admittedly hard to get regular people to think about debt this way, because their frame of reference is personal debt.

Trudeau's approach of a fiscal anchor (30% debt-to-GDP ratio) was a fine concept in theory. In reality, that anchor was too high and with no date target was never all that sincere a policy goal anyway. But it is a concept that should be built on.

The other big elephant in the room is the fiscal imbalance in our confederation. The feds have most of the fundraising power. The province a bit less. And the municipalities a lot less. The municipalities are responsible for the bulk of the infrastructure we use and the provinces are responsible for the bulk of the services we consume. At some point there needs to be a discussion about the adjusting the fiscal framework to match the level of responsibility taken on.

[Truenorth00]

Originally Posted by theman23

Why would you take a train if youre afraid of covid?

Yes. The proximity is less of an issue. And the train can operate with lower seating capacity and still take on far lower losses than an airline operating with 50% load factor.

Originally Posted by J.OT13

I'd take a train with elbow room before a tightly packed pressurized cabin of recycled air any day.

Off-topic but cabin air in an aircraft is fully refreshed every 3 minutes and run through a HEPA filter. The air in an aircraft is substantially cleaner than your home and office.

The issue is proximity as you note.

[Truenorth00]

Originally Posted by someone123

Maybe I'll be pleasantly surprised but my expectation is I'll be paying more income tax or GST while wealthy people who live primarily off of investments will continue to pay a very low effective tax rate.

The uber wealthy have more liquid assets than the rest of us. That enables tax avoidance that normies can't even imagine. That will not change unless there's a global change in attitude on taxing the very wealthy. Should be noted that Europe has moved to crack down on tax havens.

Originally Posted by someone123

I'm expecting the "eat the young (and productive)" trend to end only when Millennials get older. Which is the right thing to do but will result in cradle-to-grave generational inequity. But who knows?

I don't expect much to change. By the 2030s as millennials start getting inheritances, their tune on wealth and inheritance taxes will change substantially. Especially, when that turns out to be literally the only financial break many millennials will have ever gotten in their lives.

[someone123]

Originally Posted by Truenorth00

The uber wealthy have more liquid assets than the rest of us. That enables tax avoidance that normies can't even imagine. That will not change unless there's a global change in attitude on taxing the very wealthy. Should be noted that Europe has moved to crack down on tax havens.

Yeah although there are uncreative tax havens too such as $20M primary residences in Vancouver that are subject to property tax deferral and a capital gains tax of 0%.

[someone123]

Originally Posted by Truenorth00

I don't expect much to change. By the 2030s as millennials start getting inheritances, their tune on wealth and inheritance taxes will change substantially. Especially, when that turns out to be literally the only financial break many millennials will have ever gotten in their lives.

I know a few younger people whose life plan is "do whatever, eventually inherit $1M+". It does not seem good for financial outcomes to be so divorced from how much actual work a person does. Then again, I am in Vancouver and this is probably a bigger trend here than in most of Canada.

[theman23]

Originally Posted by J.OT13

I'd take a train with elbow room before a tightly packed pressurized cabin of recycled air any day.

You get a little bit more elbow room, but aren’t airlines now increasing spacing?
The air quality concern is baseless as already mentioned.
But realistically, the option that most people will choose is to drive instead of taking the train.

[wave46]

Originally Posted by someone123

I know a few younger people whose life plan is "do whatever, eventually inherit $1M+". It does not seem good for financial outcomes to be so divorced from how much actual work a person does. Then again, I am in Vancouver and this is probably a bigger trend here than in most of Canada.

It is also dependent on how long the Baby Boomers last.

If they had kids in their 30s and make it into their 80s and 90s, that Millenial windfall doesn't pay off until they are in their 50s or 60s.

Not exactly genius level life planning.

[theman23]

Yeah, I was gonna say. Most millennials will be planning for retirement before they end up with any inheritance.

[Truenorth00]

Originally Posted by theman23

You get a little bit more elbow room, but aren’t airlines now increasing spacing?

They are. But it's not sustainable. Several airlines have said that current spacing has made operations unprofitable. They can't make money at current load factors. And would normally cancel schedules that had such poor performance. They see this as entirely temporary. If it goes on, for more than a few months, expect to see a more permanent draw down in civil aviation.

Originally Posted by theman23

But realistically, the option that most people will choose is to drive instead of taking the train.

Agreed. That said, making long term investment decisions on the basis of a short term pandemic is probably not a good idea. Covid is hopefully not going to be a permanent reality.