TEENAGE ENTRY LEVEL WAGE BELOW MINIMUM WAGE EQUALS BLATANT DISCRIMINATION AND SOCIAL JUSTICE FAILURE

TEENAGE ENTRY LEVEL WAGE BELOW MINIMUM WAGE EQUALS BLATANT DISCRIMINATION AND SOCIAL JUSTICE FAILURE

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

In preparation for the 2019 provincial election certain provincial Conservative candidates once again are proposing economic changes that target the most vulnerable – teenage entry level wage below minimum wage and flat taxes (tax-system).

Alberta Minimum Wage Profile (April 2017 – March, 2018) ‘Alberta Analysis (wage-profile)- At 28.8%, the 15 to 19 year old group  remained the largest group of minimum wage earners in Alberta, and the 20 to 24 year old group was the second largest at 20.5%.  Over one quarter or 28.3% of Alberta minimum wage earners were students’.

Fact check:

    • Some teens work to help support their families.
    • Some teens have already left home and are trying to establish themselves as hard working independent, self sufficient  and responsible individuals.
    • Some teens are emancipated minors who leave their families because of abuse and untenable living conditions at home.
    • Some unattached (and married) individuals are living at home because they can’t afford Alberta housing prices.  From the report:   During the current reference period, 39.5% of minimum wage earners were living with their parents.’
    • Households with children receive Canada Child Benefits, unattached individuals do not.
    • It costs more for unattached individuals (independent teens) to live than married without children (Market Basket Measure).  If one person (unattached) household has a value of 1.0, the value for a two person (married) household is 1.4, not 2.0.
    • Discrimination based on age is a violation of human rights.

Conservatives have referred to the Australian model for teenage entry level wages. Australia Minimum Wage Reduction for Teens in 2018 (based on $18.93 minimum wage):

  • <16 years 36.8% or $6.97
  • 16 years 47.3% or $8.95
  • 17 years 57.8% or $10.94
  • 18 years 68.3% or $12.93
  • 19 years 82.5% or $15.61
  • 20 years 97.7% or $18.49

Living wage Calgary is over $18 ($36,000/yr.) and very few living wages in Canada are below $15.00.  Alberta minimum wage of $15 ($30,000/yr.) is below the living wage, and now Conservatives want to decrease the minimum wage, for example if based on Australian model, an 18 year old to approx. 70% or $10.50/hr. ($21,000/yr.)?

It is difficult to draw statistics on specific youth ages, but from several sources and from Statistics Canada Census Profile 2016, statistics show approximate Alberta population age 15 – 19 to be 240,035, age 20 to 24 to be 261,830.  Approximately 13% to 15% of total Alberta employees are from age group 15 to 24. Do Conservatives really want to target the minority group of 13 to 15%?

In 2011 (profile-youth) the Services-Producing sector in Alberta comprised 77.9% of all youth employment.  In 2011, Alberta youth accounted for 37.7% of those employed in the Accommodation and Food Services industry.  The average hourly wage paid to youth was $9.57 less than the average hourly wage paid to all Albertans. Approximately 63% age 15 – 24 are full  time employees. In 2011 average hourly wage for all Albertans was $25.47 and for age 15-24 $15.90.

Premise that age 21 before 100% wage takes effect or five years to become skilled at a job is just plain discriminatory, a violation of human rights and a social justice failure.  At 18 years of age, these persons are adults, they can vote, and many have left home to work and become independent persons. Their parents no longer receive Canada Child Benefits.

Why would parents support a policy that is discriminatory?

If problems lie with small business then solve the small business problem instead of targeting vulnerable minorities to bear the brunt of failures of business.   Apparently politicians, businesses can’t see that they will pay one way or another-more welfare and food banks at one end and ability to live decent respectful lives at the other.

Jason Kenney needs to reveal his plan for teen minimum wage reduction in its entirety so voters can make informed choices on their candidates.

CONCLUSION

What is needed in this democratic country are centre left and right parties for balance and to challenge each other so right and fair decisions are made.  What is not needed are far right Conservatives (Jason Kenney – teen minimum wage reduction and flat taxes, Doug Ford who broke his promise by cancelling Ontario Liberal’s basic income pilot project, and Trump’s economic policies making the rich even richer).

Proper budgeting implies that if there is a problem with deficits, taxes should not be cut without reducing the “fat” or excesses.  Conservatives are also once again proposing bringing back the flat tax without cutting loopholes for the wealthy. Why is it that they always target the vulnerable, cut the revenue side by cutting taxes, but never cut regressive tax expenditures or loopholes for the wealthy?

Parkland Institute (things_to_know_about_a_15_minimum_wage_in_alberta) makes the following points:

  • Consumer spending power has more impact on employment than raising the minimum wage.

  • Raising the minimum wage by meaningful amounts helps put a dent in increasing income inequality.

  • Income inequality increases health care costs and slows economic growth.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

CONSERVATIVE REGRESSIVE PENSION INCOME SPLITTING GOLDMINE FOR WEALTHY MARRIED PERSONS

CONSERVATIVE REGRESSIVE PENSION INCOME SPLITTING GOLDMINE FOR WEALTHY MARRIED PERSONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

Regressive tax expenditures cannot be blamed on just one political party, however, some implemented by Conservatives are the most egregious of all.

The Canadian Centre for Policy Alternatives (CCPA) “Out of the shadows” (policyalternatives)is a must read for all taxpayers.  It examines benefits distribution from 64 of Canada’s personal (business not included) income tax expenditures and provides egregious and shocking facts on how wealthy minority benefit the most.  Only five were considered to be progressive. Remaining 59 regressive expenditures cost $100.5 billion in 2011 while providing more benefit to those above the median individual income level (based on CCPA individual income, not combined couple income, of $30,000 or $15/hr. wage based on 2000 worked hours) and in some cases benefit top decile of wealthy the most.  The monies doled out in these expenditures equals same amount of all monies collected in taxes.

Stephen Harper, former Canadian Conservative Prime Minister, introduced the hastily and poorly planned regressive pension income splitting (P.I.S.) partly as appeasement for the controversial crackdown on income trusts (another regressive tax expenditure).

Fact Check:  First, married seniors, who have never had children, using P.I.S. pay less taxes just because they are married even though it costs singles more to live (Market Basket Measure – MBM).  Second, married seniors with equal incomes cannot use P.I.S. and, therefore, pay more taxes.  Third, poor married seniors benefit less as they have less income to split.  Fourth, senior singles and lone parents cannot use P.I.S., ever.  So, the wealthy married benefit most (?including Stephen Harper worth $7million when he becomes a senior). Exactly how many Canadian taxpayer households are completely left out of this formula?  – Certainly more than 50% or the majority. Just speak the truth, it is impossible for singles and low income seniors to achieve financial equality with this regressive tax expenditure.

Compounding effect of regressive expenditures ensures wealthy become even wealthier. Tax savings from P.I.S.means full contributions can be dumped into Tax Free Savings Accounts (TFSA) (another regressive tax expenditure implemented by Stephen Harper where maximum contributions now total $11,000 per year for married households).  Wealth ripple becomes ever wider because investments earned from TFSA contributions without capping of individual limits are never taxed.

CCPA states P.I.S. is the most regressive tax expenditure costing government $975 million annually – that is almost $1 billion a year.  Eighty-three per cent (83%) of benefit goes to top 10% and maxes out at $11,700 (equivalent to $6/hr. wage) when $128,800 (equivalent to $64/hr. wage) of pension income is transferred from higher earner to spouse with no income (10 times the maximum benefit to Canada’s poorest from only five progressive tax expenditures).

Over ten years the P.I.S. amount to wealthy married people could total almost $120,000.  It is not possible to calculate the wealth achieved from TFSA investments. And, it is apparent that there is no shame on the part of the wealthy that they are robbing from the poor to pay themselves.  Singles and poor seniors deserve to feel righteously angered at the gross financial discrimination of this formula.

CCPA states that from an aggregate perspective $103 billion lost annually to 64 tax expenditures is an embarrassing failure of Canadian tax policy.  Many of those in poorest deciles are singles and lone parents.

When critical thinking brings sunlight to financial discrimination and selective socialistic (Conservative) financial privileging for the wealthy, it also demands financial discrimination be changed or eliminated.  Taxpayers need to educate themselves on how they are impacted by these expenditures and contact their government officials demanding change. Although Federal Liberals have successfully eliminated some regressive tax expenditures, so far, they have refused to eliminate P.I.S. Transferral of P.I.S. tax expenditures to increased OAS and GIS based on MBM and net worth and assets would ensure greater financial fairness for all Canadian seniors.

P.I.S. has been submitted to the Canadian Human Rights Commission for adjudication of financial discrimination based on marital status and income levels and once again to the Liberals for elimination.

CONCLUSION

Canada is supposed a democratic country where fairness prevails at all levels including financial.  Why aren’t regressive tax expenditures such as stock option reduction, dividend gross-up and tax credit, and partial inclusion of capital gains for the wealthy enough that we have to introduce further regressive tax expenditures such as pension income splitting, income splitting, and Tax Free Savings Accounts which again benefit wealthy the most?

Plutocratic capitalism, as discussed by many authors including Thomas Piketty, is no different than other egregious philosophies such as communism, dictatorships, far right and far left idealism which all eventually rob the poor to pay the wealthy.  Balanced social justice is the answer to plutocratic capitalism and far right and left ideologies.

Thomas Piketty quotes (quotes):

  • When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.
  • It’s important to realize that innovation and growth in itself are not sufficient to moderate inequality of wealth.
  • We want capitalism and market forces to be the slave of democracy rather than the opposite.
  • When inequality gets to an extreme, it is completely useless for growth.
  • No hypocrisy is too great when economic and financial elites are obliged to defend their interest.
  • I don’t think there is any serious evidence that we need to be paying people more than 100 times the average wage in order to get high-performing managers.
  • What was the good of industrial development, what was the good of all the technological innovations, toil, and population movements if, after half a century of industrial growth, the condition of the masses was still just as miserable as before, and all lawmakers could do was prohibit factory labor by children under the age of eight?

(Addendum:  A study of Stephen Harper profile, former Canadian Prime Minister, shows that he claims to be an economist with only a Master’s Degree, a Christian whose right wing financial philosophy appears to be to increase the wealth of the rich, and a family man styled after the 1950’s “Leave It To Beaver”, but never includes singles in the family definition.  It seems one of his goals is to increase capital returns over wages by implementing formulas that benefit wealthy the most since they are the population who have the most capital.

After implementing Pension Income Splitting, he also introduced income splitting for families, another regressive tax expenditure benefiting the wealthy, but this was rejected by the Liberal Party who came into power shortly after.

During his tenure as Prime Minister he often introduced huge omnibus bills to hide controversial bills. His actions over time negatively affected environmental laws, cut health care funding, reduced number of food inspectors jobs, made it harder to qualify for EI benefits, and disallowed scientists to speak freely about their research, this is by no means an inclusive list.  It should be stated that omnibus bills have also been submitted by other political parties. Harper also prorogued Parliament four times for a total of 181 days when he feared he would lose a confidence vote or didn’t want to deal with controversial issues.)

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

REGRESSIVE TAX EXPENDITURE MISCONCEPTIONS INCLUDING GOVERNMENT DIVIDEND CHEQUES

REGRESSIVE TAX EXPENDITURE MISCONCEPTIONS INCLUDING GOVERNMENT DIVIDEND CHEQUES

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This opinion letter was originally submitted in abbreviated format to a local newspaper in response to a reader opinion letter.  It emphasizes the bizarreness of Conservatives who don’t see Alaskan natural resources dividends as being equivalent to a basic income program, view dividend cheques to be a right, not a privilege (while touting individual responsibility), and have no problem with receiving these monies even for children who haven’t worked for it or paid taxes.

The blog post ‘Money Benefit Programs Financially Benefit Married/coupled Persons and Families More Than Singles’ highlighting Alaska Permanent Fund Dividends was originally published several years ago and has been reproduced in its entirety at the end of this post.

RE:  READER OPINION LETTER ON ALASKA PERMANENT FUND DIVIDEND (PFD)

(Alaskan dividend program was established by the Republican (conservative) party in 1976.  From 1996 to 2015, the benefits have ranged from a low of $846 to a high of $2,072 annually.  For a family of four the twenty year total amounts to $113,156, and for a single person household the amount is $28,289.  A lot more can be done with $113,000 than $28,000. And, all is not as rosy as it seems. Alaska also has concerns about excessive government spending (pfd-effect).  For the third straight year, dividends would be more than $1,000 less than they would be under the previous formula written into state law).

The reader opinion letter, while stating Klein and related Conservative ilk took money out of voter pockets, also implies that it is better that every Alaskan man, woman, and child has received $43,000 in annual dividend cheques since 1982 – 2017 amount was $1,100. Single person household would have received $1,100, lone parent with child or married with no children $2,200, two adults, one child $3,300 and two adults, two children $4,400. You figure out what each household would have received over twenty years during lifecycle of rearing children.

The same truth applies to Klein $400 bucks. A family with eight children received $4,000 while single person received $400 (this is a true story).

Why is it that Conservative families are always in the business of making more money for themselves, but tout individual responsibility?  Why should children, like a one day old infant receive dividends when they haven’t paid any taxes or contributed to getting those resources out of the ground?  Instead, they are consuming resources such as education without contributing to them by paying taxes.

It doesn’t matter whether it is dividend cheques, Klein ‘bucks’ or natural disaster relief funds (fire-disaster-assistance).  When children are treated financially equal to adults, single adults will always be the losers even when they have worked more than forty years, not used EI or maternity/paternity benefits, paid education taxes when they have no children, etc. Families with children are receiving government transfers that singles don’t receive.

Financial fairness for all Canadians, regardless of marital or child status, will only be achieved when Market Basket Measure and net worth and assets are included in financial formulas.  The Canada Child Benefit is financially fairer than natural resource dividends (good thing for lone parents and poor families).  The Market Basket Measure cost of living scale counts an unattached individual as 1.0, and adds 0.4 for the second person (regardless of age), 0.4 for additional adults, and 0.3 for additional children.  The addition of an adult or child to household does not double or triple the cost of living, but adds smaller percentage to it.

It is time for politicians, married persons and families to stop the financial cherry picking and gaslighting.  Instead of spreading half truths it is time to develop fair financial formulas based on MBM and net worth irrespective of what political party person belongs to.

ANALYSIS OF REGRESSIVE TAX EXPENDITURES SUCH AS DIVIDEND CHEQUES

Critical common sense thinking highlights the fallacies of Conservative thinking which they, themselves, cannot see.

  • Conservatives don’t see Alaskan dividends as equivalent to basic income programs and they don’t see this as equivalent to socialist programs.  Doug Ford, since coming into power as Ontario Conservative Premier, has broken his promise by deleting the basic income pilot program authored by the outgoing Liberal Party. Alaskan dividends are as socialiastic as any basic income program.

Karl Widerquist and Michael W. Howard on Alaskan dividends (see blog article below) state:  ‘It provides a model of cash transfers to individuals without any stigma of dependence, fraud, waste, or failure—attributes often attached recipients of other government cash transfers.  The PFD funding source in natural resources rather than in taxes on individual income or wealth seems to exempt its recipients from any need to justify their use of the dividend, and to exempt the transfer as a whole from the ‘socialist’ label….’

  • Alaskan dividends are paid irrespective of any income from other sources and does not require the performance of work or the willingness to accept a job if offered. Unlike social assistance programs, it is not means-tested. Surely, this should rile up Conservatives who continually talk about personal responsibility and denigrate the poor as being lazy.  Conservatives never want to raise the minimum wage.
  • Conservatives just don’t get that Alaskan dividends are a regressive tax expenditure. Karl Widerquist and Michael W. Howard state:   ‘the PFD together with the elimination of the state individual income tax that was part of its founding has an overall regressive effect on income distribution.  To have a significant redistributive effect, the PFD would have to be recouped from wealthy individuals; in the absence of a progressive state income, consumption, or wealth tax, the PFD would have to be distributed on a sliding scale with larger dividends given to those with less income from other sources, rather than as a uniform flat payment….’
  • Alaskan dividends are paid out to individuals rather than households.  Payouts based on Market Basket Measure (MBM) or OECD Equivalence scales (equivalence-scales) would be financially fairer and would spread monies over a longer period of time.
  • What about those states or provinces that do not have natural resources? How do they handle progressive versus regressive tax expenditure?  The answer is through taxes and social justice programs.
  • It has been argued that it is preferable to have dividends from natural resources be distributed broadly rather than end up in the pockets of only a few corporate executives, wealthy shareholders, and political cronies. However, dividends distributed without marital status, number of children, income and net worth and assets consideration still means there will be an uneven distribution of dividends benefiting wealthy the most.

REPRODUCTION OF PREVIOUS BLOG POST

http://www.financialfairnessforsingles.ca/singles/2016/03/07/money-benefit-programs-financially-benefit-marriedcoupled-persons-and-families-more-than-singles/

MONEY BENEFIT PROGRAMS FINANCIALLY  BENEFIT MARRIED/COUPLED PERSONS AND FAMILIES MORE THAN SINGLES

Married/coupled persons and families often receive ‘free money’ benefits that financially benefit them much more than singles.

Two very good examples of these benefits are the Alaska Permanent Fund Dividend and the ‘Ralph Klein $400 Bucks’ Program.

Alaska Permanent Fund Dividends

The Alaska Permanent Fund Dividend (PFD) program implemented in 1982 is an annual payment paid to individuals (children as well as adults) rather than households.  It is paid irrespective of any income from other sources and does not require the performance of work or the willingness to accept a job if offered. Unlike social assistance programs, it is not means-tested.

The book “Alaska’s Permanent Fund Dividend:  Examining Its Suitability as a Model”, edited by Karl Widerquist and Michael W. Howard states the following:

‘…..In 2008, when the PFD reached its highest level at $2,069, the individual  poverty threshold in the United States was approximately $11,000; for a family of four it was approximately $22,000.  Thus, at its highest level, the PFD would have provided less than 20 percent of the income necessary for an to individual to reach the poverty threshold, but almost 40 percent of the income necessary for a family of four to reach the poverty threshold……Thus, on basis of its level alone, the PFD is at best a partial basic income…

Finally, because of its flat and universal nature, the PFD on its own makes a very modest contribution to the reduction of inequality.  But the PFD together with the elimination of the state individual income tax that was part of its founding has an overall regressive effect on income distribution.  To have a significant redistributive effect, the PFD would have to be recouped from wealthy individuals; in the absence of a progressive state income, consumption, or wealth tax, the PFD would have to be distributed on a sliding scale with larger dividends given to those with less income from other sources, rather than as a uniform flat payment….

The PFD does serve as an excellent model for the conceptualization of natural resources as commonly owned—an important step along the path to acceptance of the idea of a basic income.  It provides a model of cash transfers to individuals without any stigma of dependence, fraud, waste, or failure—attributes often attached recipients of other government cash transfers. The PFD’s funding source in natural resources rather than in taxes on individual income or wealth seems to exempt it recipients from any need to justify their use of the dividend, and to exempt the transfer as a whole from the ‘socialist’ label….’

It has been argued that it is preferable to have oil profits distributed broadly rather than end up in the pockets of only a few corporate executives, wealthy shareholders, and political cronies.

Alaska is the only state that does not collect sales tax or levy an individual income tax on any type of of personal income, either earned or unearned.  Every Alaskan, children as well as adults, receives a payment each year from the Alaska Permanent Fund Corporation. The USA does not have child benefits, although there is a child tax credit system for parents or guardians of children under 17 who meet certain requirements.  (The PFD is taxable by the Federal government).

Further review of information shows that in 2002, the poorest 20% of Alaskans relied on their dividend for 25% of their total income….some Alaskans depend on their dividend for up to a quarter of their yearly income, especially Native Alaskans, who make up 15% of the population. Those in poverty brackets and many of those living a subsistence lifestyle cannot afford to lose the dividend as a source of income.

However, review of articles on this program also states that the sense of entitlement has been established where it is very difficult to reduce state spending in this particular benefit at the expense of politicians losing their jobs, because state residents view these dividends as ‘rights’, not ‘privileges’.

One could argue that monies are being given to children who have not earned that privilege.  They have earned no money and have not paid any taxes.

If one looks at the PFD contributions over a twenty year period (lifetime of a family with children) in comparison to singles /individuals, the financial unfairness becomes apparent very quickly.  From 1996 to 2015,the benefits have ranged from a low of $846 to a high of $2,072 annually. For a family of four the twenty year total amounts to $113,156 and for a single person household the amount is $28,289.  A lot more can be done with $113,000 than $28,000.

Prosperity Bonus (‘Ralph Klein $400 Bucks’) Program

The Prosperity Bonus, also nicknamed Ralph (Premier of Alberta at that time) bucks, announced in September 2005, was the name given to a program designed to pay money back to residents of the province of Alberta as a result of a massive oil-fuelled provincial budget surplus.  This program gave $400 to every citizen of Albertan in the year 2005.

For a family of four, the benefit was $1,600, while a single/individual received $400.

ANALYSIS

‘Free Money’ Benefits allow families to achieve greater wealth than singles/individuals even though the children of these families have not earned any income or paid any taxes. Married/coupled persons without children also achieve greater financial benefits because of accumulated assets times two.

SOLUTIONS

To achieve greater financial equality between singles/individuals and married/coupled persons and families, the following suggestions are submitted:

  • Eliminate children from these programs until they reach the age majority since they have not made any contributions to the coffers in the form of salaries or taxes; rather, they are using resources such as education instead of contributing to them.
  • Top up benefits to singles at rate of 1.4 Market Basket Measure to that of married/coupled persons as it costs more for singles to live than married/coupled persons living as a single unit.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

REGRESSIVE TAX EXPENDITURES FINANCIALLY DISCRIMINATE AGAINST SINGLES AND POOR FAMILIES

REGRESSIVE TAX EXPENDITURES FINANCIALLY DISCRIMINATE AGAINST SINGLES AND POOR FAMILIES

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This purpose of this blog has been to highlight the gross financial discrimination singles and poor families face in this country.  However, many including governments, families and married persons fail to understand or choose to ignore the real financial truth. The discovery of information on regressive tax expenditures has provided an “OMG moment” because it supports what we have been saying since the beginning of this blog.  It provides solid information that poverty is not a figment of the imagination and is not created by the poor. Instead, wealth has been purposefully created for the top 50% of Canadians by government policies, especially regressive tax expenditures.

Blog article discussion on “Out of the Shadows” appears at beginning of article. Reproduction of “Will federal tax review lay the groundwork for real tax reform in the next budget?” appears at the end of this article.

PRELUDE

The Canadian Centre for Policy Alternatives (CCPA) “Out of the shadows” (loopholes) report published December, 2016 ‘examines the distribution of benefits from Canada’s 64 personal income tax expenditures where data is available, ranking them from least to most progressive.  A tax measure can be said to be relatively progressive if more than half its benefits go to the lower half of income earners. Likewise, a tax measure is regressive if most benefits go to Canada’s higher-income earners’.  (It should be noted that the 64 expenditures by no means covers all of the possible expenditures as evidenced by those not reviewed that are listed in Appendix II Excluded Tax Expenditures).

EXECUTIVE SUMMARY -Excerpts from CCPA report pages 5 – 7

ONLY 5 OF THE 64 EXPENDITURES ARE PROGRESSIVE

Only five –  the working income tax benefit (only one—the Working Income Tax Benefit—exclusively supports Canada’s working poor), non-taxation of the guaranteed income supplement, non-taxation of social assistance, the refundable medical expense deduction, and the disability tax credit can be described as relatively progressive, with a maximum benefit of $1,100 or less.

THE REMAINING 59 EXPENDITURES ARE REGRESSIVE AND COST $100.5B IN 2011

The remaining 59 regressive tax expenditures cost the federal government $100.5 billion in 2011 while providing more benefit to those above the median individual income level.

FIVE MOST REGRESSIVE TAX EXPENDITURES PROVIDE 99% BENEFITS TO TOP HALF

The five most regressive tax expenditures provide 99% or more of their benefit to the upper half of income earners. These tax expenditures pension income splitting, dividend gross-up, stock option deduction, credit for partial inclusion of capital gains, and foreign tax credit cost the government between $740 million and $4.1 billion each per year, totalling $10.4 billion in 2011. Four of these five tax expenditures have no maximum individual value, while pension income splitting where 83% of the benefit goes to the top income decile maxes out at $11,700 per person. That is 10 times the maximum benefit to Canada’s poorest from the five progressive tax expenditures.   If those loopholes were closed, the federal government could use that money to eliminate university tuition and create an affordable national child care program.

IN 2011 TAX EXPENDITURES COST ROUGHLY AS MUCH AS ALL INCOME TAXES COLLECTED

In total, personal income tax expenditures cost $103 billion in 2011, which is roughly as much as all income taxes collected that year ($121 billion). It is also not much less than what the federal government spends annually to pay for the Canada Pension Plan, employment insurance, the GST credit, the universal child care benefit, the Canada child tax benefit and the national child benefit supplement combined ($113 billion).

TWO TAX SYSTEMS, SHADOW SYSTEM FOR THE RICH, THE OTHER FOR POOR AND MIDDLE CLASS

Existing tax expenditures, on the other hand, provide on average a $15,000-per-person benefit to the richest Canadians. By comparison Canada’s poorest Canadians receive only $130 from tax expenditures and $1,130 from all federal income transfers.  In essence there are two federal transfers systems in Canada: one for the poor and middle class, and another shadow transfer system for the rich. Each system transfers roughly the same amount of money.

RECOMMENDATIONS RE MODEST STEPS TO ELIMINATING MOST REGRESSIVE AND EXPENSIVE TAX EXPENDITURES

  1. The annual tax expenditures report from Finance Canada should include the distribution of tax expenditures across the income spectrum.
  2. Tax expenditures should be included explicitly as costs in federal government financial reporting, including the main estimates, federal budget and fiscal updates.
  3. The federal government should target annual savings in tax expenditures of 5% (worth $5.1 billion a year) through the closure, capping or phasing-out of the most regressive loopholes.  This would take 20 years for total elimination.
  4. Policy-makers should continue to examine tax expenditures through a broad income inequality or vertical equity lens, and to consider the totality of these expenditures as a grossly unfair shadow transfer system for Canada’s richest tax filers.

REPORTING OF EXPENDITURES AND TRANSFERS OCCUR UNEQUALLY

(Page 9) Reporting of expenditures versus transfers – …. Moreover, while the cost of tax expenditures are individually estimated, they are not evaluated in the aggregate or compared to other large federal expenditures like federal income transfers. The latter are updated regularly and incorporated into public documents like the federal budget, main estimates and fiscal updates. Tax expenditures, on the other hand, are relegated to federal tax expenditure and evaluation reports that are published separately and frequently overlooked.

ASSESSING PROGRESSIVITY VERSUS REGRESSIVITY

(Page 10)  Progressivity versus regressivity-…..While it may be tempting to think of one set as progressive and the other regressive based on the types of activities they target, this is not how tax systems are generally judged. Assessing Canada’s tax expenditures through a vertical equity lens allows us to precisely determine what income groups benefit the most.

NET WORTH AND ASSETS LEFT OUT OF ANALYSIS

(Page 11) Report readily admits that ranking scheme focuses exclusively on current annual income and ignores other potential measures of progressivity that one might consider, such as measures based on wealth or lifetime earnings.

Blog author’s comment:

In this blog we have commented many times on how tax expenditures are handed out to the wealthy when they don’t need it because their net worth and assets have not been taken into consideration in financial formulas.

TAX EXPENDITURES PERCENTAGE OF BENEFITS TO BOTTOM HALF

(Page 12) Table 1  shows 2011 Tax Expenditures Cost, Distribution and Progressivity and % of the 64 benefits to bottom half.  (The percentage of each individual expenditure is generally below 30% to the bottom half.)

FIVE MOST PROGRESSIVE (VERTICALLY EQUITABLE) TAX EXPENDITURES

(Page 15-17) Only five of Canada’s 64 expenditures are more beneficial for lower-income earners and therefore more positive in terms of correcting income inequalities. These are the working tax credit, non-taxation of the GIS and spousal allowance, refundable medical expenses, non-taxation of social assistance benefits and disability tax credit…..These five most progressive tax expenditures have a few things in common. First, there is either an explicit maximum individual benefit or the value is based on another program that itself is capped…..Second, the maximum benefit is paid out in the lower half of the income spectrum and tapers out afterwards…..Finally, three of the five tax expenditures are related to seniors, including the non-taxation of GIS benefits, the disability tax credit and the refundable medical expenses supplement…..

Blog author’s comment:

This is the way assistance for low income Canadians should work, thus promoting financial fairness for all  Canadians.

FIVE MOST REGRESSIVE (VERTICALLY INEQUITABLE) TAX EXPENDITURES

(Page 18) ….The vast majority provide more benefit to the richest half of Canadians. To narrow it down to five (dividend gross-up and tax credit, partial inclusion of capital gains, foreign tax credit for individuals, employee stock option deduction, and pension income splitting), those tax expenditures providing 99% of their benefit to the highest-earning Canadians are isolated (14 of 64 expenditures) then sorted by cost.  The first thing that stands out in Figure 2 is the marked difference in distributional impact of Canada’s regressive and progressive tax expenditures. The benefits of the former (regressive) are clearly concentrated in the richest decile, with little or no benefit leaking down even to Canada’s middle-income earners and absolutely nothing for the poorest Canadians. In the latter (progressive) category, benefits generally peaked in the third or fourth deciles, but they also spread beyond this zone, frequently also into the upper deciles.

PENSION SPLITTING MOST REGRESSIVE TAX EXPENDITURE

(Page 18-19) The most regressive tax expenditure, which comes with a cost to government of $975 million annually, is pension income splitting. This tax measure allows a couple to shift up to half the pension income of the higher-earning spouse to the lower earner at tax time. The lower-earning spouse would still pay tax on the amount transferred, but at a lower marginal rate.  (Figure 4) This transfer effect is why the distribution shows negative bars in deciles four through seven: lower earners will pay higher taxes as pension income is transferred, but presumably net family taxes will be lower.

Benefits from pension income splitting are concentrated at the very top, with 83% of the value of the expenditure going to the richest decile. In contrast with the other most regressive tax expenditures, there is maximum benefit to this tax expenditure of $11,675 when $128,800 of pension income is transferred from a higher earner to a spouse with no income. While capped, this maximum benefit is 10 times more generous than any of the five most progressive tax expenditures.

Blog author’s comment:

Re pension splitting zero per cent (0%) of senior single person households and equal income married or coupled partners receive any monies from this expenditure.  Poor families (bottom half) receive virtually no benefit because they have less income to split than the wealthy.

DIVIDEND GROSS-UP, STOCK OPTION DEDUCTIONS AND PARTIAL INCLUSION OF CAPITAL GAINS

(Page 19-21) There are commonalities among these regressive loopholes whose benefit is most concentrated among the richest half of Canadians. For one thing, three of the five regressive expenditures are related to capital ownership; that is to say, to the ownership, purchase and sale of stocks, real estate, businesses and the like. This is not an activity most Canadians take part in, let alone have to worry about at tax time. Second, four of the five tax expenditures have no maximum value and the fifth has a very high maximum. This also has the effect of concentrating benefits among those with more money to spend.

Blog author’s comment:

These three tax loopholes are available only to the wealthiest Canadians because they are the the only ones with the means to partake of these loopholes.  When the wealthiest Canadians have these three tax loopholes why do they need even more loopholes? Article “Will federal tax review lay the groundwork for real tax reform in the next budget?” at the end of this blog post provides a very good comment on what could be done to reduce these tax loopholes.

Dividend gross-up and tax credit

(Page 24) The fifth most expensive tax expenditure is the dividend gross-up and tax credit, which cost $4.1 billion in 2011. As discussed above, the credit is also among the top five most regressive expenditures, with 92% of the benefits going to the richest decile.

(Page 25) In another comparison, recovering three-quarters of what is lost to the dividend gross-up each year could eliminate tuition for undergraduate university students, or it could halve the cost of long-term care for aging Canadians.  Tax expenditures are the same as any other real government spending: they are a fiscal choice governments make and can unmake if they want to. The money that today goes to padding the incomes of Canada’s rich could tomorrow go to eliminating poverty and reducing income inequality.

(Page 20) This tax expenditure gives shareholders of Canadian firms receiving a dividend a credit for what the corporation already paid on its profits, so that those profits are not “double taxed.”…..Seen in this light, Canada’s tax expenditure for corporate dividends looks very much like special treatment for the already very wealthy.  The dividend gross-up has no maximum value, as it is related to the amount of Canadian eligible dividends paid to any individual.

Blog author’s comment:

Re:    Good discussion on “Big 3” regressive tax expenditures (dividend gross-up, stock option deduction and credit for partial inclusion of capital gains) that overwhelmingly benefit rich Canadians is given in article “Will federal tax review lay the groundwork for real tax reform in the next budget?” shown at the end of this blog post.  (These expenditures alone cost a combined $12 billion annually – more than enough to pay for, say, a national pharmacare program).

FIVE COSTLIEST TAX EXPENDITURES

(Page 22-25) Though they may not be the most regressive, based on the criteria established above, it is worth commenting on how all five of the most costly personal tax expenditures (Credit for the Basic Personal Amount, net Registered Pension Plan or RRP expenditure, net Registered Retirement Savings Plan or RRSP expenditure, non-taxation of Capital Gains on Principal Residences, and Dividend Gross-up and Tax Credit) still provide far higher benefits to those in the upper income deciles than those in the lower half of Canadian income earners (see Figure 3).

At the top of this list is the basic personal amount all Canadians can claim as tax-free income on their tax forms ($10,527 in 2011). This tax expenditure costs an incredible $29 billion a year. To put that number in perspective, roughly a quarter of every tax dollar collected in 2011 was returned through the basic personal amount.  This tax expenditure is roughly equivalent to having an additional tax bracket under $10,527 at 0%, despite the fact that the other tax brackets are not considered tax expenditures. That being said, changing the basic personal exemption would have major implications. Besides being the most expensive, this tax expenditure is the most evenly distributed, at least in this category, with a third of the benefit going to the bottom half of Canadians. The maximum benefit in 2011 was $1,579, accessible to everyone who paid income tax, and received by virtually everyone in the fifth decile and above. The universal application of this tax expenditure to all taxpayers, particularly in the top half of the income distribution, is the reason it is so expensive.

The second and third most expensive tax expenditures are the registered pension plans (RPP) and the registered retirement savings plans (RRSP), which cost the government $16 billion and $9 billion a year respectively. The benefits of these tax expenditures are slightly more concentrated among Canada’s highest-income earners, who receive 57% of the benefit from RPPs and 63% of the benefit from RRSPs, and in both cases there is little benefit outside of the top three deciles.

(The complete discussion of RPP and RRSPs in the report has not been included here).….It is often difficult to contextualize the opportunity costs of spending billions of dollars on a tax expenditure. For comparison’s sake, the combined net loss from the RRSP and RPP tax preferences is $26 billion a year. This is three times the $9 billion spent on the GIS and spousal allowance, which are dedicated to reducing poverty among low-income seniors.  By spending only a third of the government revenues lost to RRSP and RPPs every year we could eliminate seniors’ poverty in Canada.

To evaluate the effectiveness of this tax-shifting strategy, Figure 4 shows the distribution of benefits for contributors compared to the distribution of RRSP withdrawals. Assuming that contribution and withdrawal trends continue in terms of percentage benefit, and not in terms of aggregate amounts, it is clear the richest decile will benefit the most. The richest decile sees 57% of the benefits from contributions, but only pays back 31% of the tax on withdrawals. RPPs have a slightly worse distribution, with the top two deciles seeing a net lifetime benefit. Even on a lifetime basis, instead of a cash-flow basis, the top decile sees the most benefit given current trends.

The fourth most expensive tax expenditure, non-taxation of capital gains on a principle residence, cost the government $4.7 billion in 2011. This tax expenditure is of very little use to the bottom half of the population, which sees 10% of the benefits.

The fifth most expensive tax expenditure is the dividend gross-up and tax credit, which cost $4.1 billion in 2011. As discussed above, the credit is also among the top five most regressive expenditures, with 92% of the benefits going to the richest decile.

…..Tax expenditures are the same as any other real government spending: they are a fiscal choice governments make and can unmake if they want to. The money that today goes to padding the incomes of Canada’s rich could tomorrow go to eliminating poverty and reducing income inequality.

TAX EXPENDITURES SHOULD BE TREATED AS A SYSTEM

(Page 26 – 28) 26 Beyond ComparIng Canada’s individual tax expenditures for their progressivity or regressivity, we should be treating these tax expenditures as a system, as we might federal income transfers. In that case, we can apply the same equity lens to the tax expenditure system in the aggregate to determine if the totality of these measures increase or decrease income inequality in Canada.

Based on the analysis above, the answer should be clear: if 59 of Canada’s 64 tax expenditures are regressive (i.e., they benefit the upper half of income earners more than the lower half), we should expect the system as a whole to fail the equity test. In fact, the total cost of these regressive measures is astonishing….As such, only broad conclusions are drawn from the aggregation of tax expenditures. From a policy perspective, if raising money from closing tax expenditures is the goal, a piecemeal approach is unlikely to provide as much benefit as a more comprehensive tax policy reassessment…..

The standout conclusion we come to from aggregating all personal tax expenditures is that that system is very expensive, costing the government $103 billion a year. As shown in

Table 2, this is only slightly less than the $121 billion collected in federal personal income taxes in 2011. Think about that: almost every dollar collected in personal income taxes is immediately given back through tax expenditures. Put another way, if revenues currently forgone through personal income tax expenditures were collected, the federal government would roughly double the amount of money at its disposal for other priorities.

…..While both tax expenditures and traditional income transfers result in effective transfers and are of roughly the same aggregate cost, their distribution differs dramatically, as shown in Figure 5. Federal transfers peak in the fourth decile for those with incomes between $17,000 and $22,000. The average combined federal transfer is $8,400 a person, which is mostly made up of transfers from CPP and GIS/OAS.

Blog author’s comment:

This author has talked about tax loopholes being addressed only in a vertical fashion by governments and policy makers.  This has created financial silos (continued-financial-illiteracy) where impact of one loophole is not assessed in totality with other loopholes. However, loopholes are compounded on top of loopholes.  For, example wealthy get full OAS who then put this money into their Tax Free Savings Accounts (TFSA) and then don’t have to report investment income from TFSA as income.  Financial formulas should be assessed both on a vertical and a horizontal level. Add link on financial silos.

FEDERAL TAX TRANSFERS ARE SMALL FOR LARGEST COMPONENT OF SINGLES AND LONE PARENTS

(Page 28 – 29)  FEDERAL TRANSFERS are surprisingly small for the poorest deciles when you consider that most programs target the poorest and clawback transfer payments as incomes rise. There are two reasons for this. The first is that the distribution is based on individual and not family incomes (see Appendix I for more on this). So someone earning no income would fit in the poorest decile even if their spouse made a million dollars a year.

The second, more worrying reason is that many of those in the poorest deciles are either single parents or single adults. Almost all of the federal transfer money paid to the poorest two deciles is for child-related benefits and goes mostly to single-parent families where the parent is almost always a woman. For single adults, or adult couples without children who are not seniors, the only available federal transfer is the GST credit, which maxed out at $253 per person in 2011.

FEDERAL TRANSFERS peak in the fourth decile, but they are slightly skewed to richer Canadians as they provide benefits all the way to the top of the income spectrum.  In fact, those in the richest decile, with incomes over $84,000 a year, receive slightly more on average from federal transfers ($1,300) than the average person in the poorest decile ($1,200). This is entirely due to higher CPP payments to the top deciles. Those in the ninth decile, where incomes sit between $61,000 and $84,000 a year, receive on average $2,500 a person twice as much as those in the poorest decile.

TAX EXPENDITURES, on the other hand, have a dramatically different distribution, with benefits highly concentrated (39%) in the richest decile, where the average transfer is $15,000 a year. That amount is double the $8,400 those in the fourth decile receive in government transfers (largely to support low-income seniors). Put another way, tax expenditures provide 11 times more benefit to the richest people in Canada than government transfers do for the poorest (those making under $4,000 a year).

From an aggregate perspective, therefore, the $103 billion lost annually to tax expenditures is an embarrassing failure of Canadian tax policy. With the same amount of money the government could send an annual cheque of at least $21,800 to all Canadians, completely eliminating poverty.  The money spent on tax expenditures also has an opportunity cost: it means funds are not available for physical infrastructure or to improve social program, both of which have a much higher economic multiplier in driving economic growth.

Blog author’s comment:

This blog is based on highlighting the financial discrimination of singles (ever singles and divorced early in life persons).  The above segment is refreshing in that it supports what we have been saying over the past few years.

TWO EQUAL SYSTEMS OF EQUAL VALUE-TAX INCOME TRANSFERS SYSTEM FOR POOR AND MIDDLE CLASS AND TAX EXPENDITURE SYSTEM FOR THE RICH

(Page 30) In essence, we have in Canada two federal support programs of roughly equal value: income transfers for the poor and middle class, and tax expenditures for the rich. The first (federal transfers) benefits the lower-middle class the most, but spreads widely from the very poorest to the very richest. The second (tax expenditures) benefits mainly those at the top, a shadow transfer system for Canada’s rich.

CONCLUSION (Page 31)

The unequal dIstributIon of tax expenditures remains a critically under-examined problem in Canada, particularly given their enormous cost on par with both personal income taxes collected and total federal government transfers and contribution to income inequality. Given the sheer size of these tax expenditures, it is amazing they are not listed as government spending in federal budgets and fiscal updates.

For every dollar moved into one of Canada’s individual tax expenditures, an equivalent amount is foregone in federal revenues. Since there is no cap on many of the most expensive and most regressive tax expenditures, this arrangement skews benefits toward Canada’s richest, who are more likely to have extra money to put aside (for retirement, investments, etc.). Lifetime caps, as exist for the small business capital gains exemption, would help smooth out the distributional inequities in these expenditures and lower costs for government.

Tax expenditures individually are not purposeless. Sometimes they are meant to encourage behaviour, such as saving for retirement. Sometimes, as with the dividend gross-up, they are driven by concerns about equity (the “double taxation” of dividend income in this case), though almost always in the horizontal sense of treating similar people equally under the tax code.  The vertical inequity of this measure, 91% of whose benefits go to the richest 10% of Canadians, is totally ignored.

APPENDIX I – METHODOLOGY (Page 33-36)

(Reading this section in its entirety is worthwhile to understand how statistics were used to develop the report – the following is a brief excerpt from the report).

All values in this report are in 2011 dollars. All tax rates, tax expenditure values, transfers and any other values are as they were in 2011 unless otherwise stated….

All distributional analyses in this paper are conducted for individuals 18 and over based on total income before taxes but after transfers, not families. Examining individual distribution may overstate the concentration of people in the bottom deciles, as it will split up families where one spouse earns an income and the other does not. In a situation where the former takes home, say, $1 million annually, they would end up in the top decile while the latter is in the lowest decile in this distribution. This may tend to overstate the destitution of those in the lowest income deciles on an individual basis. However, taxes are evaluated on an individual basis and Canada Revenue Agency data, in particular, is only available on an individual basis. Future research could better examine the distribution of tax expenditures across the family income distribution in Canada…..

Third, economists are particularly concerned about richer tax filers attempting to avoid any tax changes, whether from marginal bracket rate increases or changes in tax expenditures. There is particular concern that wealthy Canadians will migrate, for instance to the U.S., in a “brain drain” response to higher Canadians tax rates. Natural experiments have shown a surprising lack of migration in response to higher top marginal tax rates…..

A more likely reaction to the closure of certain tax expenditures might be an increased use of related alternatives. For instance, if RRSP contributions were no longer tax deductible, wealthy Canadians might switch those contributions to TFSAs, where a tax preference still exists. This switching of moneys between tax expenditures may mean the total cost would not be recovered even if that tax expenditure were completely closed. The more tax expenditures that exist, the more choice there is as any one tax expenditure is closed. However, as fewer tax expenditures exist, the more likely it is that the closure of any additional tax expenditure will lead to the full cost of the tax expenditure being recovered. Behavioural reaction will tend to decrease the overall cost of tax expenditures. Neither the Finance Canada reporting on tax expenditures nor this report attempts to estimate the behavioural reaction to the closure of tax expenditures.

The final possibility for avoiding taxes, besides moving and switching tax expenditures, is simply to avoid them illegally. The solution here is more straightforward: hire more tax auditors to provide better enforcement of the rules that already exist. More disclosure and international co-operation of tax agencies is also critical in closing the potential for abuse in tax havens.

APPENDIX II EXCLUDED TAX EXPENDITURES (Page 41)

Table 4 details tax expenditures that are not analyzed in this report (approximately another 64). In general, these were excluded either because distributional data or else the estimated value of the expenditure were not available. A few expenditures were excluded for other reasons……Finally, as this report only focuses on expenditures related to personal income taxes, expenditures involving businesses were also excluded from the analysis (see the details in Table 4).

HIGHLIGHTING PROBLEMS OF MAXIMUM INDIVIDUAL VALUE RE TRANSFERS VERSUS EXPENDITURES

While income transfers are tightly controlled as to the maximum value a person can receive and who in the income spectrum receives them, many of the most regressive and expensive tax expenditures do not have a maximum individual value. (Page 15-17) There is either an explicit maximum individual benefit or the value is based on another program that itself is capped…..Second, the maximum benefit is paid out in the lower half of the income spectrum and tapers out afterwards.

(Page 18) The first thing that stands out in Figure 2 is the marked difference in distributional impact of Canada’s regressive and progressive tax expenditures. The benefits of the former (regressive) are clearly concentrated in the richest decile, with little or no benefit leaking down even to Canada’s middle-income earners and absolutely nothing for the poorest Canadians. In the latter (progressive) category, benefits generally peaked in the third or fourth deciles, but they also spread beyond this zone, frequently also into the upper deciles.

HOW INCOME IS REPORTED IN THE REPORT – (BLOG AUTHOR’S COMMENT)

A major shortfall of this report is using income deciles based only on individuals.

Information from page 33 states ‘All distributional analyses in this paper are conducted for individuals 18 and over based on total income before taxes but after transfers….. However, taxes are evaluated on an individual basis and Canada Revenue Agency data, in particular, is only available on an individual basis. Future research could better examine the distribution of tax expenditures across the family income distribution in Canada…..”

(Example: Figure 2, Page 19) For the CCPA report it appears income deciles are divided into nine deciles for income from $0 to $84,000 and tenth decile for incomes over $84,000.  The sixth decile shows values of $30-$38K, seventh percentile $38-$48K, eighth decile $48-$61K, ninth decile $61-$84K and tenth decile $84K+.

It is possible to obtain some information on income levels for single person and two or more person households from Statistics Canada – Upper income limit, income share and average income by economic family type and income decile (statcan).

In 2016, income single person household reported in constant dollars were total decile income $35,400, sixth decile $31,000, seventh decile $37,700, eighth decile $45,400, ninth decile $57,800 and highest decile $96,800.

In 2016. incomes for two or more person households reported in constant dollars were total deciles $89,600, sixth decile $84,300, seventh decile $97,400, eighth decile $113,600, ninth decile $137,400, and highest decile $211,600.

(Constant dollars refers to dollars of several years expressed in terms of their value (“purchasing power”) in a single year, called the base year income).

The CCPA report uses $84K+ as the dollar value for the tenth decile, whereas, Statistics Canada shows it not possible for single person households to achieve incomes of $84K+ for any of the deciles below and including the ninth decile.  Incomes of $84K+ for two or more person households can be achieved in the sixth decile.

Stated another way Statistics Canada (statcan.gc.ca/n1/daily-quotidien) states couples with children had a median after-tax income of $94,500 in 2016, up 5.6% from 2012. Lone-parent families had a median income of $44,600, while couples without children had a median after-tax income of $76,400. Unattached non-seniors had a median after-tax income of $30,400.

Vanier Institute, Modern Family finances published Jan., 2018 states individuals in Canada whose incomes were in the top 10% had a total median before ­tax income of approximately $93,700 in 2015 ($75,200 after taxes). This represented approximately  3.1 million Canadians in 2015.

The CCPA report states more work needs to done on separating incomes of single person households from two or more person households.  From page 28, a more worrying reason is that many of those in the poorest deciles are either single parents or single adults. Almost all of the federal transfer money paid to the poorest two deciles is for child-related benefits and goes mostly to single-parent families where the parent is almost always a woman. For single adults, or adult couples without children who are not seniors, the only available federal transfer is the GST credit, which maxed out at $253 per person in 2011.

Based on the above information on income deciles, more work needs to be done analyzing singles versus family incomes to achieve financial fairness for singles and lone parents.

FINAL COMMENTS BY BLOG AUTHOR

In 2011, 39% of the benefit of all tax loopholes went to the richest 10% while the bottom half of income earners only saw 16% of the benefit.

As stated on page 30, federal transfers benefit the lower-middle class the most, but spreads widely from the very poorest to the very richest. Tax expenditures benefit mainly those at the top, a shadow transfer system for Canada’s rich.

As stated on page 25 of the above report tax expenditures are the same as any other real government spending: they are a fiscal choice governments make and can unmake if they want to. The money that today goes to padding the incomes of Canada’s rich could tomorrow go to eliminating poverty and reducing income inequality.

Also, transfers are tightly controlled since there is a maximum value a person can receive and who receives them.  Many of the most regressive and expensive tax expenditures do not have a maximum individual value.

Examining tax expenditures by income inequality alone will not totally solve the inequality problem.  Net worth and assets as well as income needs to be included in financial formulas.

The financial inequality that exists between single person households and two or more person households and between poor and wealthy families needs to be addressed through inclusion of net worth and assets, Market Basket Measure and maximum individual value limits in financial formulas.  These should be included in an aggregate format, not on an individual basis to reduce distributional inequities.

Wealthy persons should not be receiving tax expenditure monies when they don’t need it.  Net worth and Assets added to financial formulas would help to ensure monies are distributed in a graduated format and gradually diminishing to zero for the wealthy.

Market Basket Measure (MBM) (gov.br) should also be used in financial formulas to ensure financial equality based on number of person in households so that marital status bias with and without children is excluded. It costs more for singles to live than two person households without children.  This scale counts an unattached individual as 1.0, and adds 0.4 for the second person (regardless of age), 0.4 for additional adults, and 0.3 for additional children.

Pension income splitting, a blatantly financial discriminatory program against single person households, was implemented in 2006 by the Conservatives, specifically Stephen Harper.  Market Basket Measure shows it costs singles more to live, so why was pension splitting given to married or coupled households and to be used by primarily wealthy couples?

Maximum individual value limits on tax expenditures gradually reduced to zero for the wealthy would ensure financial equality and fairness.  Tax Free Savings Accounts (TFSA) were introduced in 2008, again by Conservatives, namely Stephen Harper.  This has to be one of the most egregiously discriminatory programs against singles and the poor.  It is possible for the wealthy to have huge net worth and assets and low incomes excluding huge TFSA investment amounts which do not need to be declared as income.  They can then claim poverty and receive OSA without clawbacks, and even possibly the Guaranteed Income Supplement (GIS) which is supposed to be a poverty reduction program for the very poor.  Lifetime caps, as exist for some small business formulas, would help smooth out financial inequities between the poor and the wealthy and lower costs for government.

Many regressive tax expenditures have been implemented by Conservatives (some also by the Liberals).  The Conservatives always talk about cutting taxes, but never talk about balancing tax cuts with reduction of tax expenditures and benefits for the wealthy.

The Liberal Party to their credit has reduced or eliminated Tax Expenditures for both business and personal financial systems.  On the personal tax side they refused to implement Conservative proposal for personal income splitting and increasing TFSA contributions from $5,500 to $10,000 per person.  They have also eliminated Child Arts and Child Fitness Tax Credits. On the business tax side (businesses were not addressed in the CCPA report), the Liberals have addressed financial inequalities in income splitting (“sprinkling”) and passive income.

Business income splitting (“sprinkling”) allows some families to use private corporations to sprinkle income among family members to spouse and/or children who are often in lower tax brackets than the primary owner/manager and thus the family’s total tax bill would be reduced.

For example, one of the changes means beneficiaries of business income splitting have to be actively engaged in the business and work in the business at least an average of 20 hours per week.  Since singles in their financial circle are basically financially responsible to themselves (no spouse, no children), “income sprinkling’” is of no benefit to single marital status entrepreneurs so they will pay more tax.  Tax fairness needs to be ensured regardless of marital status and how income is earned.

In short, the new rules for passive income mean that once a private corporation builds up multi-million dollar passive investment assets, its business income will no longer qualify for the federal small business tax rate (which is being lowered to 9 per cent), and instead be taxed at the regular corporate tax rate (which is 15 per cent).   The amount of business income that qualifies for the small business tax rate would be reduced depending on how much annual passive income is declared above $50,000 — and eliminated completely once passive income rises above $150,000. 

Political parties concerned about social justice (Liberals and NDP) need to be more vocal about regressive tax expenditures and why changes are needed to promote income and tax equity.

 

https://canadafactcheck.ca/tax-fairness/ Excerpts from article “Will federal tax review lay the groundwork for real tax reform in the next budget?”.  Links have been removed, links may be reviewed in article online.

While little known to the general public, the review is of enormous importance. Every year, Ottawa spends about $110 billion on programs such as health transfers to the provinces, the Canada Pension Plan, Employment Insurance, and other line item programs that comprise the federal budget. These expenditures, as with all direct spending, are put before Parliament for examination. Through this “Estimates” process, information on the costs and impact of these programs is available to the public.

Far less visible and transparent is the roughly $100 billion the federal government forgoes annually in so-called “tax expenditures”. These exemptions, deductions, credits, rebates and surtaxes are not subjected to the same kinds of parliamentary accountability mechanisms that are applied to more direct government spending. Moreover, many of these expenditures (including all exemptions and deductions), while legally embodied in the federal tax code, have huge implications for the fiscal situation of the provinces in that they also define the tax “base” against which all personal and corporate income taxes are levied at the provincial level.

Given the sheer scale of these tax expenditures, there is a strong argument for subjecting this hidden tax spending to the same oversight and public debate as any other spending. This is especially true given just how regressive (i.e. favouring the affluent) many of these expenditures are. If the government wants to provide billions of dollars in tax breaks to the richest Canadians, it should have an obligation to justify these gifts to the vast majority of Canadians who don’t benefit from such largesse.

The last comprehensive evaluation of the federal tax system was the Carter Commission of 1966. It’s clearly time to take a top to bottom look at our tax system to see if it is the truly progressive system the public deserves.

Exactly who benefits from these tax expenditures?

While the true magnitude of federal tax expenditures remains somewhat murky, what we do know is cause for concern. For example, a recent report from the Canadian Centre for Policy Alternatives (CCPA) shows that, while some of these measures benefit the general population, many others benefit most those who need help the least. In fact, of the 64 tax breaks on which solid data are available, all but five provide more benefit to the top half of earners than to the bottom.

In particular, the three most regressive loopholes (the stock option deduction, the dividend gross-up, and the partial inclusion of capital gains), give enormous breaks to the very rich without doing much for the majority. According to the Department of Finance, these expenditures alone cost a combined $12 billion annually – more than enough to pay for, say, a national pharmacare program.

Here’s a brief look at the “Big 3” regressive tax expenditures that overwhelmingly benefit rich Canadians.

The stock option deduction is an offshoot of the 50% capital gains inclusion rate (see below) and cost the federal treasury $840 million in 2016. It is for employees who, as part of their compensation, are given the option to buy company stock at a set price (e.g., today’s price). If the stock rises in the future, an employee can still buy the stock at their set price, but sell it at the going price and generate a capital gain equal to the difference between the two prices. As with capital gains, only 50% of the price differ­ence from a stock option transaction of this sort is taxable, and there is no threshold above which the government taxes 100% of the capital gain.

Another regressive tax expenditure is the dividend gross-up and tax credit. With an annual cost to government of $4.64 billion in 2016, it is also one of the most expensive. This tax expenditure is extremely concen­trated, with 91% of the benefit going to income earners in the richest decile. But, again, the decile analysis actually understates the concentration. A paper by Brian Murphy, Mike Veall, and Michael Wolfson estimate half of all benefits actually go to the top 1%. Corpor­ations pay corporate income tax on their profits, which can be paid out as a dividend to shareholders.

A third extremely regressive tax expenditure is the partial inclusion of cap­ital gains which cost the government $6.68 billion in 2016. The tax expenditure for partial inclusion of capital gains applies to an in­dividual who buys a stock or other asset at one price and subsequently sells it for more, realizing a “capital gain” in the amount of the difference between the two prices. It is only the capital gain, and not the entire sale price, that is eligible for taxation. And thanks to this tax expenditure, only 50% of the value of that capital gain is considered taxable income.

With 92% of the benefits going to the top 10% — and very little for anyone earn­ing less than $84,000 — the concentration of benefits related to the partial inclusion of capital gains is similar to that for the dividend gross-up. However, additional analysis by Murphy et al. shows the concentration of this tax expenditure is much worse than a decile analysis suggests. In fact, the very richest 1% of tax filers reap 87% of the benefits.

Is there the political will to scale back capital gains related tax expenditures?

There is also a question as to whether the Trudeau government has the political will to really crack down on the most regressive expenditures given that there are powerful employer and financial interests supporting them.

For example, upon being installed as finance minister, Finance Minister Bill Morneau declared tax fairness his top priority. Yet his record on the issue is mixed. He at first vowed to close the loophole on executive stock options (a Liberal Platform item), perhaps the most objectionable such tax break, but then changed his mind under heavy industry pressure.

The challenge for Morneau is that the government has also promised to make Canada more innovative and attractive to investors. Some supporters of an innovation agenda argue that capital gains taxes hurt innovation by limiting the amount of money in the economy that is free to be re-invested in new projects. There are also numerous voices warning federal Liberals to rein in any proposed tax-the-rich agenda in light of plans by the Trump Administration and the Republican controlled Congress to dramatically reduce personal and business taxes.

On the other hand, policy experts who are concerned with income inequality see tightening up investment-related tax expenditures as a key target given that it is primarily higher-income Canadians who have the means to generate significant additional revenue from investments.

Do we really need regressive tax expenditures to spur innovation and growth?

The argument that tax related investment incentives are required to spur innovation and growth has many doubters – and not just amongst those concerned with inequality. These “pro-growth” critics of the exemptions argue that it is strategic government leadership and public investments that are most critical to building innovative economies. These critics also argue that what is needed it to build on the work being done by publicly funded bodies such as the National Research Council.

In support of this view, the influential UK economist Mariana Mazzucato has shown that publicly funded research as well as direct support for strategic corporate investments through agencies like Defense Advanced Research Projects Agency (DARPA), have been central to the growth of innovative capacity in the United States. Corporate research and development and venture capital often follow in the wake of ground-breaking public sector entrepreneurship.

Mazzucato’s book, The Entrepreneurial State: Debunking Public vs. Private Sector Myths, cites impressive evidence in support of this thesis. For example, the parts of the smartphone that make it smart—GPS, touch screens, the Internet—were advanced by the U. S. Defense Department. Tesla’s battery technologies and solar panels came out of a grant from the U.S. Department of Energy. Google’s search engine algorithm was boosted by a National Science Foundation innovation. Many innovative new drugs have come out of the U.S.’s National Institute for Health (NIH) research.

Many innovation experts agree that there is plenty of room to expand direct public investments to compensate for any scaling back of private capital gains incentives. These experts suggest that strategic long-term public investments need to be made across- a much broader range of sectors than is currently the case……

Where does pension fund investment fit in? See article for details.

What are the options for real tax reform?

It goes without saying that there are many options on a continuum somewhere between getting rid of the Big 3 exemptions entirely (an extremely unlikely scenario regardless of which party forms the government) and maintaining a status quo in which the rich get almost all the benefits.

…..focus on practical measures that could scale back the stock option and partial capital gains exemption.  With regard to the stock option deduction, the Department of Finance estimates that 8,000 high-income Canadians deduct an average of $400,000 from their taxable incomes via stock options. This accounts for 75% of the deduction’s fiscal impact, which was $840-million in 2016. Most of these 8,000 high-income earners have stock options built into their compensation packages and take advantage of these stock option provisions on a reoccurring basis. Needless to say, only a minority of those who exercise stock options in this manner are employed by a start-up – the ostensible reason for allowing stock options in the first place.  There are a number of approaches to stock option deductions that would let the federal government reduce the extreme regressiveness of the deduction, while not penalizing Canada’s startup community.

One approach would be for the federal government to provide a one-time only $750,000 exemption on stock options. This would treat stock options in the same way as one-time capital gains for shares held in a Canadian-controlled private corporation (CCPC) for at least two years.

The $750,000 exemption gives stock option holders significant financial benefits and, at the same time, eliminates a policy that allows well-compensated executives (such as those at Canada’s large banks and insurance companies) to exercise options on a regular basis without any limits.

For startups, a $750,000 exemption is attractive because it is large enough to use as a recruitment tool in a market where there is intense competition for talent…..

There is also plenty of room to gradually phase in an increased capital gains inclusion rate. Such a phased-in increase would be entirely consistent with the history of the exemption. From 1972 to 1988, Canadians had to pay tax on 50 per cent of their capital gains. The inclusion rate was increased to 66 2/3 per cent in 1988, rose to 75 per cent in 1990, before dropping back down to 66 2/3 per cent on Feb. 28, 2000 and then further reduced on Oct. 18, 2000 to 50 per cent, where it has remained to this day.

In other words, a five-year phase-in of an increase in the inclusion rate to 75% (i.e. a 5%/yr. increase) would be just another “up” phase in the ongoing ups and downs in the inclusion rate since the introduction of a capital gains tax in 1972. Certainly no reason for investors to panic!

And keep in mind that, under these proposals, some capital gains would remain entirely tax-free, such as the gain on the principal residence or the gain where appreciated publicly-traded securities are donated to a registered charity.

Conclusion

In the coming budget, the federal government has a historic opportunity to undertake truly progressive tax reform that will finally bring a measure of fairness to Canada’s convoluted tax code. If done properly, the tax expenditure review currently being undertaken will present strong evidence that in the name of fairness, the extraordinarily regressive capital gains related tax expenditures can be scaled back somewhat and that public and pension fund investment can make a growing contribution to Canada’s growth and innovation performance.

The opportunity is there – but will the Trudeau government seize the moment? (End of reproduced article)

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

 

FINANCIAL DISCRIMINATION OF SINGLES AND LONE PARENT POVERTY MASKED BY GASLIGHTING

FINANCIAL DISCRIMINATION OF SINGLES AND LONE PARENT POVERTY MASKED BY GASLIGHTING

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This blog post is in response to a local newspaper opinion letter submitted by a reader who believes “singles only need small spaces and one tank of gas per month”.  This post was published in a local newspaper in shortened format as only so many words can be submitted for newspaper publication.

SHOCKING STATISTICS FOR PROVINCIAL INCOME SUPPORT PROGRAM RE INDIVIDUALS AND LONE PARENTS

Shocking statistics show that in one of the richest provinces (Alberta) there were in early 2014, 33,000 Alberta Income Support program (excluding AISH) recipients of all ages.  Alberta Income Support program in January, 2017, had 54,374 recipients and in January, 2018, 57,003 recipients.  Makeup of claimants in 2017 and 2018 include individuals 69%, lone-parent families 24%, couples with children 5%, and couples alone 3% (social-assistance-rates-continue-to-soar-despite-albertas-recovering-economy).  Totals do not say how many are turned away and do not include those who on verge of poverty.

GASLIGHTING MASKS INDIVIDUALS (SINGLES) AND LONE PARENT POVERTY

Reader comments on Alberta support program statistics gaslight by blaming NDP government and immigrants.  Local newspaper opinion letter submitted by a family gaslights as part of the family majority by using bias and financial illiteracy re singles finances to tell singles they only need small spaces and one tank of gas per month.   The letter implies families have to pay so much more than single retirees.  Sorry, singles and lone parents retirees are forced by married majority to pay more taxes because they can’t pension split and don’t have marital benefits privileging married and coupled persons with and without children.

So, apparently, while your children have their own bedrooms, it is okay for singles to live in spaces as small as 150 sq. ft. with only a microwave, bar fridge, bar sink, and no stove, bathtub, laundry or storage space.  And, apparently, as evidenced in Whistler, BC housing crisis it is okay for singles to earn a decent living, but have no place to live.  One person earning $2,800 after taxes has lived in a camper van for four years.  Styrofoam cutouts are wedged into the windows to keep out the cold. Or, in shared house a single bedroom was advertised for two female tenants at $780 per person.  Illegal short term rental greed has replaced housing designated for staff.

Singles have become invisible in DIY, real estate and housing TV programs.  Probably this is because singles are increasingly being charged more and more per square foot for their small spaces and are less able to afford home purchases.

One tank of gas per month doesn’t even deserve a response.

J-u-s-t  s-p-e-a-k  t-h-e  d-a-m-n  t-r-u-t-h!  Over 90% of Alberta Income Support recipients as minorities are singles and poor lone parent families!  Families gaslight by saying it is expensive to raise children covering only twenty to twenty five years.  Housing covering sixty to eighty years, especially rental, is biggest lifetime expense regardless of marital status or children.  House ownership is separating Canadians into ‘haves’ versus ‘have nots’.

MARKET BASKET MEASURE SHOWS IT COSTS INDIVIDUALS MORE TO LIVE THAN MARRIED OR COUPLED PERSONS WITHOUT CHILDREN

Conservatives, financially illiterate, gaslighters and married never talk about low income, equivalence-scales-in-relation-to-cost-of-living or cost of living scales like Market Basket Measure (MBM) (statcan).  Example:  if single person household has value of 1.0, lone parent, one child or two adult household has value of 1.4, one adult, two children 1.7 and two adult, two children 2.0.  It costs more for singles to live than couples without children.

Just one example of MBM not applied was the 2015 Federal Conservatives proposed targeted federal tax relief benefit for single senior to $20,360 ($1,697 per month) and senior couple $40,720 ($3,393 per month).  Using simple math, $1,000 rent and $400 food and white goods per month is barely covered for singles, but $1,000 rent and $800 food and white goods is amply covered for senior couples.   Application of MBM of 1.4 for couples would equal $28,504 ($2,375 per month), not $40,720.  Cost of living for couples is not twice that of singles. Trump has also given double tax relief for couples.

For 2018, net income limit is $75,910 for singles and $151,820 for couples. Applying MBM of 1.4 or $106,274 net income limit for couples ensures tax fairness.

Singles are told by married persons that they can always reduce costs by moving in with someone else.  However, this does not solve the problem of financial discrimination of singles being forced to pay more taxes.

MULTIPLE GOVERNMENT BENEFITS ARE GIVEN TO MARRIED OR COUPLED PERSONS WITH AND WITHOUT CHILDREN

Conservatives, who tout individual responsibility,  have implemented tax avoidance programs privileging upper middle class and wealthy married or coupled households with and without children (add link) like pension splitting, Tax Free Savings Accounts (TFSA) with no limits, Old Age Security (OAS) clawback targeting only top two percent, and tax loophole programs. They financially and socially discriminate against minority singles and poor households who generally do not have the income to take full advantage of these programs.  Wealthy never pay their fair share of taxes. The Canada Child Benefit does not take into account net worth and assets, so it privileges wealthy parents who have low incomes, paid for houses, and high net worth and assets who then retire early. These same benefits have been perpetuated by the Liberal Party because of fear of losing votes if tax fairness changes are made.

Married and coupled persons do not realize the financial power and privileging that has been given to them when they are able to apply benefits on top of benefits times two persons (family-tax-credits).  For example, it is shameful when married and coupled persons can get OAS, which is supposed to be part of the Canadian poverty reduction pillar, then take that money and max out their TFSAs while paying less taxes because they can pension split and not pay taxes on TFSA proceeds (TFSAs do not need to be included in income).

The local newspaper opinion letter on same day as above opinion letter thankfully recognizes widowed person, now homeless ‘single’ (doesn’t say she is age 65), who is begging for money because she can’t get on small town local social support 600 person waiting list.

Singles, including poor lone parent households, are not stupid and deserve to feel righteously angered.  (After all, they also have math skills since they went to same schools as their married/coupled counterparts).  Singles know as minority populations they are not respected in financial formulas to the same level as married or coupled households with and without children.

CONCLUSION

Personal responsibility with social justice imbalance can lead to selfishness and greed.  Personal responsibility with balanced social justice and financial formulas changes “me” to “we”. Less gaslighting and more financial and public policy formulas based on MBM, and including net worth and assets, on all benefits and taxation without political bias would ensure financial fairness for all Canadians.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.) This is a WordPress blog designed by a hired individual.

BIG LITTLE LIES OF SIMPLE TAX (FLAT) RATE

BIG LITTLE LIES OF SIMPLE (FLAT) TAX RATE

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This blog post was prompted by a right wing think tank article that once again promotes a flat tax and big little lies that it is already progressive and should replace the progressive tax system.  It was submitted to a local newspaper in shortened format, but was not published.

The article ‘Many misconceptions surround single tax rate’ is reprinted in its entirety at the end of this post along with reader comments.

EVALUATION OF SIMPLE (FLAT) TAX

This right wing author says he is the originator of the simple tax.  In fact, he has changed the name of the flat rate to the simple tax as per explanation given in article as reprinted at the end of this post.  The simple tax of 10% was adopted by the Alberta Conservative Government in 2001.  

While it is true the personal exemption rate was increased during implementation of the simple tax, during their forty year Alberta reign the Conservatives failed to raise the minimum wage to meaningful levels.  (Reality check:  The wealthy also get to use the personal exemption rate.)  One of the best big little lies or gaslighting of this author occurs when he fails to tell the truth that during the implementation of this simple tax the tax rate for lower income persons was changed from 8% to 10%.  There was no Alberta Advantage for lower income earners as a result of the tax rate being increased at the same time personal exemption rate was increased.

He once again spews lies on single tax being progressive.  He says tax paid by the wealthy are a gift to those who pay little or not tax.  Oh, puh-leese.

He states low income earners pay no tax, but fails to mention wealthy never pay their fair share.  He fails to mention the many tax federal and provincial tax loopholes and benefits which filter down to the wealthiest taxpayers.

The wealthy, for example, put their Old Age Security (OAS – a poverty reduction pillar that is only clawed back on top two percent) into TFSAs that are not declared as income.  Forty per cent of Canadians have net worths over $750,000.

The poor pay plenty by suffering financial and mental stresses while trying to pay for basic human necessities on provincial minimum wages which remained static for many years.  Low income earners cannot take advantage of tax loopholes and benefits because they do not have the income to do so.

CONCLUSION

Instead of ‘Conservative gaslighting pants on fire’ half truths, he needs to speak full truths on tax loopholes, benefits and minimum wages.  Progressive versus simple tax and ‘taxes explained in beer’ provides further discussion on fallacies of the simple tax for low income earners (tax-system-explained-in-beer-analogy). (End of post).

Reprint of simple tax article is given below.

‘MANY MISCONCEPTIONS SURROUND SINGLE TAX RATE’, Mark Milke, May 12, 2018 (https://www.pressreader.com/canada/calgary-herald/20180512/281702615355933)

Alberta’s cancelled single tax rate is in the news again after the United Conservative Party passed a policy resolution wanting it back.

 

That was followed by Twitter wars, interviews and commentaries about that tax, much of it uninformed or making obvious points.

 

I know something about the single rate tax system. I wrote about it in a 1998 submission to the Alberta Tax Review Committee, which recommended it be adopted, which it was in 2001.  I favour its return one day, but when spending is controlled and the budget is balanced.

 

Class warfare warriors have long mischaracterized Alberta’s single rate tax, so let’s clear up some misconceptions.

Let’s start with why it is called a single tax and not a flat tax. Because a true flat tax system would mean that no basic exemption exists — that everyone pays the same proportion of tax relative to income. That would be a bad idea. But that was never Alberta’s tax system. It is also why the political and media myth that the single tax was not progressive is nonsense.

 

In 2014, the last year the single-rate system was in effect, Alberta’s basic provincial personal exemption was $17,787. Income earners below that paid nothing in provincial income tax.  As for everyone else, at $25,000 in income, 2.9 per cent went to provincial income tax. At $50,000, the rate was 6.4 per cent. A $100,000 income was taxed 8.2 per cent. The single tax system was progressive.

 

Next up, the silly notion that the single rate tax was a giveaway to the wealthy. Note the language. It assumes money belongs to government and not those who earn it. In that view, any tax relief is a gift. That inverts a more sensible view from citizens to politicians: We will pay reasonable and justifiable taxes, but don’t assume our earnings are your property.

 

A relevant fact: Higher- and middle-income Albertans pay most of the income tax, not those with lower incomes. That is why the former and not the latter would gain in any tax relief scenario.

 

For example, using tax data from 2014, those earning under $50,000 counted for 57.3 per cent of all tax filers and paid just 7.6 per cent of all provincial income tax.  Of note, almost 1.8 million Albertans were in that under $50,000 group in 2014, but nearly half (845,690 Albertans) quite properly paid nothing in tax due to low incomes. (Another 8,290 at higher levels also did not pay provincial income tax for various reasons, such as maximizing previously unused RRSP deductions.)  Those who earned between $50,000 and $100,000 counted for 27 per cent of all tax filers and paid 30.6 per cent of all provincial income tax.

Albertans whose incomes were more than $100,000 accounted for 15.7 per cent of Alberta’s tax filers; they paid 61.8 per cent of all provincial income tax. Point: If one’s argument is that the wealthy should pay a hefty share of Alberta’s income tax burden, the $100,000-plus crowd in Alberta already did (a proportion higher both of tax filers and of total taxes paid than in any other province).  Thus, any substantive tax relief will naturally benefit that group.

 

Here’s the summary: Even when the single rate tax was in effect, Alberta’s over $50,000 tax filers already paid 92.4 per cent of all provincial income tax. And even for those who earned less than $50,000, more than half — more than 920,000 Albertans — paid all the income tax collected from that group.

 

When someone claims a single tax is a giveaway to higher incomes, the rhetoric has it backwards: The gift is actually from more than 2.2 million Albertans at all income levels in 2014, to the more than 850,000 Albertans who quite properly, mostly due to low incomes, paid nothing for the cost of government.

 

READER COMMENTS

#1 – Don’t bother with hard numbers Mark. It doesn’t fit the left wing rhetoric. Math is too hard for them. Lies and innuendo is the tool of the left. And 100k + income earners only paying 62% of the tax. No, Canadians want those earning more than 100k a year to pay 100% of the tax. That way, they get closer to their dream of equality of outcome. The last thing you want to do is stump a Canadian with real facts.

#2 – Your most salient point is that money belongs to those who earn it….not the government. I accept that if we want the social services we now enjoy taxes must be collected. But it must be fair and not punitive, which it is right now.

#3 – Whenever taxes are reduced, the high tax payers will always get the biggest break. Usually the biggest complainers of this move, are the socialists who pay very little tax. When Alberta implemented the single tax rate they increased the personal exemption, if the provincial or federal governments really wanted to help low income earners, just raise the exemption Trump increased the personal exemption for everybody, which means the low wage earners got a major tax break from trump. Currently are personal taxes are twice as high as the US, so why would any professional want to live in Canada compared to the US from a tax perspective.  (End of article).

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.) This is a WordPress blog designed by a hired individual.

FINANCIAL REPRIEVE FOR INFANT DEATHS (MOTION 110) DISCRIMINATES AGAINST OTHER FAMILY DEATHS

FINANCIAL REPRIEVE FOR INFANT DEATHS ((MOTION 110) DISCRIMINATES AGAINST OTHER FAMILY DEATHS (updated April 29, 2018)

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

The original opinion letter of this blog post was published in local newspapers.  Because only a certain number of words can be published in newspapers, please note that the content of this blog post has been expanded to include additional information.

MOTION 110 – FINANCIAL REPRIEVE FOR INFANT DEATHS

A Federal Conservative MP has submitted to Parliament via Motion 110 (motion-110) a proposed financial reprieve for parents who lose infant to death, particularly SIDS.  The motion proposes investigation to ensure parents do not suffer undue financial or emotional hardship due to government programming design, particularly from Employment Insurance Parental Benefits.  He believes these families are affected by “bureaucratic oversight”.

PARENTS OF INFANT DEATHS SHOULD NOT RECEIVE FINANCIAL PRIVILEGING

How is revoking of parental benefits any different than revoking of senior death benefits?  If payment of benefits continues after month in which senior is deceased, these benefits have to be repaid.

Regarding bereavement leaves, why should parents of deceased infants receive more than what other families receive in bereavement processes?  If employed, most Canadians (if they are so lucky to have these benefits) receive up to one week of bereavement leave.  Continued difficulties with bereavement process are dealt with through sick leave, then short term and long term disability.  These same benefits are not available to those who are not employed at time of infant’s death.

Conservatives continually want to cut taxes but keep adding benefits.  Who is going to pay for yet another benefit that purposely privileges special interest groups, lobbyists, families and married or coupled households over singles and the poor?  Many government programs do harm due to design.  One example, if privileged benefits are given to parents of infant deaths, then same privileging should be given to estates of singles never married, no kids who die, including tragic deaths, before receiving Canadian Pension Plan (CPP) benefits.  In just ten years of employment with maximum $2,500 annual CPP contributions or $25,000, deceased single person’s estate will only receive a $2,500 death benefit.  Total of $22,500 contribution is forfeited to be used by the survivors of married or coupled households.  Imagine what the total might be for forty years of CPP contributions (?$90,000)!  Singles face righteous anger and despair because of financial discrimination and social injustice heaped on them when they are made invisible by “bureaucratic oversight”.

It should also be noted that Employment Insurance (EI) contributions at approximately a maximum of $850 for 2018 is also forfeited by singles if they never use EI during their lifetime of being employed.  These contributions are used by parents for EI Parental Benefits and those who use EI benefits multiple times during their employment lifetime.  For ten years of employment it is possible that singles will forfeit up to $8,500 and for forty years up to $34,000.

LOST DOLLARS LIST TO DATE

The above two examples of contributions forfeited by singles show that amount can equal up to $90,000 (CPP) plus $34,000 (EI) for a total of $124,000.  Our LOST DOLLARS LIST TO DATE already includes potential forfetting of EI dollars.  CPP dollars will be added to the list (lost-dollar-value-list) with potential lost dollar value for lifetime now totalling approximately $643,000.

In article “Income support rates in Alberta continue to soar” (social-assistance-rates) a stunning, almost unbelievable, statistic states that in January, (2018) 69 per cent of recipients were individuals, 23.5 per cent one-parent families, 4.9 per cent couples and 2.6 per cent couples without children.  The income support program helps those who do not have resources to meet their basic needs, including food, clothing and shelter.  NINETY TWO (92) PER CENT requiring income support were singles and lone parent families!

CONCLUSION

Government and social policies need to include singles in the definition of family.  It is time for families to realize that their children even when they become adult single children deserve the same financial inclusion as children during child rearing years.

Singles face financial discrimination every day when they have to forfeit their financial contributions (which are required by mandatory government policies) to married or coupled persons with and without children.  This can total not just hundreds or thousands, but hundreds of thousands of dollars.

Conservatives (and perpetuated by Liberals) continue to talk only about the middle class and implement policies and benefits that benefit the middle class and the wealthy most.  They also continue to talk about ‘family’. However, their definition of family doesn’t include singles or poor families.

Conservative ideologues and far right Christians like Stephen Harper (Canadian Conservative Prime Minister), Conservative 40 year rulers in Alberta, and Sean Hannity (staunch supporter of Trump, derider of Obama and owner of 20 shell companies containing approximately 870 housing units) continue to gaslight about helping families, but instead, make themselves even richer.

Politicians need to be held accountable for formulation of policies that privilege certain segments of society such as married or coupled households with and without children over singles and poor families.  Motion 110 is an abject example of financial discrimination based on the emotion of infant deaths over tragic deaths of other family members.  Changes in financial formulas should include review of how changes will affect all members of families, not just married or coupled households with and without children.

As one segment of society, singles do not deserve to pay more and get less than their married or coupled counterparts with and without children.

The death of an infant should not be financially treated any differently than deaths of other family members.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

‘GASLIGHTING’ (FINANCIAL) OF SINGLES, THE POOR, MILLENNIALS AND OTHER DISADVANTAGED PERSONS

‘GASLIGHTING’ (FINANCIAL) OF SINGLES, THE POOR, MILLENNIALS AND OTHER DISADVANTAGED PERSONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This post addresses financial gaslighting which seeks especially to spread financial untruths about the disadvantaged such as singles, the poor and minorities.  Two articles at the end of this post give the history of gaslighting and how it affects society.

WHAT IS GASLIGHTING?

From Wikipedia ‘gaslighting’ is a form of manipulation that seeks to sow seeds of doubt in a targeted individual or in members of a targeted group, hoping to make them question their own memory, perception, and sanity. Using persistent denial, misdirection, contradiction, and lying it attempts to destabilize the target and delegitimize the target’s belief.

GASLIGHTING OF THE DISADVANTAGED-EXAMPLES

Middle class definition – Middle class rhetoric says middle class are financially doing poorly, but rhetoric doesn’t include the poor.  Gaslighting occurs when the wealthy won’t admit they are rich.

Poor create their own poverty – Dr. Ben Carson, who grew up in poverty and Trump appointee as USA Secretary of Housing and Urban Development, has made statement that the poor create their own poverty.  This statement is so false, in fact poverty is created for them and they are forced deeper into poverty by decisions and policies of the wealthy, right leaning politicians and society in general.

Children are expensive – Real truth is housing is biggest lifetime expense, not children (at present time though things could change if housing prices drop significantly). Monthly $1000 rent over sixty year adult lifespan to age 80 equals $720,000 negative net worth, seventy year adult lifespan to age 90 equals $840,000, eighty year adult lifespan to age 100 equals $960,000.  Home purchases and child expenses occur only over twenty to twenty five years. While home purchasers may have child expenses they are also accumulating wealth, renters aren’t.

Even one right wing think tank, Fraser Institute, has published article describing why children basic costs are gaslighted and conflated by making them higher than they really are because poor budgeting principles are applied in establishing the costs.  They state cost of raising children per year only costs between $3,000 and $4,500 (cost-of-raising-children).   Statement from second article provides further explanation: (explaining-cost-raising-children)

“Families are generally left free to decide how to raise their children and how much to spend. And families at all income levels have successfully raised children and continue to do so. Most of us will know friends and colleagues who were raised in lower income families. The amount you spend on your child is not the measure of the quality of your parenting. It would be a shame if we discourage prospective parents by insisting that it costs $12,000 to $15,000 (or more) per year to raise a child.”

Singles are told it costs them less to live – Families and married or coupled households without children believe it costs them more to live, one major factor being they are uneducated in the financial realities of what it costs ever singles (never married, no kids) to live.  Gaslighting occurs when households believe married or coupled households have double the expenses and families with two adults and two children have four times the expenses.  However, Low Income Cutoff (LICO) (cost-of-living) and Market Basket Measure (MBN) show if single person is given a value of 1.0, expenses for married or coupled households are 1.4 and for two adult, two children households around 2.0 or 2.2.

Gaslighting of definition  of what family is – An example of singles not being included in family definition is a chart showing family unit description of five stages of family unit life cycle comprised of childhood, early adulthood, married and rearing of children, empty nest and senior stages.  It is disconcerting to note that this chart did not include ever singles (never married, no kids) in the family unit.  After the childhood and early adult stages, singles were not included and were, in fact, invisible in the family unit chart.  Financial gurus often talk about singles, when they really are talking about widowed persons resulting in ever singles being left out of the discussion and false financial advice being perpetuated.

Gaslighting of millennials and future generations – In present political situation future generations are in for a huge financial shock re paying for the financial excesses that have been given to previous generations.  Some of their parents will have been able to accumulate significant wealth in their homes and egregious benefits like Tax Free Savings Accounts (TFSA) and pension splitting not paid for because insufficient tax has been collected to pay for this financial wealth.

Their parents say they want to leave something to their children, but children will be getting less because they will have to pay the taxes their parents didn’t pay.  An example is TFSAs. When one spouse is deceased TFSA will be transferred to surviving spouse with no taxes deducted. However, when TFSA is transferred to children as an inheritance taxes will be deducted, some at a very significant rate if TFSA amount  is substantial.

Square footage of housing for future generations is getting smaller and smaller. Millennials apparently are saying they don’t want live in the McMansions of their parents but it is unrealistic to think anyone will be happy living in 100 or 200 square foot apartments.  It is inhumane to stick anyone into housing that is the size of two jail cells.

Present political financial policies are ensuring benefits and tax loopholes are benefiting wealthy and married and coupled households more while pushing singles and poor households further towards poverty.

LESSONS LEARNED

Shea Emma Fett wrote in Everyday Feminism:

“I believe that gaslighting is happening culturally and interpersonally on an unprecedented scale, and that this- gaslighting- is the result of a societal framework where we pretend everyone is equal while trying simultaneously to preserve inequality”.

The financial gaslighting phenomenon appears to be a result of an ‘only me is important’ thinking and lack of critical and balanced thinking on how financial issues affect all segments of society, not just the middle class, married or coupled persons and families with children.  This financial dysfunction is perpetuated by political systems where vote getting appears to preserve the thinking that they are trying to ensure everyone is more financially equal while simultaneously preserving financial inequality.  Financial policies may appear to help low income persons, but same policies also make the rich even richer (Tax Free Savings Accounts).  Charity has become an ever increasing gaslighting method of helping the poor, but charity only masks poverty, it does not solve causes of poverty.

SIX REASONS WHY MARRIED/COUPLED PERSONS ABLE TO ACHIEVE MORE FINANCIAL WEALTH (POWER) (reasons).

TWO ARTICLES ON HISTORY AND MEANING OF GASLIGHTING

From Theater to Therapy to Twitter, the Eerie History of Gaslighting by Katy Waldman (history_of_gaslighting) – the following are excerpts from the article which gives a history and discussion of gaslighting.

‘In the 1938 play Gas Light a felonious man seeks to convince his wife that her mind is unraveling. When she notices that he’s dimmed the gaslights in the house, he tells her she is imagining things—they are as bright as they were before. The British play became a 1944 American film starring Ingrid Bergman as the heroine, Paula, and Charles Boyer as Gregory, her abusive, crazy-making husband.

A match struck; a metaphor flickered to life. Gas Light reminded viewers how uniquely terrifying it can be to mistrust the evidence of your senses. Flame made an evocative figure for Paula’s consciousness—her sense of self guttering when Gregory insisted she hadn’t seen what she saw.

Today to gaslight means to overwrite someone’s reality, to manipulate her into believing she’s imagining things…..Prototypical gaslighter. The term can attach to anything surreal enough to make you question your sanity, like the political news cycle, but gaslight arose from psychoanalytic literature, where it described a specific “transfer” of psychic conflicts from the perpetrator to the victim. In a 1981 article called “Some Clinical Consequences of Introjection: Gaslighting,” psychologist Edward Weinshel sketched out the dysfunctional dance: One person “externalizes and projects,” while the other “incorporates and assimilates.”…..Shea Emma Fett wrote on Everyday Feminism, “I believe that gaslighting is happening culturally and interpersonally on an unprecedented scale, and that this is the result of a societal framework where we pretend everyone is equal while trying simultaneously to preserve inequality.” Members of minority groups that face stereotypes about poor mental competence are seen as especially vulnerable.

Gaslighting identifies a real phenomenon: the way critics of a line of thought sometimes try to discount the perceptions of the person producing that thought. Gaslighting equals misdirection, distraction, and the deliberate denial of reality……Donald J. Trump is more than a flickering gaslight (or gasbag)—he’s the Great Chicago Fire of 1871. Republicans are moths in his flame.’

The Economic Gaslighting of a Generation by Anastasia Bernoullli  (describes herself as an aging millennial) – following paragraph is a  excerpt of an excellent worthwhile to read article (the-economic-gaslighting-of-a-generation):

“We are acting like a nation, and a generation, that feels guilty over screw-ups we did not commit. I obviously support the idea that everybody should live within their means, pay their bills, and be generally responsible, but when you’re doing your best, and you still can’t make ends meet, despite working full time, that’s a society problem, not a you problem. We need to overcome the lifetime of financial gaslighting we have received. Honestly take a look at your spending, and see if you’re as stupid as you’ve been lead to believe you are. I think it will be eye opening.”

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

FEDERAL BUDGET TOPICS: MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

FEDERAL BUDGET TOPICS:  MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

The January, 2018 blog post addressed the first part of the budget proposal for a housing allowance as one solution to the housing crisis.  This blog post is the second part of a Federal Budget proposal as presented to a Conservative Member of Parliament .  

TANGIBLE VERSUS INTANGIBLE TERMINOLOGY OF MIDDLE CLASS AND FAMILIES

All political parties and society spew terminology of middle class (who-is-the-middle-class) and families ad nauseum.  Middle class and families are intangible terms.  Nobody, including political parties, can define what ‘middle class’ is and ‘families’ politically is an emotional term, often excluding singles (never married, no kids) from the definition.  Singles are basically invisible.  Many of the wealthy think  they are middle class.  For God’s sake, stop talking about the middle class (middle quintile) if you are not going to include the poor (bottom fourth and fifth quintiles), and replace ‘families’ with ‘household’ terminology.  The word “household” includes everybody, even singles.

INDEXED LIVING WAGE

Fact Check:  Recent Liberal revision of Canadian Pension Plan will increase CPP pensions for the wealthy, but not for the poor, because the minimum wage is not increasing proportionately to CPP increases.  Schizophrenic political financial formulas will ensure increasing disconnect between CPP increases and minimum wage because CPP is controlled federally, but minimum wage is controlled provincially.  TFSAs are indexed but not minimum wage.

LICO for 2015 (statcan.gc.ca/census-recensement/2016/ref/dict/tab/t4_3-eng.cfm) as defined by Statistics Canada shows Low Income Cutoff of $20,386 (equivalent to $11 minimum wage per hour for 35 hour workweek) for one person household, $24,811 for two persons household, $30,895 for three persons household and $38,544 for four persons household for large urban centre population centres 500,000 persons or more.

However, Living Wage studies show it is impossible to live a decent and respectful lifestyle on $11 minimum wage per hour.

The time has come for governments to stop handing out giveaways to the wealthy and surreptitiously making singles and poor families even poorer.  Implementation of an indexed living wage financial formula based on equivalence scales or Low Income Measure (LIM) would ensure greater financial fairness for all Canadians.

Nobody says this better than Andrew Coyne in excerpt from  “Why Minimum Wages are Harmful:  

‘Rather than blithely decreeing that employers must pay their employees an amount the rest of us think appropriate, and hoping it all works out for the best, the option is open to us as a society to put our money where our mouths: to finance a decent minimum income for all with our taxes – which unlike wages are not so easily avoided.  Maybe this latest increase in the minimum wage will prove less harmful than feared, but it is certain to be more harmful than the alternative:  a minimum income, socially guaranteed and socially financed.’

An indexed living wage could be financed if government benefit programs such as Guaranteed Income Supplement (GIS), Old Age Security (OAS), child benefit and pension splitting programs were replaced with a guaranteed living wage program based on equivalence scales or LIM along with elimination of financial loopholes such as Tax Free Savings Accounts (TFSA) for the wealthy.

SELECTIVE SOCIAL DEMOCRACY

All political parties continue to practice selective social democracy (selective) benefitting the upper middle class and wealthy most.

Supporting documentation:

https://www.statcan.gc.ca/pub/75-006-x/2015001/article/14194-eng.htm Changes in wealth across the income distribution, 1999 to 2012

Assets and wealth – In 2012, families in the top fifth income quintile held 47% of all wealth held by Canadian families (and the 5% of families located at the top of the income distribution held 21%). Families in the fourth quintile held 23%, while middle income quintile families in third quintile held 16%. The second income quintile held 10% of total wealth, while families in the bottom quintile held 4%.  (Fourth Quintile average wealth $641,000 and median wealth $388,200.  Fifth Quintile average wealth $1,300,000 and median wealth $879,100.)  In other words, about 40% of Canadian families held 70% of all wealth.  Governments keep talking about the middle class (20% of population), but never talk about the bottom two quintiles or 40% also known as the poor.

Many Canadians are fed up with the selective social democracy practised by both Conservatives and Liberals which benefit wealthy, upper middle class and married over single marital status persons and poor when they don’t need it.  The fourth and fifth quintiles or 40% of Canadians have assets and wealth over $750,000 (about $650,000 in 2012), yet they are able to still get OAS, max out TFSA accounts, pension split, and have huge inheritances while paying less tax.  Once again, the poor and many singles are being forced further towards poverty because they cannot achieve the same levels of wealth.  Self serving Conservatives accuse the Liberals of social democracy when Conservatives are guilty of the same selective social democracy.

When handing out benefits assets and wealth, not just income levels, need to be included in financial formulas.  Income levels are already a part of income tax returns.  It would be very easy to add question about assets, wealth and home ownership (i.e. five broad categories) in income tax returns and adjust financial benefits accordingly. (TFSA is an egregious program which benefits wealthy the most.  In thirty years and 3.5 percent compounded interest return, couples will have $600,000 in their financial portfolios, all tax free, and that is just TFSAs.  TFSAs are not included in income, so a person with a $600,000 TFSA can claim poverty and receive GIS and OAS.  A limit needs to be placed on TFSA assets and TFSA assets need to be counted as income).

Example of selective social democracy (boutique-tax-credits) – Family with four children has paid for house and one spouse working.  These parents in their thirties already have a net worth of $500,000.  They are able to receive Canada Child Benefits to the point where they can fully contribute to Tax Free Savings Account and increase their wealth.  Why is this family receiving child benefits without income plus assets and wealth being taken into consideration?  Poor families should be the only ones entitled to child benefits when they do not have the assets and wealth that this family has.

Poor families and singles have been made to be financial scapegoats and sugar-daddies to the upper middle class and wealthy by the Conservatives and the Liberals.

PROTECTION OF PENSIONS IN BANKRUPTCIES

If corporations and private enterprise cannot control their own financial affairs and shareholder greed during hard times and bankruptcies so that their employees are the biggest losers, then governments need to take responsibility to implement procedures and policies to offset employee losses (pensions).  And governments need to stop bailing out corporations like Bombardier.

“Workers Deserve Better” by Hassan Yussuff (federal-government-can-and-must-put-pensioners-first

‘The aftermath of 2008 financial crisis and recession has been littered with the shaken futures of those who once worked for seemingly unshakeable Canadian…..icons like Sears…..We hear lots in the news about these giants, but pensioners are losing out when smaller companies shut down, too.The lesson from every one of these examples is clear: workers and pensioners should not and must not be at end of the line when companies go under.

All of these workers have every right to feel betrayed by their former employers. Especially when they see executives walk away with rich bonuses, their careers, savings and retirements intact. But it isn’t just the companies who have betrayed these workers and so many thousands before them, it’s the federal government.

The federal government can and should be doing more for pensioners. For starters, it can support legislation being proposed by the NDP that recommends changing bankruptcy laws so that pensioners are first in line, not last, when it comes to paying down creditors. The same has been proposed by the Bloc Québécois.  Critics argue that putting pensioners first in line would leave lenders less inclined to help companies in crisis. But that argument isn’t good enough given how many people’s futures have been shattered. It also ignores the reality that lenders have ample resources to inform the risks they take. Workers, on the other hand, have no option but to trust that their employers won’t just walk away from their obligations to employees.

The federal government can and must ensure bankruptcy laws put pensioners at the front of the line. And it can go one very important step further: working with the provinces and territories to create Canada-wide mandatory pension insurance. Such a system would guarantee monthly pensions up to $2,500 whenever an employer with an underfunded pension plan, like Nortel or Sears, files for bankruptcy. It would be paid for by pension funds, a fair trade-off, given their tax-exempt status.

Pension insurance isn’t just about protecting pensioners. It helps companies with no prospects of recovery or needing temporary help. It’s not a new idea. The United States and the United Kingdom are among other countries with nationwide mandatory pension insurance. Today, in Canada, only Ontario has a mandatory fund. Created in 1980, it guarantees pensions to a maximum of $1,000 per month. That’s expected to increase to $1,500 per month.

Mandatory insurance is required for most of the important assets Canadians have. We are required to insure our vehicles, our homes, and even our jobs — employers must pay into Employment Insurance and Workers’ Compensation to operate. Mandatory insurance exists because some things are critical to protect. And as Canada’s unions have long argued, pensions are among the most critical assets anyone will ever have.

The federal government must demonstrate it has the courage to stand up for pensioners.  Thousands dedicate their working lives to trying to make the companies they worked for successful, and they deserve to be treated with respect and dignity, not told they’ll have no choice but to work through retirement and turn to government services for support.’

 

“Sears Canada Legacy:  private profits and socialized losses” by Jen Gerson (sears-canada):

‘While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million…..

Instead,…. Sympathies (are) reserved for the likes of….the 72-year-old retiree is now pulling shifts at Home Depot after working for 35 years selling appliances for Sears. Thanks to the nature of bankruptcy, his defined benefit pension is likely to be cut by as much as 20 per cent — although the lawyers and actuaries are still working out the details.

While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million. While its executives enjoyed dividends, they also accepted multi-million dollar retention bonuses in the company’s closing months.  Maybe those incentives weren’t quite high enough. In the end, they didn’t seem to do much good. Regardless, none of them now need worry about how to make ends meet…..

However, if fair-minded businesses wish to reduce the cries of more onerous regulation, stories like senior employees don’t play well. Every senior pensioner who must trek back to Home Depot in his twilight years is going to raise questions about whether or not treating pensioners as secondary to other kinds of creditors in cases of bankruptcy is a fair ordering of priorities.

It’s not hard to imagine a world in which executive retention bonuses and dividend payouts are made contingent on fully funding pension plans, for example. If corporate boards are not willing to hold their executives to account, they should not be surprised to find a government eager to do so.

Ontario has attempted to ameliorate the plight of bankrupt pension plans by creating the Pension Benefits Guarantee Fund, which guarantees the first $1,000 of pension income lost in such a case; that figure has been set to rise to $1,500…..The PBGF strikes me as well-intentioned, but still fundamentally problematic. It’s using taxpayer funds to secure individual benefits at the expense of a province that is already deeply indebted.

Further, it gives us yet another example of privatizing profits and socializing losses; of placing those who were least responsible for Sears’ decline—( employees) on the hook for his bosses’ failures.

In the end, that could be what defines Sears’ legacy, far more so than mouldering catalogs and storied corporate histories.’

POSITIVE GOVERNMENT ACTIONS

It is only fair that if criticisms are doled out, then positive government actions should also be acknowledged where due.

Income sprinkling – The federal Liberals have done the right thing by modifying the income sprinkling loophole.  For example, dividends that would have been received by the primary owner of the private corporation, would instead be paid to the spouse, partner or kids of the primary shareholder, who are often in lower tax brackets; therefore, the family’s total tax bill would be reduced.  Since singles in their financial circle are basically financially responsible to themselves,‘Income sprinkling’ is of less benefit to single marital status entrepreneurs so they will pay more tax.  Singles get nothing that is comparable.  Modification of income sprinkling ensures financial fairness for singles.

Increasing the GIS supplement for single seniors is a positive, but still not enough – As the Conservative MLA knows, this author has lobbied for financial fairness and inclusion of singles in financial budgets.  The federal Conservatives did propose an increase for poverty stricken single seniors, but then were voted out and replaced by federal Liberals.

The Liberals in Budget 2016 proposed to increase the GIS top-up benefit by up to $947 annually for the most vulnerable single seniors starting in July 2016, which will support those seniors who rely almost exclusively on OAS and GIS benefits and may therefore be at risk of experiencing financial difficulties.

This enhancement more than doubles the current maximum GIS top-up benefit and represents a 10% increase in the total maximum GIS benefits available to the lowest-income single seniors. This measure represents an investment of over $670 million per year and will improve the financial security of about 900,000 single seniors across Canada.

While this is a step in the right direction, poverty stricken senior singles will receive only $947 annually while families with children are receiving Canada Child Benefits sometimes equaling thousands of dollars annually.  Financial fairness for all Canadians regardless of marital status with and without children would be ensured by having housing allowance and indexed living wage programs based on equivalence scales as outlined above.

CONCLUSION:

It is time for governments to stop the selective social democracy where the upper middle class and wealthy receive benefits and tax breaks they don’t need.  Assets and wealth in addition to income need to be included in financial formulas when handing out government benefits.  Corporations need to be held to greater accountability regarding bankrupt pensions and low income levels of their employees.

A housing allowance, indexed living wage, and government subsidized child care (as well as paid for first and second year of post secondary education- added Feb. 26/18) would help to alleviate the housing crisis and poverty resulting in singles and poor families being pushed even further into poverty.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

HOUSING BIGGEST LIFETIME EXPENSE, NOT CHILDREN. IS HOUSING ALLOWANCE THE ANSWER?

HOUSING BIGGEST LIFETIME EXPENSE, NOT CHILDREN.   IS HOUSING ALLOWANCE THE ANSWER?

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

(This discussion on the housing crisis was presented to a Conservative Member of Parliament for future consideration on federal budget consultations.  This is Part 1 of the presentation.  Further suggestions for budget considerations will be presented in next blog post).

AFFORDABLE HOUSING

First, affordable housing, affordable housing and more affordable housing.  Both Conservatives and Liberals have failed to provide solutions for affordable housing (Conservatives during their 40 year reign in Alberta had almost zero affordable housing, raised taxes for the poor from 8% to 10% with flat tax implementation and catered to the wealthy while having no financial plan for managing revenues from oil wealth, and therefore, were unprepared for the oil price crash-Peter Lougheed excluded).

FACT CHECK:  FOREIGN HOME OWNERSHIP AND MULTIPLE HOME OWNERSHIP

Canadian residents spent $2.2 billion on Florida real estate in the 12 months ended June 2014, making them Florida’s No. 1 international buyer of residential real estate (canadian-snowbirds). About half of Canadian buyers spent less than US$200,000 on Florida purchase and just 16 per cent paid more than US$400,000.  About half of Canadians purchased a condominium/apartment and 38 per cent bought a single-family detached home.  More than half (53 per cent) of Canadian buyers intended to use their Florida home as a vacation property (resulting in empty houses during part of year), 14 percent planned to rent it out, 17 percent said they will do both. Forty per cent of Canadian buyers purchased real estate in Florida, 23 per cent in Arizona, and 10 per cent in California. Dollar value of Canadian sales for 2009 $8.9 billion, 2010 $17.1 billion, 2011 $13.0 billion, 2012 $15.9 billion, 2013 $11.8 billion, 2014 $13.8 billion (total $80.5 billion in six years).  Fifty percent of sales were in four states of Florida, California, Texas and Arizona.

Both foreign home ownership in Canada and Canadian foreign home ownership in USA equal $80 billion (Canadian foreign home ownership is $80 billion in six years).  There is so much hype about foreign home ownership in Canada, but Canadians are so hypocritical that they can’t look in their own backyard regarding snowbird foreign home ownership in USA, having their Canadian homes empty for six months of the year and spending their money in USA for six months.  What does this mean? – those Canadians who are not so fortunate to be snowbirds like the poor are paying more to support the taxes and GDP of Canada.

Toronto – 121,100 people in the GTA owned at least one other home in 2016. Question: how many Canadians own multiple properties in Canada and USA (snowbirds) while in any given year 200,000 to 300,000 Canadians face homelessness?

Information from the following article provides an interesting perspective on housing:  (Renter-Struggle-Ultimate-Housing-Problem)

‘More than four million Canadian households — about 30 percent of total households — rent.

Without federal help, low-income renters’ struggle to find homes worsens.  There is, however, a lot of federal money reserved for homeowners. Owners selling their principal residence are exempted from capital gains tax, a tax break worth about $5 billion a year.

The federal government offers this aid for owners despite the fact they earn more than renters. Owners make more than twice as much as renters do at $67,522 a year, according to the last long form census in 2006. Owners also have 37 times the median net worth of renters, thanks to their homes, at $513,000, according to 2012 CMHC numbers. This wealth gap widens over time.

“The great thing about ownership is that you have an asset for when you retire… Politicians use the line that if you work hard and buy a house you’re going to be OK,” said the University of Toronto’s Hulchanski. “But what about renters? The rest of you are just lazy? And you’re going to suffer now? You’re going to suffer when you get old?”  Hulchanski calls the neglect of renters and prioritization of homeowners discrimination.  “That’s no way to organize society.” ’

HOMEOWNERSHIP

  • New data from the 2011 NHS (National Housing Survey) showed that 69.0% of households in Canada, or 9.2 million of 13.3 million, owned their dwelling.
  • Four in five (82.4%) couple-family households owned their dwelling, while less than half (48.5%) of non-family households (singles) owned their dwelling. Just over half (55.6%) of lone-parent households owned their dwelling.

Dr. Ben Carson (appointee of Trump who was put in charge of housing but knows nothing about housing) made statement that many of the poor create their own poverty.  This statement is so false.  Politicians, private enterprise, corporations and society have purposefully or unknowingly pushed singles and poor families further towards poverty by making them pay more.  Whether it is purposeful or unknowing still makes the perpetrators guilty of complicity in benefiting middle class and wealthy more.

Housing is a prime example.  Singles and poor families pay more for housing while being shoved into smaller and smaller spaces.  Examples of inequality of Canadian values in housing are as follows:

  • One condo development in housing complex includes 1 bed, 1 bath, 1 patio 552 sq. ft. micro-condo with starting price of $299,900 or $543 per sq. ft.  Three bed, 2.5 bath, 2 patios, 2 and 3 story 1830 sq. ft. condos in same complex are priced from $649,900 to $749,900 or $355 to $409 per sq. ft.  Ultra-deluxe model master bedroom suite with his and hers closets and spa bathroom covers entire third 600 sq. ft. floor.  Third bedroom is bigger than total square footage of $299,900 condo and sells for $150 to $200 less per square foot for two-thirds more space.
  • Vancouver 100-square-foot apartments equivalent to size of two jail cells rent for $570 a month (again most likely to be occupied by singles).  Renters in the 50 units share 11 bathrooms and laundry facilities over the four floors (and no kitchens?).

Where is the critical thinking of ripple effects where owners (most likely to be singles) of micro-condos have to proportionately pay more house taxes, education taxes, mortgage interest, insurance and real estate fees on less house and likely less take home pay for their biggest lifetime expense?

Which of those who spout family values as a personal issue believes females should go traipsing outside of their apartments to use bathroom in middle of the night? Who believes it is humane to stick anyone into a 100 square foot or smaller units (90 square foot units in Vancouver) plus charge excessive rents?

Who makes the decisions behind loan-shark or pay day loan type pricing where financial targeting of the most vulnerable occurs?  It is private enterprise, land developers,  cities (government), and greedy ‘what the market can bear’ persons that make these decisions.  Where does the bafflegab of neighbor helping neighbor, personal discipline, caring, responsibility and respect fit into these decisions?

HOUSING IS BIGGEST LIFETIME EXPENSE, NOT CHILDREN

Housing is a necessity regardless of whether or not households have children.  If lifetime length of paying for housing is from 20 to 80-90 years of age, then housing is a basic necessity spanning over sixty to seventy years.  Look at any Living Wage study, and it will show that as number of persons decrease per household, the greater the proportion of income will be spent on housing, yet most government benefit programs target only families with children or senior married or coupled households, thus leaving single person and poor households out of financial formulas.

If a household pays $1000 rent per month, then housing may cost $720,000 over a lifetime with nothing to show for it financially while supporting greedy real estate owners who pass their greed unto renters (and often ignoring renter psychological impact of excessive internal and external noise, being kicked out by landlord under guise of needing to renovate so prices can be raised, and dingy secondary suites, etc.). That is three quarters of a million dollars ‘lost’ to the  renter over a lifetime!

Homeowners after twenty five years and $1400 mortgage per month will likely have a $300,000 paid for house ($15,000 down payment and 3.70 interest rate for 3 years amortized at 25 years) which may or not increase in value as part of their assets and wealth financial portfolio (minus maintenance and house taxes)  They have the ability to move up or down in housing as dictated by their lifestyles changes.

Raising children covers only twenty to twenty five of those years, but both the Conservatives and Liberals have brought in child care benefits that benefit only households with children and in some cases child care benefits even pay entire mortgage and rental housing for these households.  Pension splitting government benefits apply only to senior married or coupled households.

Rent controls, rental vouchers don’t work and the greed of “what the market can bear” will not control the outrageous upswing of housing prices.  Charity is not the answer as charity masks the problem, but doesn’t solve it.

HOUSING ALLOWANCE

The Liberal proposal for a housing allowance is a step in right direction.  Instead of Liberals and Conservatives continuing their infighting and vote getting tactics, how about doing right thing and making housing allowance a permanent solution throughout entire lifetime, just like healthcare?  How about involving all political parties in defining a solution, now wouldn’t that be a novel idea? Housing allowance should be based on not just income, but also assets and wealth. Those who own their homes outright or more than one home should get zero assistance for housing allowance.  Housing is a human right.

One suggested housing allowance (renting or mortgage) formula based on of equivalence scales or LIM (Low Income Measure) (equivalence-scales) could include starting point of $500 (based on 1.0 LIM value) per month for one adult person household, $700 (1.4 LIM value) for two adult persons households or one adult, one child households and $1,000 (2.0 LIM value) for two adult, two children household. Amounts would be based on level of income AND assets and wealth). Households who have fully paid for ownership in housing, own more than one home and/or have ample wealth would get zero dollars for housing allowance.

CONCLUSION

Housing is a basic human right and is just one element of Maslow’s Hierarchy of need.  The inaction by politicians, governments, private enterprise and society on housing, especially in the so called free democratic world, is an egregious moral and ethical affront to the most vulnerable of our society.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).