Wednesday, May 25, 2011

Series Of Significance: “Taxes take 41% of pay” Gasp??

The following series of five posts were recently posted separately. They now appear together for your convenience.

PT 1 “Taxes take 41% of pay” Gasp??

[“The average Canadian family spent close to half its income on taxes last year - more than it paid for food, shelter and clothing combined, says a new study...” April 27, London Free Press]

My word. How shall I respond to the latest study from the Fraser Institute, a conservative think-tank?

Shall I clutch my chest over my heart? Shall I fall over and lie face down atop my shag carpet? Shall I curse the government for the terrible predicament (It is a terrible predicament, isn’t it?] that the average Canadian family faces day in and day out for the rest of my life?

No. I’ll do none of those things. Neither should you. Most average Canadians will be just fine, thanks.

Studies that share so little information don’t pass the Harrison Sniff Test.

Though the Fraser Inst. reports that “in 2010, a family with an average income of $72,393 spent 41.3% of its income on taxes,” which may all be well and true, I want to have more information for context, perspective and balance.

For example:

What does the average family receive in return by paying taxes to different levels of government? Is there a concrete benefit to educational, health care, social programs, etc.? Can we put a dollar figure on the value of a good education or health care over the course of an average lifetime? If Canada invested in a dental care program would it the average family actually save money over the long term?

By discussing the benefits to taxation fully, the average Canadian family might see they generally live like kings and queens in a free country.

I’d also like to know the percentage of tax that families pay who earn less than $40,000. And who earn between $40 - $50,000, between $50 - 60,000, and so on, right up to millionaires (the number of Canadian millionaires is growing) and billionaires.

By looking at those figures we might see that the 41% tax rate is about average in Canada. Or we might see that people with higher earnings pay fewer taxes and therefore have a higher percentage of disposable income, and that a fairer taxation system is in order.

With even more information, we might learn that the average Canadian is almost getting the best deal in the world.

And who is the Fraser Institute? How conservative are they anyway?


PT 2 “Taxes take 41% of pay” Gasp??

[In 2010, a family with an average income of $72,393 spent 41.3% of its income on taxes. Spending on food, clothing and shelter added up to 34% of the family income, the study found (i.e., a new study from conservative think-tank the Fraser Institute). April 27, London Free Press]

When I see a headline like ‘Taxes take 41% of pay’ I don’t gasp, clutch my chest or fall over due to weak knees. I don’t curse our government.

When I read that an average Canadian family pays 41.3% of its income on taxes I feel I need more information. What benefits do I receive for my tax dollars? What does the average family receive? What do the growing number of Canadian millionaires receive? 41.3% might be the bargain of a lifetime.

I’d also like more information about the corporate tax rate. I know it has gone down over the last few years and will go down another 1 - 2 per cent this year or next, thanks to the federal Conservative government.

So, I’d like to know how much revenue will be lost to the government because of the lower corporate tax rate. Will the 41% average family tax rate or beneficial government programs be under pressure because of the decline in corporate tax rate?

How much has the corporate tax rate declined since 2000? Since 1990? Since 1980? Since 1970? And what’s happened to our national debt from 1970 to the present time? Maybe time spent focusing on the average family would be better spent focusing on big business and a fairer, more-productive tax system.

And now that the conservative Fraser Institute has got me thinking about the average family and corporate tax rates, I want to know more about tax rates in other countries.

Do average families in the US or Europe, making $72,393 per year, pay more or less tax than Canadians? What benefits do they receive compared to Canadians? Perhaps we’d see, again, that 41.3% is an absolute bargain. Perhaps we’d see, in order to receive benefits common in other countries, that a slight increase in taxes would provide some very important improvements in our lifestyle.

Oh. Something else. I have some questions about the 34% that the average Canadian family - in the $70 - 75,000 income range - spends on food, clothing and shelter.


PT 3 “Taxes take 41% of pay” Gasp??

[“Taxes have grown over the past 49 years to the point that the government is now the largest expenditure facing a family,” Fraser Institute senior economist Niels Veldhuis said. April 27, London Free Press]

Should we fall down? No.

In spite of the conservative think-tanks findings, offered without the benefit of helpful context, when the average Canadian family (income $72,393) learns it pays 41.3% of that amount in taxes, it may breathe a sigh of relief.

“It’s the best deal on the planet,” some people will say.

“It sounds like a lot, but we’re doing well,” others will say, and say it honestly.

Now, admittedly, 41.3% is more than the average family spends on food, clothing and shelter (those costs come in at 34% of income), but people are getting a lot for their 34%.

For example, in the Food Dept.:

The average Canadian is overweight and wears XL Levis with a stretchy waistband

Canadians make 17 million visits to restaurants per day

Canadians pay one of the lowest amounts for weekly groceries (under 15%), compared to income, in the entire world. The percentage is higher in the US; it stands at 45% in Indonesia

Canadians annually write grocery lists that include millions upon millions of dollars worth of cookies, cola, sugar-covered cereals and snack foods

The average Canadian family would do much for its health - and health care costs - if it spent less on food, cooked more meals at home and walked around the neighbourhood more often after supper.

I’m sure the Fraser think tank would agree.

About the Clothing Dept.:

The average Canadian family has seen the size of closets grow substantially over the years

For example, in my 1930s three-bedroom house, the three closets (one is a hall closet for coats and two vacuum cleaners; one bedroom does not have a closet) are no more than 3 ft. by 4 ft. Modern homes and apartments now often come with one or more walk-in closets, room enough for more clothes and shoes than one person can shake a stick at. Sorry, I digress.

‘Clothes Hog’ and ‘Shoe Hog’ are modern terms and many families hire professional organizers or declutterers to help bring material possessions under some kind of control

The vintage and used-clothing markets have grown substantially in the modern era

The aforementioned 34% likely includes the cost of Nike running shoes for weekend runners at $169 per pair and the expensive NHL jerseys that adorn many fans watching the current hockey playoffs

I would therefore say the average Canadian family is getting by pretty nicely at the moment.

The conservative-minded Fraser Institute may want the average Canadian to feel that government has to be smaller, programs have to be cut, taxes have to be reduced - but I don’t buy their small government, market-first, large lifestyle philosophy.

And about the Shelter Dept.:

The average Canadian is not finding costs related to their homes unbearable because of government spending

For example, in the early 1900s, 800 - 1,000 sq. ft. homes, and smaller, were common. My parents and my four siblings lived in a one and a half storey, seven room house in Norwich for many years. We managed to get along without pitching anyone into the streets.

My wife and I and two sons lived comfortably together in our current home, eight rooms, 1,050 sq. ft., before the boys moved into their own digs. Half of the house, including the basement, is now under-used.

I would estimate that the modern day standard for a house is greater than 2,100 sq. ft., or twice my home’s size.

I would guess furnishings cost in excess of $20,000 per home. And if that includes the latest big-screen TV and finished rec room, I would suspect the high average debt per family ($148 debt for every $100 income) is the result of over-borrowing for items on “the want list” and not the size of the government. Again, I digress.

Now, what about that other 25% that the average Canadian family has left to spend after taxes and life’s essentials?

How are Canadians doing in the transportation, communication, recreation, RRSP and backyard pool departments? Any ideas? Is the government standing in the way of our success, progress, or excess?


PT 4 “Taxes take 41% of pay” Gasp??

[It has become fashionable these days to view government spending as a tremendous burden on society. In fact, spending our money collectively through governments, with their strong emphasis on health care, education and welfare, is the smartest investment we, as a society, can make. Shooting The Hippo, 1995, by Linda McQuaig]

Sixteen years have passed since L. McQuaig’s Shooting the Hippo said the above words. They may still be true.

The average Canadian family may be getting a very good deal for the 41% it pays in taxes, 34% it pays for food, clothing and shelter and the 25% it has left over to spend on whatever it wants.

And what does the average Canadian family want? I’m not sure.

And though Fraser Institute spokesperson, senior economist Niels Veldhuis, says, “Taxes have grown over the past 49 years to the point that the government is now the largest expenditure facing a family” (April 27, London Free Press), he doesn’t say what the average Canadian would actually gain by reducing taxes or the size of government or its programs.

The average Canadian could buy more food I suppose, though we are growing more obese by the day.

We could buy more clothes and more furniture for our home, I suppose. We could upgrade our transportation, communication and recreational choices, I suppose.

But perhaps there’s more benefit to putting money aside for collective choices as opposed to individual choices. More on all of us, others. Less on the individual, me.

I don’t know if Canadians will ever find out.

The more elitist organizations, such as the conservative Fraser Institute, propose fewer taxes and smaller government (without context, and usually for the elite’s overall benefit - what might that be? - and not the average Canadian’s), the more likely the average Canadian will, unknowingly, lean toward the goals of the elite.

And what are the goals of the elite?

“In many ways, what the elite wants now is to lower citizen’s expectations of what they can count on from society, to roll back the frontiers of government - to return to an earlier focus on enforcing more narrowly defined legal and political rights. It wants to wean us away from the notion of government as provider and equalizer, and re-establish the discipline of the marketplace in meting out those sorts of rewards where they are “earned.” Under the harsher discipline of the marketplace, we would have no automatic “rights” or “entitlements:” all we would have is whatever we could get by selling our services to those with the money to pay us.

“Presented this way, the new ideology might not sound appealing to most members of society; so it is rarely presented this way. Rather, proponents of rolling back government have focused on finding fault with the system of extended rights that we’ve come to enjoy, or presenting ordinary citizens as victims of an excessive tax burden apparently caused by government largesse.”
pg. 7, Shooting the Hippo

Are ordinary citizens in Canada, e.g., the average Canadian family, victims of excessive taxes?

I don’t think so. The average family is growing big and strong on 34% of its income (maybe too big and strong) and has 25% leftover to buy additional stuff that will one day clutter up a big house and garage in the burbs.

Instead of worrying or questioning the size of government, we should ask for a lot more information from the Fraser Institute. They paint wild pictures and make claims that are completely unsubstantiated.

Perhaps we should even read Shooting the Hippo by Linda McQuaig so we’re better equipped to recognize a pile of guff when it appears in the news.


PT 5 “Taxes take 41% of pay” Gasp??

[The notion that a consensus existed on cutting social spending was misleading. If anything, a consensus appeared to exist not to cut social spending. An Angus Reid poll, taken in late April 1993... found that almost 80 per cent of Canadians opposed any funding cuts to medicare, and almost 90 per cent opposed any funding cuts to education. pg 34, L. McQuaig, Shooting the Hippo]

Yesterday I said, “And what does the average Canadian family want? If you’re an average Canadian let me know.”

I said that because senior economist Niels Veldhuis (Fraser Institute) says, “Taxes have grown over the past 49 years to the point that the government is now the largest expenditure facing a family” (April 27, London Free Press), perhaps hoping the average Canadian would fall for his line of guff, clutch his chest and demand smaller government and fewer taxes and reduced social programs.

I’m pretty sure that’s what the elite want, but I believe their goals in 2011 differ greatly from those of the average working stiff (even though I referred to a 1993 poll).

Kevin O’Leary, seen nightly on the Lang and O’Leary Exchange (CBC TV), is on record for saying he supports a corporate tax rate of 0 per cent.

0 per cent. Of course, he’s a millionaire, he can afford private education for any children he might have now or in the future, he can afford private health care wherever he can find it, he can afford to let corporations (he’s the head of a business empire) get away with zero taxes. Why, he’d absolutely frickin’ love it!

What he doesn’t say is that the tax rate (all taxes) of the average Canadian family (41% on income of $72, 393) will likely rise substantially three seconds after he gets his wish.

O’Leary would love small government, lower taxes, fewer social benefits. O’Canadians want something else.

As mentioned earlier, 80 per cent of Canadians are opposed to any funding cuts to medicare, and almost 90 per cent are opposed to any funding cuts to education.

From Shooting the Hippo:

This fits with the results of polls done by Environics. Dasko (pollster) said that support for social programs remains strong... the public supported the idea of reforming - rather than cutting - social programs. “People think there are inefficiencies and abuses in social programs and strongly feel that those should be ferreted out,” said Dasko.

Dasko also notes that while the public supports the idea of reforming programs, it is not primarily motivated by a desire to save money... the goal of ending inefficiencies ranked above the goal of saving money. Interestingly, however, the polling showed that people suspect that the government’s main motivation in overhauling the programs is to save money. (pg. 34)

Canadian readers are welcome to say the following:

Times have changed

McQuaig was referring to old news, e.g., polls from the 1990s

This is 2011. Liberals are out. Conservatives are in. Canadians want real change.

I have to ask. What kind of change does the average Canadian want?

Does the average Canadian family want a 39% tax rate, instead of 41%, and reduced government services (e.g., related to medicare and education) as a result?

Does the average Canadian feel that, in spite of what the Fraser Institute says, he is surviving in a satisfactory or excellent manner and doesn’t need to live by the same goals as the elite?

If you’re an average Canadian, let me know.

(Mr. O’Leary. No need to write).


Please click here to read another Series of Significance



Kevin said...

What kind of a taxation policy can work better for taxpayers in the long run? A tax rate that is directly proportional to the income of the individual, or a single flat rate of taxation for all? This article, about progressive tax vs flat tax comparison, will help you find answers to these questions, and get a better idea about taxes in general.

G. Harrison said...

Thanks for your visit and comment, Kevin. Do you have a link to send me?