(Canada) What's a 'fair share'

[sakimano]

With all the consternation from waiting model 3 owners about their $14,000 rebate on their $70,000 Teslas when the big bad wolf (blue party) take it away, it got me thinking about the election.

I saw an ad on telly for the NDP saying they were going to give a bunch more free stuff to people if they get elected, and all they'd have to do to pay for it is ask the wealthy to pay a little more, or 'their fair share'.

What's a fair share? Is what the wealthy are paying today 'unfair'? Let's see:

When a woman makes $500,000/year employment income in Ontario, barring any great tax saving schemes, they pay about 47% average tax rate. They're paying about $235,000/year in tax.

When someone makes $90,000/year (less than almost every police officer and firefighter in the province it seems so a good wage but not 'the wealthy' by most definitions) they pay about 26% average tax rate which amounts to about $23,500.

How is giving everyone free stuff and asking the $500,000 / year lady to pay EVEN MORE than the $235,000 / year she already pays anywhere near 'fair' or their share? She's paying 10 shares already.

Just wondering.

 

[bpjod]

What's a fair share? Is what the wealthy are paying today 'unfair'? Let's see:

When a woman makes $500,000/year employment income in Ontario, barring any great tax saving schemes, they pay about 47% average tax rate. They're paying about $235,000/year in tax.

When someone makes $90,000/year (less than almost every police officer and firefighter in the province it seems so a good wage but not 'the wealthy' by most definitions) they pay about 26% average tax rate which amounts to about $23,500.

How is giving everyone free stuff and asking the $500,000 / year lady to pay EVEN MORE than the $235,000 / year she already pays anywhere near 'fair' or their share? She's paying 10 shares already.

Just wondering.

I do somewhat sympathize with your argument, but to play devil's advocate: the individual earning the "good wage but not 'the wealthy'" income has $66,500 left to live on after taxes and hopefully lives an enjoyable life. The woman would have $265,000 after tax income. That's 4x the after tax income of the other.

Assuming $66,500 covers the basic necessities (we all need a roof over our heads, plumbing that works and food to fill our bellies) plus a few luxuries, what's the woman doing with her extra $200,000? That's a lot of money left over after the necessities are looked after for luxuries. Now extrapolate that over a 40 year career. Poor gal...

Please note I'm simply using your numbers. Both of their tax bills would be considerably less than your example as you're using the marginal tax rate as though that applied to their entire earnings. Furthermore, in reality the woman would likely be able to hire a good accountant to make adjustments to reduce their tax bill further.

 

[sakimano]

I do somewhat sympathize with your argument, but to play devil's advocate: the individual earning the "good wage but not 'the wealthy'" income has $66,500 left to live on after taxes and hopefully lives an enjoyable life. The woman would have $265,000 after tax income. That's 4x the after tax income of the other.

Assuming $66,500 covers the basic necessities (we all need a roof over our heads, plumbing that works and food to fill our bellies) plus a few luxuries, what's the woman doing with her extra $200,000? That's a lot of money left over after the necessities are looked after for luxuries. Now extrapolate that over a 40 year career. Poor gal...

Please note I'm simply using your numbers. Both of their tax bills would be considerably less than your example as you're using the marginal tax rate as though that applied to their entire earnings. Furthermore, in reality the woman would likely be able to hire a good accountant to make adjustments to reduce their tax bill further.

Let's clarify...I'm using AVERAGE tax rate. Not Marginal tax rate. The marginal tax rate of the $500,000 earner is 53.3% before provincial health care levy. Hiring an accountant to make adjustments is also irrelevant. Even after taking a $26,000 RRSP contribution there aren't too many ways for a salaried individual to reduce their tax bill. Further, those same benefits apply to the $90,000/yr person as well so as I said it's irrelevant and will in fact only make the disconnect look larger. If they both for example make a $26,000 RRSP contribution, the $500,000 person goes to $220,000 in tax owing, while the $90,000 person goes to $13,620 in tax owing...so now rather than a 10 for 1 tax bill the $500,000 earner is paying 16x what the $90,000 earner does.

As for the 'poor gal' comment and her great earnings, let's not forget that in the grand majority of cases, she is either

a) more educated
b) more productive
c) harder working
d) risked her capital
e) all of the above

You don't accidentally earn $500,000 a year in this very competitive economy unless you inherited a business or a large investment portfolio and as the original post noted, this is a highly paid employee, not a business owner, not a rentier.

Suggesting that she shouldn't complain because she still has more money after tax implies everyone's work is equal...when we know that's not remotely true. Your argument also starts a slippery slope. It's why we're at a 54% marginal rate already when we were at 46% a few short years ago. 'They're doing well...let's keep taking from them to pay for everything.'

With that argument that someone making $500,000 still has a nice take home wage, why not take 70% tax? They can surely live on $150,000. In fact, let's take 80%. They can surely live on $100,000 if the other people are getting by on $66,500.

Where do you stop?

Reality is the person earning $500,000 is in effect being penalized for doing well, being more productive, working harder and being more educated (generalizations...don't give me one offs please). They're paying 10 fold what the other person pays and they're still using (largely) the same services and not getting the same 'bang for their buck' when you compare the two.

 

[taylortbb]

I think the best way to look at it is income inequality. Inequality has been increasing over the past 20 years, and the top earners have seen significant inflation-adjusted wage growth while those with middle and lower incomes have been stagnant (inflation adjusted). This is a societal problem, both from an equity perspective, and from a pure self-interest perspective for the wealthy (higher income inequality causes social instability). Tax policy is the most direct way to fix this problem, and it's quite effective in a number of countries that have higher standards of living (e.g. the Nordic countries).

I'm in the group that's going to see a tax increase under the Ontario NDP's plan, and I'm okay with it. For me it means I'll take a slightly less luxurious vacation each year, but for the people that benefit it's a difference of being able to get a post-secondary education or not, or something equally important. Taxes aren't about "bang for your buck", they're about building better societies. If income was purely about working hard then I'd agree with you, but look at any data around inter-generational wealth and it's very clear that's not what happens in our society.

 

[kzod]

Taylor if they were spending the money on Education, Healthcare, or basic requirements (police, fire, etc...) most of us wouldn't care. It's their little pet projects and all the layers of management that never manage to do much. This isn't about inequality or paying a fair share it is politics at it's ugliest. Get the majority to believe that if you vote for me I will strip away all the advantages of the rich guy so you can take what he has. The trick is they have to keep lowering the amount of money that describes "too rich" while just keeping it a hair more than we make, since we don't want to pay higher taxes either.

 

[bpjod]

Let's clarify...I'm using AVERAGE tax rate. Not Marginal tax rate. The marginal tax rate of the $500,000 earner is 53.3% before provincial health care levy. Hiring an accountant to make adjustments is also irrelevant. Even after taking a $26,000 RRSP contribution there aren't too many ways for a salaried individual to reduce their tax bill. Further, those same benefits apply to the $90,000/yr person as well so as I said it's irrelevant and will in fact only make the disconnect look larger. $500,000 person goes to $220,000 in tax, while $90,000 person goes to $13,620...so now rather than a 10 for 1 tax bill the $500,000 earner is paying 16x what the $90,000 earner does.

As for the 'poor gal' comment and her great earnings, let's not forget that in the grand majority of cases, she is either

a) more educated
b) more productive
c) harder working
d) risked her capital
e) all of the above

You don't accidentally earn $500,000 a year in this very competitive economy unless you inherited a business or a large investment portfolio and as the original post noted, this is a highly paid employee, not a business owner, not a rentier.

Suggesting that she shouldn't complain because she still has more money after tax implies everyone's work is equal...when we know that's not remotely true. Your argument also starts a slippery slope. It's why we're at a 54% marginal rate already when we were at 46% a few short years ago. 'They're doing well...let's keep taking from them to pay for everything.'

With that argument that someone making $500,000 still has a nice take home wage, why not take 70% tax? They can surely live on $150,000. In fact, let's take 80%. They can surely live on $100,000 if the other people are getting by on $66,500.

Where do you stop?

Reality is the person earning $500,000 is in effect being penalized for doing well, being more productive, working harder and being more educated (generalizations...don't give me one offs please). They're paying 10 fold what the other person pays and they're still using (largely) the same services and not getting the same 'bang for their buck' when you compare the two.

I stand corrected on the marginal vs. average tax rate. I looked it up (I’m not from ON) and saw 46.84% in the last column and assumed that it was the marginal rate on income, but it was for non-eligible dividends. Oops!
As for the rest of your argument, I feel that a progressive tax is truly a fair way of assessing income tax. I don’t have much of an issue with their method of revenue generation. Each should pay to support our society within our means. My real problem is that all levels of our governments have a HUGE spending problem. Spend more time trimming budgets and provide us with the essential services we really need as a society and the firefighter, the ‘poor gal’, you and I would be far better off.

 

[sakimano]

I think the best way to look at it is income inequality. Inequality has been increasing over the past 20 years, and the top earners have seen significant inflation-adjusted wage growth while those with middle and lower incomes have been stagnant (inflation adjusted). This is a societal problem, both from an equity perspective, and from a pure self-interest perspective for the wealthy (higher income inequality causes social instability). Tax policy is the most direct way to fix this problem, and it's quite effective in a number of countries that have higher standards of living (e.g. the Nordic countries).

Is this really the case? Let's test your theory about income inequality. Sure you can point to C suite compensation which has largely revolved around share price (and thus has seen parabolic increases in comp packages as a result of a largely booming stock market for 20 years) but let's look at more 'normal' examples:

2018
Average Ontario Firefighter over $100,000
Average Ontario Schoolteacher $83,000
Average Ontario Police officer $96,000

Compare these to numbers 30 years ago and you'll see those incomes have more than doubled or tripled while inflation has added only 88% to the cost of living over the same period. This is hundreds of thousands of people in Ontario, in those 3 job roles. They're good examples because they're largely thought of as 'normal' people but a quick look at their earnings show that this is anything but a 'normal' income in society, nor has the rate of income gains they've made over the past 30 years been. When you compare them to lawyers, accountants, engineers, dentists and doctors, you'll see that those professional roles have seen approximately 100% wage growth over that 30 year period, while the 'normal' jobs have seen close to 200% growth (near tripling, vs a doubling and vs inflation less than doubling).

If you want to roll out a list of minimum wage earners, sure lets do that too.

Minimum wage in Ontario has increased from the late 80s from $3.75/hr (I used to earn that lol) to $14 today and $15 next January. That's a near quadrupling....so they're growing even faster than everyone. Against inflation of 88% over the same period.

So I don't buy your argument. At all.

Certainly there are challenges, but when you consider the rate of pay increase in that 'normal' group and the fact they all come with gold plated, government guaranteed, indexed to inflation pensions they're doing quite well in comparison to 'the wealthy' such as physicians and other professionals. It isn't lost on me that all three groups benefitted greatly from unions negotiating with governments who were happy to dole out massive wage hikes and contracts that would make any business owner's toes curl.

The problem with the nordic comparison is that here, we're not seeing tax dollars spent wisely. If the spending was indeed wise, the contracts well negotiated, the fluff eliminated and the system efficient as heck, I'd agree with you but frankly if that were the case, you could give much of those savings to the 'less fortunate' and solve far more problems...and you wouldn't need to further tax the highest income earners.

 

[sakimano]

My real problem is that all levels of our governments have a HUGE spending problem. Spend more time trimming budgets and provide us with the essential services we really need as a society and the firefighter, the ‘poor gal’, you and I would be far better off.

we all can agree on this (unless 'we' include some lobbyists and pet agencies )

 

[taylortbb]

Is this really the case? Let's test your theory about income inequality. [...]
So I don't buy your argument. At all.

Rather than trying to create our own synthetic benchmark based mostly on public sector employees (who are a minority of employees) there's actual data available on this. Take a look at The fall and rise of Canada's top income earners . Particularly look at chart 2, 1982 to 2014 was very bad to be in the bottom 50%, while the top 1% saw incredible gains. Inequality has reversed itself a little since 2008, but it's still far higher than average for the post-WW2 era.

The problem with the nordic comparison is that here, we're not seeing tax dollars spent wisely. If the spending was indeed wise, the contracts well negotiated, the fluff eliminated and the system efficient as heck, I'd agree with you but frankly if that were the case, you could give much of those savings to the 'less fortunate' and solve far more problems...and you wouldn't need to further tax the highest income earners.

This is a common refrain in politics, but appears little supported by evidence. I agree government isn't a model of efficiency, and we could do better, but any time we've elected politicians that promise to find efficiencies they've always had to resort to service cutbacks to get any major savings. I'm sure we could move things a few percent through efficiency improvements, but not nearly as much as someone like Ford is promising.

If you add up health, education, and interest you're already at over 70% of the Ontario budget before considering anything like the justice system or social assistance programs. The programs that people like to complain about as wasteful just don't represent that much of the budget.

 

[Uncle Paul]

It would make sense to me to have all citizens pay a solid flat amount to cover their costs of government. This would make government accountable to their citizens. Also would give the government a restriction on what they could spend. Not an open ended, endless checkbook. Also governments should not be allowed to borrow. They should live within their means instead of indebting their next generation.

Wealthy could pay more and gain access to even more services if they wished.

Any government taking over 50% of a person's income is guilty of soaking the rich and should be voted out.

 

[DMC-Orangeville]

It would make sense to me to have all citizens pay a solid flat amount to cover their costs of government. This would make government accountable to their citizens. Also would give the government a restriction on what they could spend. Not an open ended, endless checkbook. Also governments should not be allowed to borrow. They should live within their means instead of indebting their next generation.

Wealthy could pay more and gain access to even more services if they wished.

Any government taking over 50% of a person's income is guilty of soaking the rich and should be voted out.

....you're not from around here, are you?
Almost all of our political parties are left-leaning, and even the Conservatives believe in a social safety net.We Canadians in the top 25% are used to paying high taxes. We moan about it....but not much else

 

[alsetym]

Sure, it's not obvious what YOU get with a progressive tax system or from shuffling money from the top to the bottom, until you compare to countries that don't.

Don't like having to pay private security to keep 'the poor' off your property? Just one of the perks! Creating a system that was stable enough for YOU to increase your wealth? Also a perk. Taxes keep the pitchforks away. Not to mention the myriad other benefits that don't play into humans' natural greediness, but the pitchforks should be enough justification. But these debates are always fall on deaf ears as one of the defining feature of those with wealth, by in large, is they want more. Probably net benefit, as long as someone is looking out for everyone else (i.e. The big evil government).

 

[Canuck]

But these debates are always fall on deaf ears as one of the defining feature of those with wealth, by in large, is they want more.

This is human nature resulting from evolution. We consume way too much fat and sugar too -- and most of us have to fight our urges not to. Modern man, surrounded by fast food, cheap calories, 24-hour grocery stores and all-you-can-eat buffets, faces the same dilemma: Our genes, fine-tuned to help us survive famine in a radically different environment hundreds of thousands of years ago, have stacked the deck against our health.

We also try to procreate too much because, as Christopher Hitchens said: “Evolution has meant that our prefrontal lobes are too small, our adrenal glands are too big, and our reproductive organs apparently designed by committee; a recipe which, alone or in combination, is very certain to lead to some unhappiness and disorder.”

I don't for a second buy the class warfare answer that "those with wealth, by in large,... want more". Those with no wealth want more too. I've never met a poor person who would pass on being wealthy. It's just human nature to want more and all part of evolution that got us to this place. If giving things away was good for our survival, we wouldn't have an issue with being taxed too much, at least in my view.

The OP asked a great question. The answer requires a delicate balancing act between being treated fairly and being punished. When you come from nothing, work hard, watch others be lazy and leach off the government, while you're being asked for more than 50% of what you earn (with all forms of taxes that's the reality up here) -- it can naturally breed resentment.

Don't like having to pay private security to keep 'the poor' off your property? Just one of the perks!

We pay private security to keep the poor off our property in Canada? Break-ins are mostly drug related. No one is breaking in to get a steak to eat.

2018
Average Ontario Firefighter over $100,000
Average Ontario Schoolteacher $83,000
Average Ontario Police officer $96,000

I'm glad to hear of those stats -- since it's hard to live comfortably on much less. I doubt many people have any issue paying taxes for those salaries.

Here's something that can be cut back:

Canada gives $3.3bn subsidies to fossil fuel producers despite climate pledge

 

[Harrta]

Homer: "Oh people can come up with statistics to prove anything Kent, forfty per cent of all people know that."

 

[Doug_G]

You all realize this is completely off-topic for the forum. By rights I should move this to the Off Topic subforum. Unless there's something in here about cars...

 

[sakimano]

Don't like having to pay private security to keep 'the poor' off your property? Just one of the perks! .

Fear tactics? So we have to pay 54% (or 60%) tax otherwise we have to hire guards? Funny when we paid 44-46% top marginal rate for the past 30 years I don't remember needing those guards. Maybe you were living in Sweden back then.

Guessing you've got a red or orange sign on your lawn lol...

 

[sakimano]

You all realize this is completely off-topic for the forum. By rights I should move this to the Off Topic subforum. Unless there's something in here about cars...

1. It's a Canadian discussion, so the off topic forum won't really work
2. It's about the government rebate program...see the first sentence?

 

[Harrta]

This has had nothing to do with the rebate from the beginning, thread should be locked or moved. There are plenty of other places to discuss politics.

 

[Doug_G]

1. It's a Canadian discussion, so the off topic forum won't really work
2. It's about the government rebate program...see the first sentence?

1. Sure it will. See revised title.
2. Uh...

 

[ohmman]

Mod note: 3 posts moved away. Keep it civil - you Canadians have a reputation to uphold.