golchowy@gpu.utcs.utoronto.ca (Gerald Olchowy) (08/25/89)
A flat-tax rate system is (IMHO) the only fair tax system. One might have a large personal exemption to give immediate assistance to the low end of the income spectrum, but that should be the the only exemption. In addition, one could have different rates for individuals and for businesses. (Ideally, business income should be untaxed. You can tax business income by taxing the dividend and capital gains incomes of individuals. However, businesses should not be able to claim phony expenses like 3-martini lunches and boxes at the SkyDome as business expenses...but then this is a whole other issue) In response to article 1618 from <rayt@cognos.uucp> that entrepreneurs would not like such a system, IMHO that is absolutely wrong. True entrepreneurs would welcome a flat tax rate system with open arms. Then market forces determine what investments are made and are profitable, rather than the dubious wisdom of a loophole-riddled tax system where the government robs from the many to endow the chosen anointed few, and where vast armies of lawyers and accountants do essentially unproductive work to obtain memberships for themselves and their clients in this elite class. The problem with most of Canadian business is that it is not entrepreneurial...it is at the government trough like most of the citizens of this country. As for the comment that some investments are more risky than others, that's the way its supposed to be. The oil industry was mentioned. Let's take this as an example. If nobody goes looking for oil, the price of oil is sure to rise. (I still see more cars on the road than bicycles...another pearl of Canadian wisdom, the Brazilians are evil for burning the Amazon rainforests....but you aren't for driving your car to work in AnyCity, North America). As the price of oil rises, the potential profit than becomes proportional to the potential risk, and if you are a competent oil driller, with a flat rate tax system, you will be able to realize that potential profit and provide society with the oil it requires. If you are investing in something risky that society does not desire, you aren't being a very astute entrepreneur, and the government should not reward you for your incompetence or for taking an ill-advised risk. Gerald Olchowy <golchowy@gpu.utcs.utoronto.ca> Department of Chemistry, University of Toronto, Toronto, Ontario M5S 1A1
jmsellens@watdragon.waterloo.edu (John M. Sellens) (08/26/89)
In article <1989Aug24.150811.14764@gpu.utcs.utoronto.ca> golchowy@gpu.utcs.utoronto.ca (Gerald Olchowy) writes: >Ideally, business >income should be untaxed. You can tax business income by >taxing the dividend and capital gains incomes of individuals. So that someone earning a lot of money in a business can just leave it there earning more money and delay paying any taxes for as long as he likes. Make the poor pay! :-) One of the goals in the current tax system is to make the tax rate the same, no matter how you get the money - that's why the weird tax rules for dividends. These weird rules are intended to remove problems like the above.
henry@utzoo.uucp (Henry Spencer) (08/27/89)
In article <16123@watdragon.waterloo.edu> jmsellens@watdragon.waterloo.edu (John M. Sellens) writes: >>Ideally, business >>income should be untaxed. You can tax business income by >>taxing the dividend and capital gains incomes of individuals. > >So that someone earning a lot of money in a business can just leave >it there earning more money and delay paying any taxes for as long >as he likes. Make the poor pay! :-) Yup. Clearly, creating jobs and investing in our economy is evil and should be discouraged by taxing it. Or rather, by taxing people who are *successful* at it and therefore make money. And people wonder why our economy is steadily sliding downward... "Your deep seated resentment of people who make profits is showing." -J. DeArmond -- V7 /bin/mail source: 554 lines.| Henry Spencer at U of Toronto Zoology 1989 X.400 specs: 2200+ pages. | uunet!attcan!utzoo!henry henry@zoo.toronto.edu
rwwetmore@grand.waterloo.edu (Ross Wetmore) (08/27/89)
>>>Ideally, business >>>income should be untaxed. You can tax business income by >>>taxing the dividend and capital gains incomes of individuals. >>So that someone earning a lot of money in a business can just leave >>it there earning more money and delay paying any taxes for as long >>as he likes. Make the poor pay! :-) >Yup. Clearly, creating jobs and investing in our economy is evil and >should be discouraged by taxing it. Or rather, by taxing people who >are *successful* at it and therefore make money. >And people wonder why our economy is steadily sliding downward... >"Your deep seated resentment of people who make profits is showing." > -J. DeArmond While my first reaction is to applaud the latter sentiments, at least for their tone, this seems to be degenerating into a business vs average (downtrodden) man kind of serial. Has anyone considered the position that tax laws and the various wrinkles in the rates and definitions of taxable income are a valid form of government economic control? Certainly, a graded rate provides a disincentive to shelter money for significant periods of time if it all has to come out in a lump at the end. On the otherhand encouraging people to keep money in a business, rather than sucking it all out does not seem too wild a suggestion. Many 'tax breaks' are designed to further strategic areas of the economy where otherwise no one would invest and hence there would be not only no jobs and economic benefits, but no taxes as well. Is the government really 'paying' for such things and hence spending money that it could use elsewhere? Where is the dividing line between a simple, fair and easy to administer tax system, and one which provides a legitimate measure of government control over the economy? Where is the dividing line between a legitimate measure of economic control, and a system that is an engine of social reform? Or so complex that it just becomes a milk cow for those that can find the bugs faster than Revenue Canada can write their tax programs? Or is their a legitimate region of overlap that provides a little bit of everything for everybody? Ross W. Wetmore | rwwetmore@water.NetNorth University of Waterloo | rwwetmore@math.Uwaterloo.ca Waterloo, Ontario N2L 3G1 | {uunet, ubc-vision, utcsri} (519) 885-1211 ext 4719 | !watmath!rwwetmore
jmsellens@watdragon.waterloo.edu (John M. Sellens) (08/27/89)
In article <1989Aug26.214344.24140@utzoo.uucp> henry@utzoo.uucp (Henry Spencer) writes: >In article <16123@watdragon.waterloo.edu> jmsellens@watdragon.waterloo.edu (John M. Sellens) writes: >>>Ideally, business >>>income should be untaxed. You can tax business income by >>>taxing the dividend and capital gains incomes of individuals. >> >>So that someone earning a lot of money in a business can just leave >>it there earning more money and delay paying any taxes for as long >>as he likes. Make the poor pay! :-) > >Yup. Clearly, creating jobs and investing in our economy is evil and >should be discouraged by taxing it. Or rather, by taxing people who >are *successful* at it and therefore make money. I was referring more to the situation of making a bunch of money in a business and putting it in the bank. Should you get the benfit of delaying paying tax, just because the business owns the money sitting in the bank? And then what is meant by "in a business"? If the business entity is a corporation, it is (currently) treated as a separate entity. If the business is unincorporated, then it is treated as a part of the owner. If a business is unincorporated, there are no dividends or capital gains in the ordinary course of things. How do you (re-) define the point where non-taxable income comes out of the business to become taxable income of an individual? Do you distinguish between incorporated and unincorporated businesses for tax purposes? If so, why? Why should the form a business takes affect how much and when tax is paid? Why should there be a tax incentive to leave money lying dormat owned by a business rather than lying dormant owned by an individual. The money would have the same effect on the economy and jobs no matter who owned it. Saying "business income should be untaxed" is fine - but stating it just like that ignores the fact that there are many facets to all this, and that once you investigate it, it seems (to me at least) that things become a little less clear, and the dividing line a little harder to find. The current tax system attempts to be integrated e.g. you sell something and make a profit and eventually some money ends up in your pocket. The tax system tries to make sure that the end result is the same (i.e. the overall tax rate is the same) no matter what *form* the transaction takes. It tries to tax based on the *substance* of the transaction, rather than the (possibly contrived) *form* it happens to take. John M. Sellens, C.A. (i.e. Yes - I have some knowledge of the tax system and its principles)
rayt@heraclitus.UUCP (R.) (08/28/89)
In article <1989Aug24.152032.etc.> Gerald Olchowy writes: >A flat-tax rate system is (IMHO) the only fair tax system. One >might have a large personal exemption to give immediate assistance >to the low end of the income spectrum, but that should be the >the only exemption. In addition, one could have different >rates for individuals and for businesses. (Ideally, business >income should be untaxed. You can tax business income by >taxing the dividend and capital gains incomes of individuals. >[...] >In response to article 1618 from <rayt@cognos.uucp> >that entrepreneurs would not like such a system, IMHO that is >absolutely wrong. True entrepreneurs would welcome a flat tax >rate system with open arms. Then market forces determine what >investments are made and are profitable, [...] You may be right; it seems to me, however, that under the current system where tax incentives are given for the investor, an elimination of that system would ultimately net less from an investment. It would, clearly, depend upon the relationship between what is presently paid and what would be paid. The question, though, is whether it is in the government's interest to make it less profitable for investment under the guise of enhancing fairness. The entrepreneur can, for example, just take his money elsewhere if more favourable conditions evince themselves - that they would be forced to move out of Canada is a choice many are undoubtedly considering anyway. >As for the comment that some investments are more risky than >others, that's the way its supposed to be. The oil industry >was mentioned. Let's take this as an example. If nobody goes >looking for oil, the price of oil is sure to rise. >[...] >As the price of oil rises, >the potential profit than becomes proportional to the potential >risk, and if you are a competent oil driller, with a flat rate >tax system, you will be able to realize that potential profit >and provide society with the oil it requires. One can be a very skilled oil driller and still miss the oil - simply because it isn't where you are seeking it; while much progress has been made in gathering heuristics for natural resource location (prospecting), it is by no means as simple as just drilling for it. Equally, like any sort of future-oriented business, its pointless to wait until an unsatisfiable demand is current before seeking remedies: it takes time to find/design the resources plus time to extract/implement them once located, and finally a significant time to achieve regular production levels. One also must account for unexpected technological barriers arising (e.g. if new technology or process is involved). Crisis management is probably the worst from the consumer point of view - initial shortage with exorbitantly high prices (if you can get it), followed by a glut; something like the fiasco of the 1970's. Governments are interested in avoiding such eratic market fluctuations since it puts their autonomy at risk - equally, it is a sign of mismanagement, that is, incompetence. Ideally, one wants to be ready with a product at the point where the demand is ready to absorb it (low competition with no warehousing costs); this implies R & D with significant foresight AND significant funds. The further R & D in one country lags behind another, the more it loses its global market share and the balance of payments becomes skewed. If a government gave no incentives for research/exploration, it would be carried on where such incentives do exist (Japan comes to mind). >If you are investing in something risky that society does not >desire, you aren't being a very astute entrepreneur, and the >government should not reward you for your incompetence or for >taking an ill-advised risk. My own view is that society really only wants `more for less' and is more than willing to leave the specifics up to those capable of designing something to fill this vague demand. There is also the very curious fact that much desire is GENERATED rather than found. Lastly, taking `ill-advised' risks generally means investing more than one is likely to recoup profitably; under a tax scheme which broadens this domain, one is likely to find oneself in a second-rate nation of subsidiary plants and resource management. R. -- Ray Tigg | Cognos Incorporated | P.O. Box 9707 (613) 738-1338 x5013 | 3755 Riverside Dr. UUCP: rayt@cognos.uucp | Ottawa, Ontario CANADA K1G 3Z4
dave@lsuc.on.ca (David Sherman) (09/25/89)
In article <1989Aug26.214344.24140@utzoo.uucp> henry@utzoo.uucp (Henry Spencer) writes: >jmsellens@watdragon.waterloo.edu (John M. Sellens) writes: >>>Ideally, business >>>income should be untaxed. You can tax business income by >>>taxing the dividend and capital gains incomes of individuals. >> >>So that someone earning a lot of money in a business can just leave >>it there earning more money and delay paying any taxes for as long >>as he likes. Make the poor pay! :-) > >Yup. Clearly, creating jobs and investing in our economy is evil and >should be discouraged by taxing it. Or rather, by taxing people who >are *successful* at it and therefore make money. > >And people wonder why our economy is steadily sliding downward... > >"Your deep seated resentment of people who make profits is showing." I think you're mistaken, Henry. I'm all in favour of making profits. What you're overlooking is that if there's no taxation at the corporate level, there is a very strong incentive to leave funds in the corporation, whether they are invested in bank deposits, the stock market or anything else. This would create a bias to investment over consumption. It would also allow those who earn investment income through a corporation to effectively defer taxation indefinitely. It would also be inequitable unless you allow those earning income directly (not through a corporation) to defer taxation on all invested income as well. Kind of like no limits to RRSP contributions. That kind of system has been proposed; when you examine it carefully you realize it's much like the GST -- a pure tax on consumption (i.e., everything you don't save). David Sherman -- Moderator, mail.yiddish { uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca
golchowy@gpu.utcs.utoronto.ca (Gerald Olchowy) (09/26/89)
In article <1989Sep25.123029.20626@lsuc.on.ca> dave@lsuc.UUCP (David Sherman) writes: >In article <1989Aug26.214344.24140@utzoo.uucp> henry@utzoo.uucp (Henry Spencer) writes: >>jmsellens@watdragon.waterloo.edu (John M. Sellens) writes: >>>>Ideally, business >>>>income should be untaxed. You can tax business income by >>>>taxing the dividend and capital gains incomes of individuals. >>> >>>So that someone earning a lot of money in a business can just leave >>>it there earning more money and delay paying any taxes for as long >>>as he likes. Make the poor pay! :-) >> >>Yup. Clearly, creating jobs and investing in our economy is evil and >>should be discouraged by taxing it. Or rather, by taxing people who >>are *successful* at it and therefore make money. >> >>And people wonder why our economy is steadily sliding downward... >> >>"Your deep seated resentment of people who make profits is showing." > >I think you're mistaken, Henry. I'm all in favour of making profits. >What you're overlooking is that if there's no taxation at the corporate >level, there is a very strong incentive to leave funds in the >corporation, whether they are invested in bank deposits, the >stock market or anything else. This would create a bias to >investment over consumption. It would also allow those who >earn investment income through a corporation to effectively >defer taxation indefinitely. It would also be inequitable unless >you allow those earning income directly (not through a corporation) >to defer taxation on all invested income as well. Kind of like >no limits to RRSP contributions. That kind of system has been >proposed; when you examine it carefully you realize it's much >like the GST -- a pure tax on consumption (i.e., everything you >don't save). > >David Sherman >{ uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca A couple of points: 1)As for leaving the funds in the corporation, the shareholders will have something to say about that. Companies that don't pay dividends aren't likely to have a lot of people wanting to buy their shares. Tax the divedends. If you tax the corporation and then the dividend income of shareholders, you are taxing the same profits twice. Also, companies with large 'cash' balances tend to be good fodder for raiders. Raiders will tend to drive the share price up....the government then can tax these hidden profits by taxing capital gains on the shares. 2)I do agree that this is a bias for investment over consumption... but (IMHO) this is what the North American economy desparately needs. I would argue that the future properity of North Americans is being jeopardized by over-consumption and under-investment---i.e. see our huge budget deficits, our huge trade deficits, our low savings rate, the high interest rates required to attract foreign capital, our crumbling infrastructure, etc. 3)There are voices in Canada who constantly complain amount the amount of foreign ownership and control there is of our economy. Not penalizing investment over consumption would perhaps be one way of reducing this. Gerald Olchowy Department of Chemistry University of Toronto
henry@utzoo.uucp (Henry Spencer) (09/26/89)
In article <1989Sep25.123029.20626@lsuc.on.ca> dave@lsuc.UUCP (David Sherman) writes: >What you're overlooking is that if there's no taxation at the corporate >level, there is a very strong incentive to leave funds in the >corporation, whether they are invested in bank deposits, the >stock market or anything else. This would create a bias to >investment over consumption... Comparing rates of investment, as opposed to consumption, here to those in, say, Japan, this clearly is an area that could use some biases in its favor. >... It would also be inequitable unless >you allow those earning income directly (not through a corporation) >to defer taxation on all invested income as well... Sounds plausible to me, although it might be necessary to exempt things like small savings accounts simply to keep paperwork under control. >... when you examine it carefully you realize it's much >like the GST -- a pure tax on consumption (i.e., everything you >don't save). While I would be somewhat unhappy with this in a personal sense, given that my current cash flow tends to go to consumption rather more than investment, I would have to concede that a greater bias toward investment is almost certainly in the long-term best interests of the economy. -- "Where is D.D. Harriman now, | Henry Spencer at U of Toronto Zoology when we really *need* him?" | uunet!attcan!utzoo!henry henry@zoo.toronto.edu
kpicott@alias.UUCP (Socrates) (09/27/89)
In article <1989Sep26.102844.6519@gpu.utcs.utoronto.ca> golchowy@gpu.utcs.UUCP (Gerald Olchowy) writes: >2)I do agree that this is a bias for investment over consumption... >but (IMHO) this is what the North American economy desparately needs. I have to agree and disagree with this point. Yes, the economy desperately needs this bias. No, the GST will not help it. Someday the government will learn that increasing tax rates will only get more and more grumbling from the population at large, but they will STILL continue to pay it until it becomes physically impossible (witness the taxes on liquor, cigarettes and gasoline if you do not believe this). So how do we create the bias? To do this we need ("we" as in "Canada") to look at why people go into investment in the first place. It might be an entrepeneurial drive, a flair for the financial, or just an earnest desire to improve one's lot in life. But now the government is teaching us, through extended social aid (the state of which is a different topic entirely) that if we do not take care of ourselves, the government will handle it for us. (Notice I say "do not" and not "can not".) This provides an intrinsic security (like "job" security, only broader; maybe "existence" security?) that makes people unwilling to take chances in the investment arena, because it is not necessary for them. We now have the government presenting us with two sides of the same issue. (One might say this is hypocritical, but I don't think that an organization can have this characteristic. It's more like "the right hand doesn't know what the left hand is doing".) Human nature, being what it is, will naturally guide us to the easiest path; that of not investing and trying to grab all of the security we can get. IMHO if the government wants to stimulate investment they should do it not through over-taxation, but by spreading the message that the greatest risk is in seeking security. Complacency is the enemy, and taxation is not the solution; it is the aspirin for headaches, the coffee for waking up in the morning, the valium for going to sleep at night. (If anyone wants to convince me that these are good things I'd be happy to hear your opinion.) Hey B.M.; fix the cause and not the effect!