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#1 2017-04-02 16:09:23

From: Winnipeg, Canada
Registered: 2002-08-20
Posts: 6,001

Abolish income tax on Earth

At one point I had a look at what we are doing on this forum, and asked "Why do we want to go to Mars?" and "Can we do it here now?" Came up with a plan. Tried to run for political office to push this plan. Even won the nomination in my Riding (Federal Electoral District) in Canada, then got squashed.

Goal: get rid of income tax.

Treat the federal debt like a mortgage, pay the whole damn thing off, then once it's gone abolish federal personal income tax. During the election campaign for the January 2006 election it was fairly simple. We already had a surplus, the May 2006 budget confirmed the 2005/2006 fiscal year had a "status quo" surplus of $17.4 billion. Just apply all of that to the principle of the debt, then set that plus interest as a fixed total every year. As the debt comes down, interest will come down. For each dollar of interest reduced, increase the payment to principle by the same dollar. That's how the mortgage of a house works. If we started this in January 2006, it would have taken 15 years to pay off the entire federal debt. That would have mean effective January 1, 2021, no federal income tax! Unfortunately that didn't happen, the Paul Martin Liberals lost the election. Stephen Harper's Conservatives got in, and they went on a spending spree. To do this today we would have to cut spending to create a $24 billion surplus, and it would take 18 years. That's 18 years from the time the full $24 billion surplus starts, not some fraction. That's because the debt is larger now. Now only did Harper Conservatives squander the surplus they inherited from the Martin Liberals, they ran us into debt. On March 17, 2011, the Parliamentary Budget Officer announced the federal debt equalled it's previous all-time high. That means Harper undid all the hard work the Liberals did paying down the debt, from election day October 1993 to January 2006. And the government has run a deficit every day since, which means the debt sets a new all-time high every day. Now we have Justin Trudeau Liberals, but they're spending as badly as Harper Conservatives. We continue to go more deeply into debt every day. mad

Abolishing income tax would be limited. EI and CPP premiums pay for those programs, so the premiums have to stay, but no increase, no decrease, no change what so ever. For our American friends, EI and CPP together are equivalent to Social Security. Provincial income tax is under authority of provincial governments, so anyone who wants to get rid of that would have to talk to their provincial politicians. In provinces with a health insurance premium (eg Ontario) that's also under authority of provincial government. So this plan would only eliminate federal income tax off your paycheque; all other deductions would remain the same.

Balancing the budget without federal personal income tax would have been relatively easy in January 2006. Freeze both GST and corporate income tax at the levels they were at that time. Corporate surtax could be abolished, and Paul Martin Liberals had already passed a law to abolish federal corporate capital tax, but the effective date was after election day so Harper Conservatives tried to take credit for that. But corporate income tax itself would have had to be frozen. Unfortunately Harper Conservatives didn't stop there. They undid the Liberal cut to personal income tax from the November 2005 fiscal update, then brought it back a year later and tried to claim they cut income tax. That's not a cut. What they did do is cut GST and deeply cut federal corporate income tax. To balance the budget now, we would have to increase GST and federal corporate income tax back to what they were.

That's close to balance, but we would need a little more. Shift tax on corporate dividends from personal income tax to corporate. That would be done very simply: tell corporations they can no longer deduct what they give out in dividends from taxable income for the purpose of corporate income tax. And have them issue a tax slip with that dividend cheque, which would include the corporation's tax number for corporate income tax. When an individual gets that cheque, if it has that tax slip then that dividend would not be included in taxable income for the purpose of personal income tax. Foreign corporations do not pay income tax, at least not to Canada, so they wouldn't have paid income tax on that dividend cheque. So a dividend cheque without that tax slip must be included in taxable income. Short term gain: an incentive for investors to invest in Canadian companies. Long term: when we abolish federal personal income tax, dividends will stay taxed.

And one more thing: shift GST credit from a cheque that's mailed out once very 3 months to a line item on your paycheque. Currently everything on your pay stub is deducted from your paycheque. This will be added to it. Your employer's payroll department would net-out income tax withholding from GST credit added to your paycheque. A page on the Canada Revenue Agency website would tell employers whether that employee gets it, and how much to add to give him/her. If an individual has more than one employer, the first employer to register that employee's Social Insurance Number would get it. Only one GST credit per SIN number. And if you haven't filed your income tax return, your GST credit will be withheld from April 1 until you get your assessment notice. If you're not employed, it would be added to your EI benefit cheque. If you're not employed and don't get EI, but retired and getting CPP, then it would be added to your CPP cheque. If you're not employed, don't get EI, don't get CPP, but on provincial welfare, it would be added to your welfare cheque. If you don't get any of that, the default is add it to next year's income tax refund. If you want to get it promptly, ensure there's a cheque to add it to. It would never be sent as a separate cheque, or separate direct deposit, and no mailed statements. There would be a paragraph about GST credit on your income tax assessment. If you really want to know what your GST credit will be, then log onto your "My Account" on the CRA website. The purpose is to reduce administration expense for the GST credit, then pass that cost saving onto taxpayers, double the amount you get per year. Anyone who currently doesn't qualify for the GST credit still won't, but those who do will get double. However, when federal personal income tax is abolished, the GST credit will be abolished the same day. GST will stay, but the credit will be gone. Since federal income tax deducted from your paycheque is larger than what you get in GST credit, you will see your paycheque increase. That will minimize complaints when we take away the GST credit.

Furthermore, drastically cut the personal income tax division of the Canada Revenue Agency. Employers current pay a portion of EI and CPP premiums. They have to file an annual return for their portion. Just make that include the employee's portion. That means employees would still pay, and at the same rate they do now, but for anyone with an employer, your employer would file the return for your for your EI and CPP premiums. Anyone without an employer would have to file their own. This would mean the only reason anyone would have to file an income tax return would be for provincial taxes. If provinces want to retain provincial personal income tax, they would have to pay for collecting it. The year federal personal income tax is cancelled, individuals would still have to file a return because it would be for the previous tax year. However, that would be the last tax return they file. That means CRA would have to be fully staffed that year, but the following year the massive lay-offs would begin. Unless provinces paid to keep them. Hopefully that will create enough incentive for provinces to find a way to abolish provincial personal income tax as well.

I have a way Manitoba could restructure their taxes to do so, but it uses something unique to Manitoba. Since my ambition is to run for federal office, I don't want to dictate to other provinces how they run their affairs. But I live in Manitoba, so entitled to an opinion here.

On election day 2006, Canadian federal corporate income tax was 21%. When they took over from Mulroney Conservatives in 1993 it was 28%, so they had cut it. And supporters for Paul Martin told me he intended to cut it down to 19%. That's equal to American federal corporate income tax now. The official American rate is 35%, but after deductions most corporations actually pay 19%. But Harper Conservatives didn't stop there, they cut Canadian federal corporate income tax to 15%. That's equal to the lowest personal income tax bracket, so the same as individuals who earn minimum wage, and those below the poverty line. Multi-billion dollar corporations pay the same as individuals who earn more than the basic personal exemption but less than the poverty line? That's obscene! But that's what we have now. However, I want Paul Martin supporters to support my plan, so I had to find a way to balance the budget with 19% federal corporate income tax instead of 21%.

Everything I could think of was already in this plan. Then the Liberals solved the problem for me. They passed a policy resolution to legalize marijuana and tax it. Actually the resolution said legalize and regulate, but for a tax guy the important thing is tax. Justin Trudeau was against legalizing marijuana, but he wanted to win the party leadership so decided to go along with it. That election promise gained him a lot of votes. However, his team appear to be dragging their feet on this one. But under my plan, they wouldn't be able to spend any of that tax money, because it would be needed to balance the budget when we take away federal personal income tax.

So would you support this plan?

Ps. When I posted this plan on a Canadian web forum with a political theme, they gave me the "typewriter" medal for excessively long posts. typewriter.png Yea, it's long, but I'm serious.


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