one little cog

Well it is almost time to file your income tax. Sitting on the buses these past couple of weeks, I keep noticing the Ufile ads plastered all over our public transit system. So that’s where our tax dollars go eh? To provide a century old forum for advertising to brainwash us … subtly. But that’s beside the point of this post, I am here to tell you today that we shouldn’t be paying high income taxes.

Your response: Duh… we all know that one.

My response: Everyone generally agrees on that point, except for the oddball who would claim that they are willing to sacrifice a rather substantial chunk of their annual income for the rest of Canada. I am not saying that I wouldn’t, nor am I stating that everyone else is selfish. I am saying that as much as we all believe in the Canadian way of equalization payments and a social safety net with health care for all and so on, I think taxing income is not the way to go.

Your response: Okay, so what’s your point?

My response: Growing up, I had to endure my dad’s ever-constant lectures about economics and business. Getting into university, I endured a never-ending wave of teachings revolving around our Canadian “philosophy” or “ideology”. Up to this day, we continue to hate the GST even though it literally saved our country from an eternal deficit, yet we merely wave a fist at Revenue Canada (oh sorry…the politicians now call it the Canada Revenue Agency) who takes away a chunk of our income. This year, I estimate they’ll take away at least $—-, give or take a couple digits. Now think of what you could do (or for that matter, what I could do) with that money.

Your response: Yeah well, so what?

My response: So what? The money that we would have in our so-called pockets could either be re-invested, put aside to savings or put to good use in the economy. That would in turn create a very good effect. Now let’s re-examine this situation but since income taxes would be lowered to a much lesser percentage, this ultimately means a great amount of income for people to make use of (and survive off of…). To fund all of those public programs that we hold dear to our Canadian way, we would apply a flat tax percentage across all products (goods and services), with the exception of any food item purchased from a grocery store. By doing so, those who consume more, will essentially pay more taxes.

Your response: You’re crazy, where’s the logic or reasoning in that?

My response: There is plenty of logic and reason behind a consumption tax. Income taxes that simply use an income bracket to take off chunks of income, hoping to cash in on the wealthy, is actually flawed. There is really only so much money you can take off of someone’s income. Why is a consumption tax practical? Here’re three reasons why:

1. People regardless of who they are will pay the same tax percentage. What differs is based on the value of the product they purchase, rather than using an income bracket to determine the tax percentage. This is where it is actually fair for everyone regardless of how much money one makes. Ironically, this has the possibility of creating a win-win-win situation for people concerned about the social network, tax payers in general, and the government.
2. By having people, organizations and businesses pay the proper proportion of taxes for every item that they purchase, there is an actual residual effect within the economic and social policy for the government or for that matter, the world. Think about it. For every product that we purchase, we are consuming something from this planet. For every computer, car, desk, chair, air conditioner, bottle of wine that we spend our money on; there are residual effects. The car is the simplest example because it DOES pollute, it is involved in numerous hit and runs, it requires paved roads and it involves the financial industry (insurance companies), etc. The tax revenue collected from this would be greater than the income tax formula that Canada continues to use currently.
3. When does the government collect income tax? Once a year. When is sales tax collected? Every time you or I purchase something or pay for a service. Not to mention, you get to choose where your taxes are coming from.

So as the fiscal year comes to end and the taxman is coming to your doorstep to grab a portion of your annual fortune, perhaps it is time to pay attention to our country’s gold mine: you, me and the other persons that we know. I am not declaring that sales tax is the ultimate solution to our problems, but it is time that we lose the perception that sales tax is bad, because regardless of whether you’re a thrifty individual or a shopaholic, it works for both kinds of people (as well as people in between the two extremes). With the former you have more money to save and invest, and with the latter you have more money which equals more buying power.

Your response:  Aren’t you overlooking a lot of vital and important factors such as inflation and other cycles in the economy?

My response:  I’m not overlooking them.  I do agree that my overview isn’t absolute, but I am simply pointing out that moving from an income-tax-dependent revenue over to a more (not totally dropping income tax here) sales tax oriented funding system would be beneficial to everyone.

technorati tags:finance, taxes, economics, income, government, policy, politics, canada, perspective, opinion, canadian

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