WHY GOUGING THE MIDDLE CLASS MUST COME TO END
Every spring Canadians are cranky and deserve to be. It is tax season, the snowbirds are returning to 13-per-cent sales taxes, and the 2018 federal Liberal budget broke promises to pensioners and self-employed persons with holding companies.
Worse yet, Ottawa’s budget watchdog in its latest economic and fiscal outlook in April said the government lowballed deficits in February. Deficits will be $4 billion higher for the next two years, meaning that taxpayers were misled by 20 per cent or the Liberals don’t know how to count.
Another $8 billion is not a rounding error and is all the more unacceptable after the huge tax hikes imposed on the country’s higher income earners who, frankly, support the system.
The top tax Ontario rate, for those lucky enough to make a good income (or pension), has soared in Ontario from 49 per cent to 53.53 per cent since 2015 — an obscene jump of 9.2 per cent. In what universe, or nationstate, does this occur minus the excuse of a recession or a war or a calamity of some kind?
Self-employed persons such as doctors have been mistreated too. Dividends out of their personal holding companies were taxed 10 years ago at 30 per cent and this year leaped by 12.8 per cent from 40.13 per cent to 45.3 per cent tax rates.
This year’s gouging is not only destructive economics, but represents broken promises. People work decades to earn a pension, or to build up investments in holding companies to dividend out for themselves.
This is nation-busting stuff, the kind of disincentive that underlies Canada’s brain drain of doctors, nurses, tech workers, and entrepreneurs to the United States and elsewhere. Just watch the enormous economic damage done when Congress extends its permission for snowbirds by two months — to eight months a year — to stay in the U.S. without becoming taxable.
At the same time, the feds have done nothing to stop money laundering and anonymous companies that have propelled housing prices in Toronto and Vancouver beyond the reach of the middle class.
The snowbird phenomenon is about tax avoidance, and in large measure why Canadians own 500,000 residences in Florida alone and are the single biggest real estate investors in the U.S. This will increase.
With tax rates approaching Sweden’s level, Canada will end up with an economy and hightech sector just as booming as Sweden’s which, needless to say, not exactly booming.
The inability for Canada’s political class to abide by taxand-spend ceilings, zero-based budgeting, or apply common sense fiscal discipline is hollowing out the country. Canada remains America’s “farm team” and as long as taxes outpace growth this will continue. Here are some facts:
More Canadian physicians, engineers, and scientists move there than here by a significant percentage. For instance, for every American physician that moves here, 19 Canadian physicians move there.A study by Canadian Public Policy said if Canada’s taxes were equal to the United States, immigration south of the border would have been dramatically lower.A study by the National Bureau of Economic Research found that “superstar” inventors, with patents in eight countries including the U.S. and Canada, migrated mostly based on the effective top marginal tax.
Only France levies higher taxes than Canada, in the G7, and Canada’s highest rates kick in at a lower income than do rates in most OECD nations. Overall, Canadian taxes collected are equivalent to 38.6 per cent of GDP. In the U.S., this is 36 per cent and in Australia taxes equal 34.3 per cent (with nearly twice the military of Canada’s and the same social benefits.)
Gouging the middle class must end or Canada’s living standards will continue to fall.