Changes would close expensive tax break

Finance Minister Morneau is closing an expensive tax escape for high-income earners, in the name of fairness. It affects only about 10 per cent of the top 10 per cent of earners, yet the noise in opposition is deafening.

The Carter Commission on Taxation in the late 1960s offered a blueprint for tax fairness. The Trudeau government of the day brought in a major revision of the tax system in the early 1970s with fairness as its touchstone. It called for a tax on capital gains starting at low rates and intended to rise to be equal with other income. It included numerous provisions for tax deferral and multiyear averaging of tax rates.

That the system was good and effective in its goals. This is attested by the fact that the Mulroney government of the 1980s dismantled or otherwise denatured all of the fairness provisions.

The current Trudeau government could restore some of the fairness provisions that affected the lower 80 per cent of taxpayers. The main one that comes to mind is the five-year backward averaging.

The main beneficiaries were the new entrants into the workforce whose income rises from year to year, the artists who struggle to keep a roof over their heads for years until suddenly the payoff comes and at the end of a pensioner’s life when the remaining RRSP funds land into the final year’s income. The high income would be spread over the previous five years to fill up the lower tax categories.

It was simple. It was automatic. It was beneficial to anyone who wasn’t already taxed in the top bracket. And the software is still around. Ron Fast, Ancaster