Sunday, April 20, 2008

Sunday funnies: flat taxes and bitter laughs

Let's begin with the humour, by all means. First we have the Vancouver
transit cop memo. Then, a personal message from God to Kate McMillan: global warming is a fact, but for you and the other knuckle-draggers, have a nice Spring.

Now, to a truly unfunny joke: helobious (thank you,
CanWest) Citizen columnist Randall Denley thinks a flat tax is the answer to yearly income tax-preparation woes. And it's fairer, he says--the current system (in all of its labyrinthine complexity) "discourage[s] people from working harder and earning more because those extra dollars are taxed at progressively higher rates. Why do we want to discourage hard work?"

Denley is a meticulous researcher most of the time; if you want to disagree with him on his generally right-of-centre take on municipal affairs, you do so with your hat in your hand. But on this issue, he's plain wrong. He's proposing nothing less, in fact, than a massive transfer of the tax burden onto the backs of ordinary working Canadians.

It's simple math: if the government currently receives $X in tax revenue within the current progressive tax system, the rich will pay a proportion of that based upon an ascending marginal tax rate. If that $X is to be obtained from a flat tax arrangement, then the rich will pay less--and middle-income earners will pay more (Denley points out that the poor will be largely sheltered).

Denley notes, with appropriate disapproval, the current tax fudges, loopholes and dodges currently enjoyed by the rich. All that would go with a flat tax system, he says. Really? It's that easy? Then why not get rid of all that stuff right now? No more untaxable family trusts. No more tax-free offshore accounts. No more corporate boondoggling and complaisant Revenue Canada write-offs...

Well, one can dream, but Denley is dreaming in technicolour. Conservatives like the flat tax because it will reward the wealthy: in effect it will force average Canadians to subsidize them. If the poor can be protected from income tax burdens, as in Alberta, the rich can be protected too. They aren't about to give up their own commodious tax shelters if a flat tax is adopted.

As John Kenneth Galbraith once quipped,
"We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had much." But some, it seems, are hanging on to that notion for dear life. Meanwhile, I gave all my 2007 stuff to an accountant, and I'm hoping he can work his usual miracles. After all, if I have a legal problem, I'll hire a lawyer. Some things cannot and should not be reduced to Denley's "single sheet of paper." That kind of simplification would benefit only one group: the one that's already doing quite well enough, thank you, under the current system.

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