As Bev Dahlby’s essay points out, there are also economic costs to worry about. Efficiency costs occur when beneficial activity would have been undertaken, but tax rates and rules prevent or discourage it. Dahlby’s research shows that in every province, these indirect costs now exceed the direct cost of taxation, which is simply the money we transfer to the taxing government. His provincial-level estimates are striking. The cost of raising $1 of PIT (Personal Income Tax) revenue exceeds $2 in all provinces, while in Quebec it exceeds $3, in Newfoundland and Labrador $4, and in Ontario almost $7. Given these costs, projects financed with PIT revenues would have to exhibit benefits of more than $7 for every $1 spent on them in order to be justifiable. The list of such projects can’t be very long.
there is a much better way to tax and be revenue neutral
"The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property (think of all the fixed income and equity trades that are made every day) and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure." Quote above from the Summary, (page 2) of Taxation for the 21ST Century: the automated payment transaction (APT) tax.
As I have already demonstrated (See my March 12, 2017 post) in Canada we could reduce all of our "tax" payments to at least 4.25% on any financial transaction we make whether individual or corporate and we could get rid of the tax department and all filing requirements. And that's just with my limited access to the data that is required to make the "revenue neutral" calculation. If we could get access to the hidden data, we could show the reality of reducing that 4.25% even further. Feige got his model down to less than 1% for the U.S. economy.
are you worried that wealthy people will object?
"The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure."
I have already shown a possible APT tax in Canada of 4.25% per transaction and if we could uncover the data required to complete the thesis (please help) we could probably start approaching Feige's U.S. model of 0.3% per transaction ! Let's use 10x Feige's number ie: 3% per transaction (6% total on each side of the transaction ie: the debit side pays 3% and the credit side pays 3%). Let's do some math and see what happens; the results below are per annum.
An APT tax structure in Canada would do away with all other forms of taxation and indeed the CRA (Canada Revenue Agency) would become a science based technological institution working on behalf of every citizen, not an issuer of benefits to lobbyists sanctioned by the political party of the day.
Because the micro-fee charged on all transactions at the source would accrue to the Government immediately, a real time analysis of spending needs and choices could be made on the fly. The emphasis and social debate could be placed on providing the services and benefits that citizens want; health care, education, affordable housing, a clean and productive environment, aid to the less fortunate and investment in research and development.
This project is doable. We have the computational power and a young generation of men and women with the skills to implement it. Perhaps what needs to happen first is to get the old generation of politicians out of the way. If lobbying the government is the only way to get policy changed then write your Member of Parliament, or better yet, START A NEW POLITICAL PARTY. In my opinion, Electoral Reform and Tax Reform should be the first two issues to rally a base of support. Both reforms can be implemented with our existing technology and work force.
A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.
See my March 12, 2017 post that demonstrates that in Canada we could reduce all of our "tax" payments to at least 4.25% on any financial transaction we make whether individual or corporate and we could get rid of the tax department and all filing requirements. And that's just with my limited access to the data that is required to make the calculation. If we could get access to the hidden data, we could show the reality of reducing that 4.25% even further. Feige got his model down to less than 1% for the U.S. economy.
If you want to help, suggest a way to enlist some accredited professionals to begin the process of creating an APT model designed for our Canadian economy that will replace the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral tax that is automatically assessed and collected when transactions are settled through the electronic technology of the banking payments system.
Here are some media posts from today:
White House reveals tax plan to slash corporate rate Politico April 26, 2017
R (Tax Revenue) / PT Tax Base Volume of Transactions = Revenue Neutrality APT %Tax
R (295,453.0) / PT (3,506,841.5) x 100 = 8.452%
Let's say we round the APT tax rate to 8.5%, then each side of the listed transactions would pay 4.25% on each transaction. If we could gather and input more "PT" data to the model then the APT tax rate would drop even more. Please contribute your knowledge if you can.
Using R/PT=8.5% and if your household income was $100,000 per year and you spent $75,000 on expenses, your total annual tax would be:
Income $100,000 x 4.25% = $4,250
Expense $75,000 x 4.25% = $3,187.50
Total Tax paid = $7,437.50 or 7.44% of your $100,000/yr income.
Net savings at end of year would be $25,000 (unspent income) less $7,437.50 (tax) = $17,562.50 (net savings)
We are going to have to endure more blather from politicians about tax crediting and tax targeting (carrot and stick) in the upcoming municipal, provincial and federal election cycles but if the past is any indication, all we will see is more favoritism towards political party constituents.
I'm pretty sure there are people out there who can add to my modest attempt at illustrating that Edgar Feige's APT model would work in Canada. Please join in this attempt. Review the thesis.
I'm opening this blog on the very day that that we find out that there will be no electoral reform as promised.
Headline Today: "Trudeau government abandons promise of electoral reform." CBC News, Feb 1, 2017.
As tax paying voters, we are used to these reversals. That's why we get fed up and occasionally vote the incumbents out when we hear the new team promising reform.
Headline January 2016: "How the Liberal ‘revenue neutral’ tax plan could cost billions and push top talent south"
"That’s because delivering on the promise (of tax reform), intended to be “revenue neutral” is proving much more costly than envisioned when Justin Trudeau was elected prime minister on Oct. 19, 2015." Financial Post, Jan 15, 2016
Sometime before my original 2012 post (see the Thesis Page), I came across Edgar Feige’s Automated Payments Transaction APT tax model (see the Feige Page) which demonstrated that a potential revenue-neutral flat tax of 0.6% on financial transactions (0.3% on each side of the transaction) in the U.S. based on late 1990’s economic data, would eliminate all personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes. It would eliminate the U.S. Internal Revenue department and there would be no more annual tax filings.
OBJECTIVE: This blog and website is an attempt to gather the necessary Canadian data to plug into Edgar Feige’s model and see what the APT tax rate might be in Canada. After we find out, the next steps would be toward changing the Canadian Tax System into an automated micro-fee process based on the model; a task that is going to need a lot more expertise than I can provide, but perhaps some of you will have the ability to move this project along to completion. If you are already out there working on this and are well ahead of my attempt, please let me know, and I will join your effort.
As you may know, getting data from Canadian sources is very difficult. I will be making additions to the Data Page as I uncover more, but no doubt, I will need the help of insiders. Please take a look and if you know how to get, or can get the still missing data, please contribute either by email or use the blog comments to post and I will add your contribution to the file.
This is not a political blog. I have opened the comments but I am not looking for partisan argument unless of course you can show that Feige's model will not work in Canada. I'm looking for people who want to really reform our tax collection system.
I will moderate this blog and will not publish any spam or off topic comments. I should be able to approve your comments or respond to email daily unless I am travelling and out of reach of mobile or wifi.
Thanks in advance, Brian Ripley.