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.