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The trouble with tax credits


 

Kevin Milligan critiques the fitness tax credit proposed by the Conservatives.

Boutique tax credits benefit those who can afford accountants to arrange their financial affairs, and lard our economy with extra burdens of filling in forms and shuffling paper … Those Canadians struggling most with their budgets don’t benefit, since non-refundable credits only help those who pay tax. This is not a trivial concern – more than eight million Canadians filed non-taxable returns in 2009.


 

The trouble with tax credits

  1. Boutique tax credits are piecemeal bribery.

  2. Boutique tax credits are piecemeal bribery.

    • I'm expecting any day now the Brampton tax credit. Available only to residents in the event the CPC sweeps Brampton.

  3. don't forget all the nice folk hired by CRA to administer and audit all of these things

  4. As long as I’m not paying tax to support health care and infrastructure and whatever else I benefit from I’m never going to complain about not getting tax credits. But I certainly agree with the rest of the problems. It’s not a great sign when a guy like Harper is adding complexity to the tax code.

  5. Then we wonder why we don't have a small govt

  6. Then we wonder why we don't have a small govt

  7. As long as I’m not paying tax to support health care and infrastructure and whatever else I benefit from I’m never going to complain about not getting tax credits. But I certainly agree with the rest of the problems. It’s not a great sign when a guy like Harper is adding complexity to the tax code.

    • too many negatives, my eyes went all crossed…

      • lol

  8. "Those Canadians struggling most with their budgets don't benefit, since non-refundable credits only help those who pay tax."

    Kind of a similar story with the Tory income splitting proposal — sounds good, but it's dumb and regressive in practice:

    – Childless couples don't see a tax savings at all, regardless of age (bad for those planning a family).
    – Single-parent households who could really use some relief don't see a tax savings at all because they are solo filers.
    – Of the two-parent households that do qualify, the wealthiest couples reap the largest tax benefits.

    Regressive reform.

  9. "Those Canadians struggling most with their budgets don't benefit, since non-refundable credits only help those who pay tax."

    Kind of a similar story with the Tory income splitting proposal — sounds good, but it's dumb and regressive in practice:

    – Childless couples don't see a tax savings at all, regardless of age (bad for those planning a family).
    – Single-parent households who could really use some relief don't see a tax savings at all because they are solo filers.
    – Of the two-parent households that do qualify, the wealthiest couples reap the largest tax benefits.

    Regressive reform.

    • Indeed. That policy strongly regressive. Families with modest income get almost no help. The reform also gives a $12,000 tax rebate to the highest income earners.

    • And people who share custody and pay child support to the parent with less income are considered to be childless. Payments for child support are completely disregarded even if the payor also supports children in the household half of the time. The Child Tax Benefit doesn't recognize the higher costs of maintaining two households for shared custody situations, which is probably almost as common as two parent housheolds.

      If we've got forms and time and CRA staff to diddle around with dozens of little credits and tax free savings accounts and GST exemptions for golf club memberships why can't we have a tax system that deals with our actual family situation instead of some Leave it Beaver template?

      • the breakdown of the Canadian family is hardly something that conservatives would want to encourage through tax policy; now governments regulating approved sports and arts programs and tracking whether your kids are registered for such approved activities or not, is obviously good conservative tax policy.

        • woot! Divorce tax!

      • Because, silly, the rich need to fool the less-rich into voting for this crap. After all, there are far, far more of us less-rich folks than there are the rich ones. And how on earth can the rich keep pulling away from us less-rich, if we don't cooperate and vote for this stuff, on the understanding that we'll get a couple of dimes out of it?

  10. why do you hate tax collectors?

  11. too many negatives, my eyes went all crossed…

  12. I agree that it generally doesn't direct benefits to those most in need, but as for administrative stuff it's keeping a receipt and filling out a line on a form. Or forego the $75 (on $500 spent) if it's too much trouble. but if you can manage household finances, you can handle a simple tax credit.

  13. LOL doesn't everybody?

  14. LOL doesn't everybody?

    • Not Jesus.

      • True, Jesus only cursed fig trees.

  15. I agree that it generally doesn't direct benefits to those most in need, but as for administrative stuff it's keeping a receipt and filling out a line on a form. Or forego the $75 (on $500 spent) if it's too much trouble. but if you can manage household finances, you can handle a simple tax credit.

    • What about the paternalism aspect? Why should tax relief be tied to government-approved behaviour?

      • I generally prefer practicality to ideology. You'd have to addrees your Coyne-isms to Mr. Harper.

    • In a lot of cases, couldn't $500 be spent in one or two expenditures, meaning it's not really too tough? For instance, if the adult fitness tax credit were a real credit today, I'd just be hanging onto my receipt from my Whistler/Blackcomb season's pass (assuming skiing is an allowable credit, I really have no idea).

      Given my outline above, it kinda makes one wonder why other people should be subsidizing my ski pass, but there you have it. I'm probably going skiing if I get $75 back or not.

      • It's a stupid gimmick that will only benefit the well-to-do, who tend to be healthier anyway. What public policy goal does this achieve other than buying votes? Argh!

      • Those are all definitely considerations in crafting a tax policy.

  16. I doubt anyone elver gets audited over a $75 maximum non-refundable credit, although if one was being conducted anyway it might become a minor aspect of the procedure. Remember, the simplest tax measures, like a basic credit, would be the easiest to enforce, as well.

  17. I doubt anyone elver gets audited over a $75 maximum non-refundable credit, although if one was being conducted anyway it might become a minor aspect of the procedure. Remember, the simplest tax measures, like a basic credit, would be the easiest to enforce, as well.

    • Audited? No, not that I've seen. Asked questions about it? ALL THE TIME!

  18. I'm expecting any day now the Brampton tax credit. Available only to residents in the event the CPC sweeps Brampton.

  19. Indeed. That policy strongly regressive. Families with modest income get almost no help. The reform also gives a $12,000 tax rebate to the highest income earners.

  20. lol

  21. And people who share custody and pay child support to the parent with less income are considered to be childless. Payments for child support are completely disregarded even if the payor also supports children in the household half of the time. The Child Tax Benefit doesn't recognize the higher costs of maintaining two households for shared custody situations, which is probably almost as common as two parent housheolds.

    If we've got forms and time and CRA staff to diddle around with dozens of little credits and tax free savings accounts and GST exemptions for golf club memberships why can't we have a tax system that deals with our actual family situation instead of some Leave it Beaver template?

  22. Isn't that the one only available to left-handed bagpipe players with tennis elbow? In 5 years?

  23. What about the paternalism aspect? Why should tax relief be tied to government-approved behaviour?

  24. I generally prefer practicality to ideology. You'd have to addrees your Coyne-isms to Mr. Harper.

  25. I mean, politics itself is the art of allocations of resources. Anyone who says, OMG what right do we have to allocate resources!!!! either isn't invovled in politics or is trying to argue against a specific allocation.

  26. What is practical about this tax credit? Why not just lower the marginal rate by 0.1% instead? That sounds more practical, and reduces the disincentive to work.

  27. In a lot of cases, couldn't $500 be spent in one or two expenditures, meaning it's not really too tough? For instance, if the adult fitness tax credit were a real credit today, I'd just be hanging onto my receipt from my Whistler/Blackcomb season's pass (assuming skiing is an allowable credit, I really have no idea).

    Given my outline above, it kinda makes one wonder why other people should be subsidizing my ski pass, but there you have it. I'm probably going skiing if I get $75 back or not.

  28. What is practical about this tax credit? Why not just lower the marginal rate by 0.1% instead? That sounds more practical, and reduces the disincentive to work.

    • Whose marginal rate, though? That would probably just make it a tax deduction, which would probably cost more, would benefit the wealthy to a greater extent, and might be a greater cost than budgeted for.

      Assuming there is revenue neutrality between a 0.1% (or 10 cents per 100 dollars or $50 per $50,000 subject to this aspect of tax) cut to some aspect of income tax and eliminating this proposed one, you would have to weigh the benefits of giving a very very small cut to everyone or a small cut to everyone. Factor in whether the benefit would convince more people to take part in a worthwhile activity (in this case, probably not), and if you think it will make people vote for you (really the only question in politics!), any other factors then come to a decision! It's not so much the practicality of the tax credit, so much as considering different aspects of any given plan.

  29. the breakdown of the Canadian family is hardly something that conservatives would want to encourage through tax policy; now governments regulating approved sports and arts programs and tracking whether your kids are registered for such approved activities or not, is obviously good conservative tax policy.

  30. In Brampton?

  31. In Brampton?

  32. Not Jesus.

  33. Why do you hate Brampton? LOL

  34. True, Jesus only cursed fig trees.

  35. Non-refundable tax credits are the worst form of incentive that the government can provide. They not only do nothing to help people who can't afford the activity in the first place, but only benefit those people who demonstrably don't need the benefit.

  36. Non-refundable tax credits are the worst form of incentive that the government can provide. They not only do nothing to help people who can't afford the activity in the first place, but only benefit those people who demonstrably don't need the benefit.

  37. Audited? No, not that I've seen. Asked questions about it? ALL THE TIME!

  38. Because, silly, the rich need to fool the less-rich into voting for this crap. After all, there are far, far more of us less-rich folks than there are the rich ones. And how on earth can the rich keep pulling away from us less-rich, if we don't cooperate and vote for this stuff, on the understanding that we'll get a couple of dimes out of it?

  39. It would appear that Mr. Milligan's comment would apply to essentially any income tax rate reduction or credit, as the earners in question are not paying tax under the current system of rates and credits.

  40. It would appear that Mr. Milligan's comment would apply to essentially any income tax rate reduction or credit, as the earners in question are not paying tax under the current system of rates and credits.

    • But not refundable tax credits.

      • Aren't the only refundable credits for tax or other deductions paid to the government such as EI or CPP deductions?

        If there are refundable tax credits where the government refunds money you have not already paid it, I will stand corrected, but I can't think what they are.

  41. Heh. This tax credit is too complicated for Canadians? Has this guy heard that the LPC platform involves a tax credit that requires you to get an energy "audit" of some type done before being able to claim it? If the CPC plan is complex, the LPC plan is rocket science.

  42. Heh. This tax credit is too complicated for Canadians? Has this guy heard that the LPC platform involves a tax credit that requires you to get an energy "audit" of some type done before being able to claim it? If the CPC plan is complex, the LPC plan is rocket science.

    • CPC also promised an eco-energy retrofit program that requires an audit. As Dennis would say, next!

  43. woot! Divorce tax!

  44. It's a stupid gimmick that will only benefit the well-to-do, who tend to be healthier anyway. What public policy goal does this achieve other than buying votes? Argh!

  45. Those are all definitely considerations in crafting a tax policy.

  46. But not refundable tax credits.

  47. CPC also promised an eco-energy retrofit program that requires an audit. As Dennis would say, next!

  48. Whose marginal rate, though? That would probably just make it a tax deduction, which would probably cost more, would benefit the wealthy to a greater extent, and might be a greater cost than budgeted for.

    Assuming there is revenue neutrality between a 0.1% (or 10 cents per 100 dollars or $50 per $50,000 subject to this aspect of tax) cut to some aspect of income tax and eliminating this proposed one, you would have to weigh the benefits of giving a very very small cut to everyone or a small cut to everyone. Factor in whether the benefit would convince more people to take part in a worthwhile activity (in this case, probably not), and if you think it will make people vote for you (really the only question in politics!), any other factors then come to a decision! It's not so much the practicality of the tax credit, so much as considering different aspects of any given plan.

  49. I hate tax credits, and I say that as someone who benefits from quite a few. If you want to lower taxes, lower taxes. If you want to pay people, cut a cheque.

  50. I hate tax credits, and I say that as someone who benefits from quite a few. If you want to lower taxes, lower taxes. If you want to pay people, cut a cheque.

    • what about deductions?

      And tax credits DO lower taxes.

      • But if you lower taxes then the amount of tax deducted from your paycheque is decreased, which is what helps people. Credits only insure that people who qualify, make enough taxable income, and properly claim the credits receive a benefit a year after the fact.

  51. what about deductions?

    And tax credits DO lower taxes.

  52. Aren't the only refundable credits for tax or other deductions paid to the government such as EI or CPP deductions?

    If there are refundable tax credits where the government refunds money you have not already paid it, I will stand corrected, but I can't think what they are.

  53. But if you lower taxes then the amount of tax deducted from your paycheque is decreased, which is what helps people. Credits only insure that people who qualify, make enough taxable income, and properly claim the credits receive a benefit a year after the fact.

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