Thomas Mulcair on taxes - Macleans.ca
 

Thomas Mulcair on taxes

The NDP leader refuses to target the rich


 

The NDP leader reminds Bloomberg that his party opposes the cuts to the corporate tax rate that have been made by the Harper government. The NDP’s budget submission in 2011 recommended setting the rate at 19.5% (the NDP’s 2011 platform committed to maintaining a corporate tax rate lower than the rate in the United States). The NDP also proposed reducing the small business tax rate and establishing a job creation tax credit. In its 2012 budget submission, the NDP asks “the federal government to tie financial incentives to real job creation.”

More interesting, Mr. Mulcair seems to eliminate any possibility of a tax-the-rich proposal from the federal NDP.

Mulcair said he would not raise taxes for high-income earners because marginal tax rates in the country are already too high. “Absolute guarantee it will never be part of my program,” he said. “It’s never been my policy and it never will be.”

Last year, the Ontario NDP successfully convinced the Liberal government to accept a surtax on those earning $500,000 or more in return for the NDP’s support for the government’s budget. And the surtax enjoyed widespread public support.

More than three-quarters of people surveyed — 78 per cent — like her idea with only 17 per cent opposed and 5 per cent unsure, according to the Forum Research poll. “It’s hugely popular. You never see that — that’s huge,” Forum president Lorne Bozinoff said Wednesday.


 

Thomas Mulcair on taxes

  1. Ditch corporate taxes completely. Let’s be honest, the reason people like the idea of corporate taxes is that we see it coming either from the big-wigs who are making a ton of money already or we forget that a corporation is ultimately just a group of people and so don’t think that it’ll actually hurt any person.

    But there’s enough evidence out now that a corporate tax is simply a regressive form of tax which hits the lowest paid workers the hardest. This makes sense when you think it all the way through. After all, companies get the money to pay taxes from one of three things: Higher prices to consumers, lower returns to shareholders, or lower wages to employees. The first two make them less attractive to investors, so they’ll avoid those unless they absolutely have to. And the last one works best for them if they lower the wages of the workers who are easiest to replace, in case they leave. This typically means the lowest paid, least skilled workers who’ll have the most trouble finding a job elsewhere and so can’t afford to do anything but eat the pay cut.

    Ditching corporate taxes would be a hit on gov’t revenues, true, but not nearly as much as we might think because doing so would also eliminate all of the tax-credits corporations get. It would also eliminate one of the major ways that people tend to cheat their taxes — a “business” that loses money. There’d still be a difference, of course, but that difference you make up through taxes on things that have little inherent productivity: property ownership and capital gains. And you know what this does? This does what we wanted corporate taxes to do in the first place.. hit the big-wigs who are raking it in through options etc.

    Do it right, such as having the capital gains tax rate start extremely high but decrease over the length of time the asset is held, and you encourage investment as opposed to speculation.

    • Completely agree. I have a feeling that’s the direction the government is going in, although very slowly (which is probably the right way to do it).

      • Actually, they’re not. Sure, they cut the corporate tax rate, but then they increased the EI premium rate, which is *doubly* regressive, since it’s not only a higher cost to corporations (and as such has the same issues as a direct corporate tax) but then also comes off the workers directly.

        In my little ideal society in my head, we have only four types of taxes: GST/VAT (which has a low income rebate paid monthly), Carbon Tax, (which is pooled each year, then split evenly, and returned to everybody monthly over the next year), Capital Gains Tax (which as stated above, starts at a very high rate and decreases over time), and Property Ownership Tax (which has low income credits)

        Good luck getting there though.

        • Why not a set lifetime exemption for capital gains instead of having to game a system of increasing “hold rates”

          • Because the idea is to encourage investment over speculation. To encourage using the money in a way that benefits everybody (by enabling something to grow, create employment, profits, and fulfill societal desires), as opposed to using the money in a way that helps yourself (by riding the wave of what’s popular in the moment, and getting out as its popularity declines)

            With a straight exemption, there’s no incentive to holding longer over shorter. No incentive to picking companies that are going to actually grow as opposed to companies where the perception is growing.

    • I might agree, including your provisos, but that still wouldn’t address the fact that many corporations are:

      a) having their operations subsidized by taxes collected from the rest of us

      b) claiming the rights of citizens to oppose regulations that defend the rights of actual people, but refusing to take responsibility

      c) spending heavily to influence our political system

      d) externalizing all sorts of costs their operations impose on other taxpayers
      e) using the threat of capital flight to suck up public funds or avoid taking responsibility for the real costs (social, environmental and economic) of their operations

      • True, but then again, neither does the current system of corporate taxation. Those are separate problems which should be addressed.. well.. separately.

        • I can see addressing toby’s concerns without eliminating the tax, but to eliminate business tax without directly tying it to addressing those concerns would be absolutely foolhardy.
          Further, corporations take full advantage of our infrastructure – at least as much as private citizens do. Why should they benefit without footing some of the cost? Infrastructure in itself becomes a major subsidy, if they aren’t paying taxes.
          If I thought eliminating taxes on businesses – and the subsequent downloading of that tax burden onto private citizens would be offset by higher wages and higher employment (making the change revenue-neutral for both citizens and government) then I’d be on board. But I have seen no evidence from previous tax cuts that such would be the case.

          • You’re falling into that mindset I spoke of earlier. You’re forgetting that corporations are simply groups of people. In reality, corporations take no advantage of anything because a corporation is a legal fiction surrounding a group of people. People take advantage of our infrastructure, and people should pay the taxes on it. Now, if a particular group of people use that infrastructure more, I can certainly see the reasoning that that group should pay more for it.. which is why we put higher taxes on capital gains.. so that the people who see the profit from that use are the ones who pay. Corporate taxes means that it’s the ones who *work* for those who see the profit are who pay.

            I’ll agree that lowering corporate taxes does nothing to benefit workers directly. The extra money gets shunted straight over to shareholders, agreed. But.. again.. this is where the higher capital gains tax comes into play. It gets shunted to shareholders, taxed at a higher rate, enters the public coffers, and, ideally, is used to benefit the lower income workers directly.

          • Eliminating corporate taxes as part of a complete overhaul of our tax system may be worth considering (and one which you now seem to be proposing). But as a strategy in its own right, which seemed the main thrust of your first post, it is a bad idea.

          • Note that in my first post, I specifically pointed out an increase in capital gains and property tax as a way to make up the difference from lost corporate taxation. I do not see the two as severable.

          • It would need to be more comprehensive than that, though.
            Your reply to Rick Omen about your “ideal society” does set out the bare bones of a more comprehensive plan; I might be willing to give that more thought if you care to flesh it out. (Then we’d just need a party other than any of the three mainstream ones, if we were to have any hope of championing it.)

      • I’m all for ditching corporate taxes as long as they pay their real costs just like you toby. Right now corporations are more than willing to take from the public purse but not contribute in any meaningful way and they have the resources and power to ensure this state of affairs will not change.
        If they want to pay no taxes, then they should have no say in how the country is run and should receive no monies from the country. Then they can truly say, “I did that.”
        Until then they are the ultimate in entitled, elitist welfare queens

    • I do think there’s some merit to this argument, and I need to think it through some more, but I do see a BIG problem.

      Take, this: After all, companies get the money to pay taxes from one of three things: Higher prices to consumers, lower returns to shareholders, or lower wages to employees… the last one works best for them if they lower the wages of the workers who are easiest to replace, in case they leave.

      Fair enough as it stands, but if corporations STOP paying taxes, we don’t seriously think that the gain will be put towards higher wages for their lowest wage employees, do we? Corporations may take their loses out of the pockets of their workers, but they also tend to put their gains into their profit margin. So, I don’t think the elimination of corporate taxes would help workers. It would only help shareholders.

      So, yes, there are three groups involved here, but I think that it’s axiomatic that loses get passed off on to consumers and workers, while gains get passed on to shareholders.

      • You’re absolutely correct.. which is why I pointed out that we make up the difference through taxes on capital gains. Hit the people – directly – who get the profit from the corporations.

        Although it strikes me I should be more clear.. when I say capital gains, I’m including any and all investment income in that.

        • While I’m not averse to taxing the rich, I think that could do a lot of damage to RRSPs and retirement plans generally.

          • You’re probably right.. however, that gets down to detail implementation. I expect that for the worst effects of the changeover, we could arrange specific niche exemptions for registered plans created before the change.

            edit: oh, and a minor nitpick.. it’s not “taxing the rich” it’s “taxing money made without labour”. Now since it’s typically only the rich that can afford to do this, it’s pretty much the same thing, but I think the semantics of the difference are important.

          • You’ve clearly given this a lot of thought – and given me something to think about. Can’t say I’m entirely on board yet, but definitely open to the possibilities. Thanks for the thoughtful posts, Thwim!

          • No, I had it right; I’m in favour of taxing those who can afford it (“the rich”). The wealthy will be able to look after themselves. But middle and lower class folks trying to save for retirement could be seriously hampered by your capital gains tax proposal without some serious hedging and tinkering (which in turn would reduce the effectiveness and introduce new tax loopholes).

        • How would you apply that to foreign and institutional shareholders and their dividend windfalls?

          • The same way it’s done now, of course. I don’t believe that being in another country automatically exempts you from paying taxes on income made within that country. Were that the case, people would simply live in the lowest taxed regions in the world and conduct all of their business in other nations from there. We already have ways to handle that kind of activity.

        • Still a bit of a Catch 22 though. Capital gains taxes go up and, arguably, the folks in charge make up for THAT by paying workers less and upping their profits to re-capture the capital gains tax difference.

          It’s a vicious little circle. :-)

          • No, because additional taxes on companies reduce bottom lines.. they have to take steps to fight that or become less attractive on their comparative statements.

            But additional taxes on shareholders do nothing to the company’s bottom line. Shareholders might want more profit, but that’s just the nature of shareholders — there’s nothing on the books that serves as a point to make companies take specific actions.