The Fraser Institute, Professor Kevin Milligan, across the bay at UBC and others have researched and described the correlation between tax rates and tax revenues. Their findings are fairly common sense when you stop to think. Raising taxes on high income individuals, including those living in West Vancouver, introduces an incentive for those tax payers to seek relief by lowering their taxable income in other ways. The popular moniker for this action is called “tax planning.” High income tax payers are the best equipped to alter the profile of their income by taking non-taxable benefits, deferring tax, moving income to lower taxed jurisdictions, or employing alternative mechanisms for sheltering income. All these actions are legal and beyond the greedy hands of our very good friends at the CRA.
Tax revenue is comprised of two components: 1) the tax base; and 2) the tax rate. Tax revenue is the product of the two. Studies show that raising the tax rate reduces the tax base. Therefore marginal raise of tax rate does not produce a proportional increase in tax revenue due to taxpayers’ response of lowering their tax base. This phenomenon is called the Behavioural Effect.
The Behavioural Effect was certainly not considered by the federal Liberals in their introduction of 33% marginal tax rate on income over $200K per year. This is not unexpected as in 2014 their leader, Justin Trudeau, justified an election platform of spending to grow the economy with the profound explanation “… and the budget will balance itself.”
What does this have to do with Ms. Goldsmith-Jones?
Ms. Goldsmith-Jones, first time Ottawa representative of our bedroom village on the sea, certainly understood the implications of the punitive actions of Morneau/Trudeau’s tax changes for Canadian small business owners. At an October 2017 Chamber of Commerce meeting up in Squamish, Ms Gold-Smith-Jones stated that “the Liberal Government claims will make business tax structure fairer had led to more than 1,200 email messages from concerned small business constituents.” She clearly understood the constructive and even sometimes angry feedback the Liberals were receiving from their ill advises attack on West Vancouver’s small business community.
The response of Ms. Goldsmith-Jones, while expressing empathy and clear understanding the implications of the proposed plan, she did nothing. There is no public record of her advising Morneau/Trudeau of their miscalculated step. No a single snip of evidence that while she understood 1,200 constituents she chose to not take any public action to champion their cause even within her own party.
October 19, 2019 is only 23 months distant, and another impact of behaviour might be displayed. West Vancouver’s entrepreneurs, attacked for their contribution to the Canadian economy, will remember the inaction of their representative, if only resident on the backbench, and will surely seek a more effective voice in Ottawa.
Ciao,
No comments:
Post a Comment