The extent of economic illiteracy and ignorance in our country is broader and deeper than I imagined. I heard Evan Solomon cheer up a caller who thought a Wealth Tax was a "good idea" (as if someone just discovered the concept last week) by pointing out that a group of billionaires like Warren Buffet called for a top rate of 70%. Well, in Canada, the top rate kicks in at a miserly $210000 at 33%, 45% if you include provincial taxes (not including HST and municipal taxes and yet another way BTW our system is not competitive with the US - their top rate is 37% but does not kick in until US $501000 in earnings. The point is that the truly plutocratically rich do not care about the rate as it would hardly affect their bottom line and their already having made it, and, if they do care, well, that's what accountants are paid to do - help them avoid paying the real tax rate as they no doubt already do with the "lower" rates.
In other words, in such a system, the government almost never gets the revenues it projected it would get. Precisely because the rich person does not volunteer to surrender his income robotically according to the diktats of government. Would Mr. Solomon (who I'm guessing may make more than the top threshold) long employ an accountant who left him in that position? The UK government under Brown is just one of the many who learned this lesson when it famously failed to get the revenues it projected when it moved to a 50% top rate. Or my favourite, when the US brought in a Yacht Tax and the resulting collapse in the industry saw no revenue raised by it.
The people I'm worried about in this class warfare tax system are not the Buffets of the World who've already made their bones. I worry about the aspiring future Buffets and Bransons and Gates. I worry about them not because I have any special undying love for flinty eyed, tough, profitseeking entrepreneurs. It's the people they could employ and the communities they can enliven and rejuvenate by their ventures that I seek to shelter and elevate. These last will not prosper if their potential employers are given an incentive to curtail their activities by high marginal rates.
The fundamental problem with most politicians' outlook on taxation is that they misunderstand its purpose. It is not a social program or a social engineer. It is not an engine of revenge against those more successful or even more fortunate than us. It is not a vehicle, above all, for something the politician likes to call "fairness". ABC's Charlie Gibson pointed out to then Senator Obama in the 2008 presidential debate that whenever the Capital Gains rate is increased, revenues go down and vice versa. Obama conceded this but said that the important thing was that it was "fair" that it be higher (obviously implying that most people who get capital gains are rich when, even then, 55% of capital gains went to people in the lower tax brackets).
Taxation is not meant to be fair. It is meant to raise revenues to supply the government's operations and debts in the most efficient possible way. What Adam Smith called "simple, fair and easy" taxes. To do this, one must strike a delicate balance between confiscation of property which is what taxes are and the fostering of the prosperity needed to finance the state.
In this sense, the billionaires can donate the money to the state now to make up for any perceived gap they feel in what they should really be paying (and get out smelling salts to their tax lawyers). But, really I recommend they give it to the community in charity or devise their own uses for it. What they decide to do with the money will always be better than what any bureaucrat could think of doing with it anyway. If we could see the true purpose of tax this way, then maybe it would be harder for politicians to prey on our class envy.
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