Flat Tax or Progressive Tax Structure?

So as you know Canadians have their income taxed on a progressive scale.

Their is about a $10,000 tax exemption currently (that all Canadians workers get their first approx. 10 grand tax free), then the rest goes in a rising progressive tax system.

I digress.

My personal opinion is the following:

Give *every* citizen their first $20,000 of income TAX FREE. Then apply a flat tax rate to any income made above that.

This is good in two respects:

1) It can't be "cruel" to the poor, because it gives lower income Canadians most of their income tax free. But the personal tax exemption is applied equally. So a person making 30,000 a year, and a person making 1,500,000 a year, would both get their first 20,000 tax free.

2) Its ends the "Steal from the rich give to the poor" "punish the rich" attitude of our tax structure. One should not be penalized for succeeding.

So I ask you vote in the poll and discuss.

I remember when Tony Clement was running for the leadership of the tories he proposed something similar and I thought it was a neat idea. His plan would have made the first few thousand dollars new workers earned tax free.

That being said, I still think the current tax structure is better than a flat tax of any sort. A person earning $30,000 a year can't really afford a 15% tax rate, but a person earning $300,000 a year will be fine regardless.

no but if we have a personal tax exemption worth around 20-25 grand, then the lower income Canadians are covered, then any income made over that is a flat tax.

I too have the belief that lower incomes people need a boost up, but thats why the personal tax exemption is so great, helps the poor and is applied equally.

We can't be a society that punished those who succeed, its a ludicrous ideology. Its the NDP ideology, lol.

How high would the flat rate have to be to bring in the same amount of revenue?

Here is how I thought this should be designed. It's based on Freidmann's Negative Income Tax and Social Credit

1. Raise GST

2. Have a flat tax rate for all citizens (from year of birth) of %income - prosperity credit, for persons age 6-16 %income -porsperity credit - School credit.

3. Devote income tax to welfare.

If a persons income is a negative amount they ahve a negative tax debt and the government pays them income tax, simplifing welfare.

We could also use NIT to improve health insurance by fostering competition if we charge a set amount for public health insurance then allow that amount to be deducted from NIT. Lower income persons recive a health voucher ensuring everyone has access to public or private health insurance.

I saw a study of taxes in the newspaper by the Canadian Centre for Policy Alternatives, a left wing think tank. It calculated taxes for the poor were 30%, the middleclass 35% and families earning over $250k annually 30%. Presumably the low taxes on the well off are due to the fact these people avail themselves of tax exemptions, which are in themselves government programs. The Canadian Centre for Policy Alternatives concluded taxes were nearly flat and that this flew in the face of people paying according to their ability to pay. Mysef I don't entirely trust such calculations, taxes overall are higher than that.

I think this sounds like a bad idea. The flat tax would have to be fairly high to offset the lost revenue from the high income persons on the progressive scale. This is if the taxes are to come out with a simular amount, which unless the government is going to drasticaly cut spending, it needs to be.

I also think higher income persons should pay more than people less well off, this is long been a Canadian value and a value of most western nations. Canada maybe more so than some, but i don't think this is just a Liberal value either.

Tommy douglas had it right when he said a society is judged on how they treats its poorest.

I do agree that the personal tax exemption should be raised, but yo can't raise than and have a flat tax for the rest. That woudl result in FAR less money coming in...?

The one thing I do know is it was dumb for the Conservatives to raise the income tax after the Liberal lowered it, to have there flashier GST cuts. You seem to be concerned about the middle class, well lowering the income tax would have been a much smarter call, as many have pointed out.

Rather than the first 20 - 25 grand, why not the income that falls below the poverty line being tax exempt?

The aspect of income taxation, so often overlooked is the distribution of income/wealth in the population. Many socialist governments, British in particular, with a tax the rich policy, discovered to their regret that although the wealthy class are wealthy, they are also a minority. Most income/wealth is in the hands of the middle class.

"Tax the rich", just impares the elements who invest, employ and create wealth for the majority.

Tzarist Russian had a negligable middle class. The Bolsheviks eliminated the rich and instantly made everyone poor. A class-less society.........

Bruce_the_vii

This whole "punishment for succeeding" argument is crap. Pure and utter crap. Why should you pay a higher dollar figurejust because you earn more? Even a one rate no exemption structure has the rich paying more than the poor, so how is that not punishment for "succeeding"? Drop an exemption on it and it's even more punitive of success, because you don't have to pay anythign until you start to earn over the exemption.

Any rate means the tax is not flat. Any exemption means the tax is especially not flat. The only true flat tax is like what Blue_Nose said - divide government expenditure by population, and send everyone a bill regardless of their income (so babies would get a bill, school kids would get a bill, those who are incapable of working would get a bill, and it would all be the same bill. How is that not just supremely fair?).

The entire concept of progressive taxes punishing the successful is bogus from the start. There is never a point at which earning a dollar more means you pay over one dollar more in taxes. You never stop earning.

It's a tough call but I would assume that, on a whole, the richer you are, the more use you make of the nation's infrastructure, directly and indirectly and the quality of this infrastructure directly impacts on your earnings.

Bob owns a trucking firm with a fleet of 50 trucks running on the nation's highways 24/7. The quality of those highways directly affects his bottom line. If the highways are crap he will ultimately be paying more in repair costs on his trucks and potentially provide poorer service to his customers. Bob also uses airports at least once a month for business and pleasure. Bob employs 10 people that have post secondary education to run the office. Bob can sleep easy at night knowing that his truckers will get prompt and thorough medical care in the event of an accident at very little additional cost to him.