An End to the Myth of the Rich

  1. Fergus and JMP - correct this if this is wrong, as it refers to Canadian tax laws:
    The following article appeared in the February 23, 2002 issue of the
    Lakeshore News - Salmon Arm, B.C. It was written by Ron Adams, a
    local
    financial advisor who writes a regular column in the paper. Ron is
    sometimes
    a little irreverent and ruffles many conservative feathers in town
    but he
    is
    often entertaining and usually gets straight to the heart of the
    issue.

    ++++++++++++++++++++++++++++++

    I was having lunch at PJ's with one of my favourite clients last week
    and
    the
    conversation turned to the Campbell government's recent round of tax
    cuts.

    "I'm opposed to those tax cuts," the retired college instructor
    declared,
    "because they benefit the rich. The rich get much more money back
    than
    ordinary taxpayers like you and I and that's not fair."

    "But the rich pay more in the first place," I argued, "so it stands
    to
    reason
    that they'd get more money back." I could tell that my friend was
    unimpressed
    by this meager argument.

    Even college instructors are a prisoner of the myth that the "rich"
    somehow
    get a free ride in Canada. Nothing could be further from the truth.

    Let's put tax cuts in terms everyone can understand.

    Suppose that everyday 10 men go to PJ's for dinner, The bill for all
    ten
    comes to $100. If it was paid the way we pay our taxes, the first
    four men

    would pay nothing; the fifth would pay $1; the sixth would pay $3;
    the
    seventh $7; the eighth $12; the ninth $18. The tenth man (the
    richest)
    would
    pay $59.

    The 10 men ate dinner in the restaurant every day and seemed quite
    happy
    with
    the arrangement until the owner threw them a curve. Since you are all
    such

    good customers, he said, I'm going to reduce the cost of your daily
    meal
    by
    $20. Now dinner for the 10 only costs $80.

    The first four are unaffected. They still eat for free. Can you
    figure out

    how to divvy up the $20 savings among the remaining six so that
    everyone
    gets
    his fair share? The men realize that $20 divided by 6 is $3.33, but
    if
    they
    subtract that from everybody's share, then the fifth man and the
    sixth man

    would end up being paid to eat their meal.

    The restaurant owner suggested that it would be fair to reduce each
    man's
    bill by roughly the same amount and he proceeded to work out the
    amounts
    each
    should pay.

    And so the fifth man paid nothing, the sixth pitched in $2, the
    seventh
    paid
    $5, the eighth paid $9, the ninth paid $12, leaving the tenth man
    with a
    bill
    of $52 instead of $59.

    Outside the restaurant, the men began to compare their savings. "I
    only
    got a
    dollar out the $20," declared the sixth man pointing to the tenth,
    "and he

    got $7!"

    "Yeah, that's right," exclaimed the fifth man. I only saved a
    dollar,too.
    It's unfair that he got seven times more than me!

    "That's true," shouted the seventh man. "Why should he get $7 back
    when I
    got
    only $2? The wealthy get all the breaks."

    "Wait a minute," yelled the first four men in unison. "We didn't get
    anything
    at all. The system exploits the poor."

    The nine men surrounded the tenth and beat him up. The next night he
    didn't
    show up for dinner, so the nine sat down and ate without him. But
    when it

    came time to pay the bill, they discovered something important.

    They were $52 short!

    And that, boys and girls and college instructors, is how Canada's tax
    system
    works. The people who pay the highest taxes get the most benefit from
    a
    tax
    reduction. Tax them too much, attack them for being wealthy,and they
    just
    may
    not show up at the table anymore.

    There are lots of good restaurants in Switzerland and the Caribbean.
    •  
  2. 2 Comments

  3. by   fergus51
    This is my province, so I'll take it. It was also printed in the Vancouver Sun and Province and in our local paper, along with replies from economists and economy professors about how ridiculous it was. The idea that 40% of Canadians pay no taxes is what most found absolutely stupid. The only people who don't pay any taxes are aboriginals (who make up about 4% of our population) and those who make under a certain amount a year (something like 8 000 for singles and 14 000 for dependants).

    This is our federal tax rates:
    16% on the first $30,754 of taxable income;
    22% on the next $30,755 of taxable income;
    26% on the next $38,491 of taxable income; and
    29% of taxable income over $100,000.
    So the wealthies members of our society (less than 4% of the pop) are paying 29% ONLY on the income over 100 000.

    This is our provincial :
    7.3% on the first $30,484 of taxable income, +
    10.5% on the next $30,485, +
    13.7% on the next $9,031, +
    15.7% on the next $15,000, +
    16.7% on the amount over $85,000 (all available from the canada customs and revenue agency website)

    I find it hard to believe that 36% of our population are making that little, unless Ron Adams is including children and seniors in that figure, in which case I say put those lazy old ladies and preschoolers to work and get their money.

    The notion that these tax cuts don't favor the rich AT THE EXPENSE of the poor is ridiculous. I make a decent living (now about 50K CDN) and my extra money from the tax cut was about 500$. Does that really make a huge difference in my life? No. I would rather they kept my 500$ and stopped butchering the public sector. This is one area where I think Canadians (and British Columbians in particular) are VERY different compared to Americans. We are generally in favor of keeping social programs even if they cost us. The only people seeing a real signifigant return are the very wealthy.

    If you don't you want a rant about the new gov't here stop reading now: Gordon Campbell was elected on a platform that said tax cuts would pay for themselves (they haven't so to make up for it he has increased our medical payments 50% and cigarette taxes and sales tax), he believed in fair collective bargaining (he legislated contracts and ripped up preexisting ones as soon as he was in office) and that he would eliminate gov't waste and get BC back on it's feet. In fact, our deficit this year is supposed to be the biggest in our history (thanks in no small part to the over 2 billion in tax cuts) and is projected to get worse in the next few years. Really he was elected because people were so sick of the NDP wasting our money, but Gordon isn't going to be able to blame the NDP for our financial woes for much longer.
    Last edit by fergus51 on Apr 1, '02
  4. by   fergus51
    Oh, here's the letter to the editor from the Vancouver Sun

    Peter Minshull
    Vancouver Sun


    Saturday, March 30, 2002

    On March 18 The Sun reprinted Ron Adams' comparison of the tax system to 10 men eating in a restaurant. Though the piece was witty, it left a bad taste in my mouth. In the analogy four of the 10 men ate for free. I could not believe that 40 per cent of people pay no taxes, but how to get the correct figure? A call to the federal ministry of finance?

    I'm still waiting for a response from that source. It's taken until now, but I have finally discovered that only 6.7 per cent of the people who filed income tax returns last year paid no tax.

    I am disappointed that as a financial adviser Ron Adams would not have more concern for getting his numbers right. I am disappointed that The Sun would reprint such an inaccurate analogy. The danger in telling such a clever but untrue story is that it makes the tax system look worse than it really is. It builds an unjustified resistance to paying even legitimate taxes.

    Peter Minshull

    North Vancouver
    Last edit by fergus51 on Apr 1, '02

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