Can having lower taxes on the rich help your income?
The information I’m looking at suggests the answer is yes.
We’ve all heard the rhetoric from Prime Minister Justin Trudeau saying that the wealthy don’t pay their fair share. He said that to justify raising the top federal tax rate from 29% to 33% and is saying it again to justify going after small businesses.
I’ve already documented the hypocrisy of Trudeau and Morneau on the small business attack, read that here if you wish.
But what effect will attacking the wealthy have you your income? Well that’s a good question.
We keep hearing that if you tax people too much, they move. Either they move physically or they move their money.
Fund manager Eric Nuttal of Sprott told BNN at the end of July that he had already moved his investments out of the Canadian energy sector and into the American market because there were too many roadblocks to investing in and running an energy business in Canada under the Trudeau government.
Now we have John Manley, the former finance minister on Liberal PM Jean Chretien talking with The Canadian Press about wealthy Canadians just up and leaving with their money.
Manley pointed to one example where a successful business owner has decided to leave Canada with “billions of dollars.”
On the advice of tax professionals, he said the individual decided to move the money primarily because of the impacts the reforms could have on his family through changes related to estate planning. Keeping the business in the family would result in a big tax hit.
There’s a notion that other big players could soon head for the exits, Manley said.
So, how does that have any impact on your wages?
Well simply put, excessive taxation leads wealthy people to move their money which leads to lower investments in businesses that create jobs.
Last week Stats Canada put out a report on media incomes and income growth in Canada. The three provinces with the lowest median incomes also have the highest taxation rates on high income earners.
Meanwhile, provinces with the highest median incomes are at the other end of the spectrum.
Quebec, the once booming engine of the Canadian economy has a median income of $59,822. Quebec has the highest provincial income tax rate 25.75% on incomes above $103,150.
Next door in New Brunswick, the median income sits at $59,347. New Brunswick charges a provincial income tax rate of 20.3% on taxable income over $152,100.
In Nova Scotia, the median income is $60,764, slightly higher than New Brunswick but Nova Scotia charges a slightly higher provincial tax of 21% on income over $150,000.
Compare that to Alberta where the median income for 2015 was $93,835 and the top rate is 15% on income over $303,900. Saskatchewan had the second highest median income at $75,412 and a top rate of 15% on the amount over $129,214. Ontario was third with a median income of $74,287 and a top rate of 13.16 % on the amount over $220,000.
Now this relationship between high income tax on top earners and income levels is not the only reason for the disparity and to argue so would be simplistic and naive but I think we have to consider this.
Why would a successful person set up shop in a jurisdiction that will tax them at significantly higher rates and often at lower levels?
I’d like to see more study done on this idea, studies done in a serious and dispassionate manner to see how much proof is in my pudding.
Am fortunate in that I am already retired and have learned to live within my means. Having said that, the financial state of affairs at both the Provincial and Federal levels is worrisome and affects all of us. And, there is no money except what they continue to borrow-at the expense of how many generations of Canadians, now, and in the future. Time for a revolt.