Yet another word on entitlements….

In my last blog post on entitlements, I had highlighted that there is no way that government can legislate its citizens to accept personal responsibility.  With the enrichment of entitlements, it also creates dependency as people (especially those who are unable to earn much above minimum wage) cannot afford to go off entitlements.

However, I’m reminded of a subject that was very near and dear to me when I was on Town Council, that being taxation, and government feeling entitled to these tax revenues.  While on Council, I only voted for one of the four budgets presented, as it was the only zero increase budget, coincidentally presented in an election year.

My contention was if we needed to raise taxes to support the services taxpayers wanted, then it was necessary to do so.  However, my suggestion was that we first exhaust every option we had as Council to save costs elsewhere.  I had even identified areas where I felt the community could save substantial funds, including putting caps on travel budgets for Mayor and Council, and making substantial changes to our money pit of a community hall.  I was unable to get support for either of these initiatives.

What I felt most frustrating about this were comments like, “Well, services cost more every year, so people need to get used to tax increases every year”, or “If people can afford to build big houses in the nice part of town, then they can pay more taxes”.  Even within the microcosm of a small community’s municipal government, we clearly saw two things.

  1. A belief that the municipal government was entitled to whatever revenues they needed for their spending
  2. A disrespect for the people who worked hard to better themselves and their families, as they now had an “obligation” to pick up more of the municipal bill as they had done well

With our current federal government I believe we are seeing the macrocosm of this.  We have a federal government that does not appear to have much restraint on spending, and we have also seen some horrible acts of entitlement out of the Liberals.  However, before I get into discussion of this, I’d like to share my feelings on taxation.

When government spends tax money, they are spending people’s lives.

As human beings, the only thing we have a finite amount of on this planet is time.  If we all lived forever, we could retire whenever we had earned enough money, be it after 50 years, or 200.  We would have all the time available for us to pursue whatever passions we wished in life.  We could read all books we wanted to, travel to every part of the world we wished, spend as much time with our family as we like.

Unfortunately, life is not this way.  We have only a finite time on this planet, and must use our time as productively as possible.  We go to work daily to keep a roof over our heads, feed our families, and to save for our futures.  We exchange the most priceless commodity we own, time, for money.

And no one, no government, no organization should ever feel entitled to this.  And no one, no government, and no organization should ever spend these funds without understanding that they are spending the lives of their taxpayers.

So how much tax are we REALLY paying?

So this being said, let’s look at how much government feels entitled to take for every one of us on a regular basis.  And since I’m in Manitoba, I’ll use here as an example.  Please also understand I am going to have use generalities – every individual will have a different tax situation and the purpose of this discussion is to illustrate just how much we are taxed.

For this illustration, I am going to use the example of a single person earning $100,000 per year.

So let’s start with the money companies earn, as corporate taxation is an integral part of the economy.  The general combined tax rate on small business is 25%.

Salary to be Paid: $100,000
Pretax Income needed at 25%
corporate tax rate to pay this salary: $133,333
Plus: Employer CPP $2,544
Plus: Employer EI $1,337
Total Pretax income employer must have to pay $100,000 Salary $137,214
Effective Tax Rate: 27.1%

 

So before a single dollar even hits the palm of the employee’s hand, the government has already scraped off 27.1% of the economic output of the company paying the employee.  One could argue the CPP and EI are not taxes; I argue differently.  These return zero value back to the employer, and would be considered taxes if these social entitlements were included in the general tax rate, and not as separate programs.

Please also note for simplicity’s sake, I have also not included other taxes the company pays, like payroll tax, PST, duties, and property tax, plus hidden taxes on items such as fuel.

So now our individual received his $100,000 – how much is taxed off this to determine our after-tax income?

Pretax individual income: $100,000
Combined Provinical and Federal Taxes -$29,500
After Tax Income $70,500
Less: Employee EI -$955
True Post Tax Income $69,545
Effective Tax Rate: 30.5%

 

So after receiving his funds from his employer, these funds are reduced by an additional 30.5%.  However, the tax express doesn’t stop here.

Let’s assume the taxpayer saves 10% of their post-tax income annually (7% of gross, which is above the current national average savings rate).  How is the remaining 90% of their post-tax income spent?

Disposable annual income: $62,590
GST on 50% of amount -$3,130
PST on 50% of amount -$5,007
Property taxes, via rent or direct payment -$3,000
Hidden taxes on fuel* -$480
Hidden taxes on alcohol** -$200
Final Post Tax disposable income: $50,774
Add Back Savings: $6,954
Final Post Tax Income: $57,728
*Assumptions: Individual drives 20,000 km/year, at 10L/100km, or uses 2,000
litres/year.  $0.24/L excise tax between fed/prov governments
** Assumption, person spends $500/year on alcohol (one 6-pack or bottle of
wine per week), tax is 40% of sales price

The above makes the assumptions that only 50% of the individual’s income is spent on taxable items.  The only main items people will purchase tax free are food, and shelter.  Fuel will have GST and PST.  Meals out, services, and items (and even home insurance) will all have GST, and often PST.

So what is the net result?

Starting corporate income: $137,214
Final After-tax income to the individual: $57,728
Total taxes: $79,486
As a percentage of the original funds earned: 57.9%

So in short, of every dollar earned by a corporate entity in Manitoba, 58% of this ends up in the government’s pocket, and 42% ends up in the employee’s pocket.  And of every dollar the employee earns, at least 42% of it ends up in the government’s pocket.

Certainly there are tax breaks for families, but they also have substantial expenses that go along with having children.

So back to entitlement, and where YOUR money goes:

As Canadians, I think we all believe in the common good.  We understand a need for health care, roads, and schools.  However, when we move away from these core values is where the discussion becomes more interesting.  Let’s look at some ways in which the Liberals have spent our tax dollars since being elected.

  • $200,000 in moving expenses for two Trudeau advisors to move from Toronto to Ottawa
  • $122,000 in meals for the oversized Canadian delegation at the climate summit in Paris
  • $6,600 for a private photographer to follow around a cabinet minister at the summit
  • $1,000,000 total bill for Canadian delegation to the summit
  • $8,000 in limo rides and private lounge fees for the Health Minister in Ottawa
  • $5,000 on 56 coat hooks in a federal building
  • $416,000 to renovate a 2-year old office building
  • $835,000 to renovate Minister Amarjeet Sohi’s office
  • $1.1M to build a new office for Minister Patty Hajdu. When her deputy minister was questioned about the expense, she responded: “The minister has a right to have a nice office close to her dept.” (bold italics mine)
  • $4.3 billion (yes, Billion with a B) spend outside Canada for everything from humanitarian aid to climate change
  • A 20% increase in public spending
  • A 3% reduction to Health Transfers to the Provinces
  • The only operating deficit recorded outside of the crash year 2009, and the bleak years of 1976-1986 (curious who the PM was for many of these years)

In fact, economists at TD Bank are forecasting that projected Liberal spending over the next five years could add $150 billion (yes, Billion with a “B”) to the Canadian debt.  Even if this debt is serviced at a bargain 3%, this adds $450 million (yes million) in just debt servicing charges – an additional $450,000,000 annually that is not available to Canadians for funding of essential programs and services.

If interest rates spike, this level of debt could bankrupt our country.

The best comparison I can think of is that the government can no longer afford its lifestyle, so it has ordered an additional credit card.   Then the only solution becomes raising taxes, or reducing its spending.  It’s shown a willingness to do the former, and an inability to do the latter.

Unfortunately, much of this spending also seems designed to improve the public perception of Justin Trudeau as a great humanitarian, though all of us are footing the bill for it.

In an excellent piece on the Huffington Post, Keith Beardsley highlighted how this funding could have been used within Canada to deal with our own humanitarian issues.  Heck, how many of our own First Nations do not have adequate housing or clean water?   Unfortunately, this does not get worldwide headlines, nor give our photogenic Prime Minister the photo-ops that seem to fuel this government.

So next time you go to the polls ask yourself:

  • Which party takes a responsible approach to spending?
  • Which party wants to focus on public image versus true spending impact?
  • Which party has demonstrated a respect for taxpaying companies and individuals in Canada, and which have not?

One just has to look at what has happened in Manitoba to see the long term effects of financial mismanagement.  We’ll just say the NDP also felt entitled to spend taxpayer’s money how it wished, including on long term leases, union contracts with no layoff clauses, and unwise hydro projects. Manitoba is a Province that has an incredibly huge hole to dig itself out of, and should serve as a cautionary tale for the federal Liberals.

To conclude, the question I have when I look at all of the above is “Why are people not angry about this?”  We would not tolerate this sort of taxation/spendthrift behaviour in a spouse, or family member, or employee; why do we tolerate this in our government?  That is a subject for another day.  Let’s just hope (including for the sake of future generations) public pressure and media coverage will have some effect on the entitled spending our current government has.

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Personal responsibility (and political correctness, too)

As I was driving to work the other morning, I was listening to the CBC, and the on-air fundraiser they were having for Winnipeg Harvest.  It always makes me sad to hear things such as “If we brought 100 children in here, 32 of them would be hungry.  If we brought 100 children in here from a Northern Reserve, 63 of them would be hungry.”  I may not have remembered the numbers above exactly, but they would be close enough to what was stated to be indicative of the current level of child hunger in our society.

The question is, with the level of social entitlements we have in society, and even supplemental family programs (such as Heathy Child that offer free milk to families), why do we still have rampant child hunger?

The answer to this question, like so many other similar questions, is personal accountability.  As a society, we have forgotten how to take responsibility for ourselves, or hold each other accountable.  The convenient response when we are unhappy about the status of something in our society is “the Government should do something about it”.

Unfortunately, this has become so commonplace in our society that I believe a large cohort of Canadians have a belief that government can cure all ills that befall our society.  Listen to CBC Radio One, and pay close attention to how many times their guests or their hosts state that “Government should……”  Read the Winnipeg Free Press, or other online mainstream media, and pay close attention to how many times any article dealing with a societal issue states that “Government should” solve the issue.

The point is, the government can launch any program they choose, or throw as much money as they want at an issue.  However, if individuals in our society refuse to take accountability for themselves, the program will be ineffective and the resources will be wasted.

As long as members of our society refuse to take accountability for themselves and their lives, and continue to remain victims of their circumstances, then their lives will truly not improve.  And if government continues to indulge them with even larger social entitlements and programs, where does this leave all those who have been responsible, and are now picking up the tab for others.

Let us consider a recent phenomenon in Canadian politics – the cry for provincial pension plans.  To some, they are a way to ensure all residents of a Province retire with adequate income.  To myself, this looks like another tax on working folks and employers, and yet another case where those who have not saved or planned are now being bailed out by a rapidly shrinking pool of taxpayers.

So, like individuals I know and have known, a PPP gives them yet another reason not to save for retirement, yet another reason to not be responsible with their money.  And again, those that are responsible with their money, and those who sacrifice now to save for later are those who end up footing the bill.

Of course, if you were to ask advocates of a PPP why they need it, you will likely get answers that place the blame for their need on someone else, or government.  They will be victims of their circumstances, powerless to make their lives better, and unsupported by a government that didn’t do more for them.

Very seldom will they mention making sacrifices to seek further education.  Very seldom will they discuss the financial sacrifices they made to be able to save and live at the same time.  Very seldom will they discuss how everyday life choices they make, in many cases poor choices, have affected their ability to save or improve their life.  Instead, we will hear how they are victims, and how government didn’t do enough for them.

But it is difficult for us to have frank conversations about this as a society, as in our desire to be more inclusive over the last thirty years, we have now allowed political correctness to control the direction of conversation.  This fear of being labeled a “poor basher” or “racist” or “misogynist” prevents us from having honest conversation about issues.  In this era of political correctness, there becomes no solution except to throw money at problems.

Let us look at some specific issues, and tell me how these could be approached in a manner that does not cause the individual discussing them to be labelled something unsavory:

  • Substance abuse issues (alcohol, tobacco, drugs) in low income households
  • The state of housing on Reserves in Canada
  • The number of unwed and single mothers in society, and the absentee bio-fathers of the children
  • Intergenerational poverty, and normalization of being on assistance
  • Addiction issues (substance and gaming) in Northern and isolated rural communities
  • Official bilingualism
  • The failure of specifically targeted groups to take advantage of educational opportunities
  • The state of public subsidized housing in Canada
  • Child and Family Services, and their effect on families

Just reviewing the above list, one can easily see a large number of political landmines that a person could easily step in on attempting to discuss these issues.  But they need to be discussed.  Throwing money at problems is what we’ve done until now, but the issues seem to be getting worse, not better.

If we discuss issues in a forthright manner, and discuss the role of the individual and their responsibilities  in helping solve these challenges, it would be an important first step.

It can’t be anti-poverty activists who carry the discussion.  It can’t be government that carries the discussion.  It has to be the people whose lives are affected, and who are willing to step up and take accountability and ownership for their lives.  These people deserve all help necessary to improve their lives.

For those who refuse to take accountability for their lives, and who choose to make poor life choice after poor life choice, there is very little we can do for them.  Improving entitlements for this cohort is a waste of taxpayer’s money.

As a society, we have a responsibility to take care of the vulnerable and those who cannot care for themselves.  But until our government has the will to place personal accountability on individuals, and develop the will to discuss and solve politically sensitive issues, we will never solve the underlying problems that have generational impact in Canadian society.

Like child poverty and hunger.