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.

Advertisements

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.

Conservatism and Social Entitlements

As you may have read on my “About Me” page, I had a grandmother who was staunchly anti-conservative.  In her words, “They’re only for the rich.” She truly believed this, and although she would never tell me where she put the “x” at election time, I am confident the words “Progressive Conservative” were never on the same line.

However, my grandmother was an incredibly compassionate woman, and lived her life as such.  Someone needed money?  She could always find a few dollars in her pensioner’s income to help.  Need a meal?  She’d be happy to cook for you.  Although she lived a modest life, there was always “enough” for others.

Interestingly though, she never had much patience for those who refused to help themselves.  She took great pride in that although she had not lived an extravagant life, she had never needed to live off of the state.  To her, if you didn’t have what you needed, you made do.  Born in 1908, she had lived through two World Wars and a Great Depression.  She understood what “making do” was.  And if you were able to make do, then you didn’t expect others to give their hard-earned labor to support you.

Ironically, she enunciated one of the core beliefs we have lost in Canadian Conservatism.  Somewhere in the last twenty-to-thirty years, Conservatives have begun (like Liberals) to believe that forms of social assistance are now “entitlements” as if people are “entitled” to social benefits.

When I was a young man, I was brought up to believe that going on any form of social assistance was tantamount to freeloading off of others.  Although I had the ill-fitting clothes and permanent second-hand smoke smell of the working-class, at least I didn’t have to live with this stigma like a number of my classmates.

So I look back to the 70’s, and I look at today’s society, and I wonder when it all changed?

Social assistance was always meant to be a temporary means when a family needed help getting back on its feet.  In fact, if one looks at the Employment and Income Assistance program in Manitoba, its specified goal is to:

∙ assist Manitobans in regaining their financial independence by helping them to make the transition from income assistance to work

∙ provide income assistance to Manitobans in need.

That sounds pretty good, in theory.  Help people become financially independent, and help those who have no viable source of income.  Unfortunately, government makes it very attractive for people to not become financially independent.

Earning a living on assistance:

Based on 2015 rates, a family with two children in Manitoba will receive between $1,117 and $1,261/month tax free (based on the ages of the children). With the enhancements to the CCTB announced by the Trudeau government, this family would also receive an additional $1,137/month tax free including their GST credits.  So for a family with no income, and two children under 6, they would receive $2,398/month tax free, or $28,776 annually.

Plus being on assistance entitles the recipient to other assistance that would not be available to people not on assistance.  Some examples include:

  • Ambulance
  • Chiropractic
  • Basic dental
  • Eye exam every two years, new glasses every three
  • Foot care
  • Hearing aids
  • A number of medical expenses, including prescriptions
  • Prosthetics
  • Transportation to medical appointments
  • School supplies
  • Child care (whole working or at school)
  • New beds every seven years

Of course there will be dollar maximums attached to these benefits, but I believe the point is evident.  For a family not on assistance, they get to source and pay for child care, cover off all work expenses including transportation, and get no help on these expenses of daily life.

If we said these benefits are worth even $1,224/year, this moves this family of four to a tax-free income of $30,000; this is the equivalent of the family earning approximately $38,000/year.  Granted, this is not an extravagant standard of living, but is liveable.

Just for reference, my 1999 income indexed to 2016 is approximately the same gross and net amount as stated above.  However, I paid taxes, purchased a first home (a very modest one) and also went to school full-time while working full-time so that my family’s standard of living could improve.  We lived a modest life, we worked hard, and as we were “making do”, we expected no one else to take care of us.

The trouble with these “entitlements”:

So where is the incentive for a family to regain its financial independence?  Paying benefits at these levels means that even the most financially challenged of our families can easily become ensnared in a cycle of dependency.  One parent wants to work?  Once their work income is factored out, and they pay all the additional expenses associated with working, their in-pocket cash could be lower.  No to mention any issues this could have on subsidized housing, or other benefits.

Fundamentally, the system is designed incorrectly.  On assistance, a person’s basic needs can be met.  So unless they have educational or career prospects to increase earnings substantially above the levels stated above, then where is the incentive to get off of assistance?

Futhermore, well-meaning liberal policies end up compounding this issue.  One day I heard an anti-poverty activist on the CBC discussing the quality of public housing in Manitoba.  His contention was that housing needed to be improved as it wasn’t a “very uplifting” environment.

Excuse me?

As a young man, I had lived in a variety of average to below-average apartment buildings around Winnipeg.  I hated it.  I never seemed to have enough money for anything, only bought my first $500 car in 1991, and rented until I was 29 years old.  To even be able to afford our home, while paying for me to go to school required extreme saving, the type of saving where eating dinner out is a major financial decision.  We did not have cable, satellite, or Internet.   We drove a 1986 Dodge Omni.  You could not say our lifestyle was very “uplifting”.  But we knew if I got educated and worked hard, we could make our lives better, for us and our kids.

If we had been comfortable instead; if the state had provided us with a nice place to live, and adequate funds to meet our needs, plus a bit more, would this motivation had been there?  I would venture that the day-to-day existence of someone under the current entitlements is less desparate than our was.

But from that desperation comes motivation.

So what’s a Conservative solution?

Well, paying people to stay at home doesn’t do anyone any good.  Unless someone is unable to work, providing financial disincentive for people to work is wrong.  Worst of all, it normalizes living on assistance, and sows the seeds of intergenerational poverty.  Increasing entitlements paid to low-income families to continue to have more children simply locks the family into a difficult to escape cycle of dependency.

However, the Conservative doesn’t believe in the social engineering that the Liberals typically espouse.  Don’t pay people more to stay on assistance, “pay” them more to get off of it, through review of the tax act, and revisiting income splitting for families.  Work on private and public partnerships so that businesses receive financial or tax incentives for providing on-the-job training and skills upgrading.  Expecting government to create jobs is folly; by creating the proper conditions for business, it is business who will eventually help raise the standard of living by creating good paying jobs.

Oh yes, and remove the payroll tax where applicable.  What government in its right mind taxes a company for increasing the number of people it hires.

This being stated, a Progressive also understands a modern and wealthy society has an obligation to take care of its most vulnerable.  Seniors should be able to retire with dignity, and have adequate income to ensure the necessities of life.  For those who are unable to work, we take care of them.  And most importantly, we ensure our schools both feed and train our children to be as successful as their talents can make them, regardless of their economic background.

We need to get back to what I consider the true party of the working class, the Progressive Conservatives.  Progressive Conservatism is different than Liberalism, in that we truly want people to be successful and productive members of society.  The best way to do this is through training for people and incentive for business, all to help people achieve what they can.

Although Liberals have equally positive goals for those in poverty, they instead believe in the ability of a munificent nanny state in caring for people.  So although they may temporarily improve the lives of people on assistance (like with the CCTB increase), this improvement creates complacency and dependency.  To pay for these expensive entitlements, those working pay more, and business pays more.    This stunts consumer spending, and stunts job creation.  In short, we create dependency.

So as Conservatives, we need to quit subscribing to the Liberals’ practice of paying voters to vote Liberal  with the voters’ own money.  I believe plenty of families would like a road map to escape their entitlement paradox and to improve the lives of them and their families.

Welcome to the New Canadian Conservative

Welcome fellow Conservative Canadians, or at least Conservative-curious Canadians.

For many of us in Generation X, we grew up under a Canadian political duality.  For working-class families such as mine, there were the Liberals, led by the charismatic and all-around good guy, Pierre Trudeau.  For the rich and barons of business, there were the Progressive Conservatives, led by the dry as mummy bones Joe Clark.  Of course, there were other parties, such as the NDP, Social Credit, and Marxist-Leninist, but much like today, the Liberals and Conservatives were the only two credible options.  Certainly the other parties could influence policy, but it was near impossible to conceive any of them forming a government.

Certainly Trudeau the first was an ambitious man.  He introduced the National Energy Policy.  He brought in official bilingualism, and the metric system.  He repatriated the Canadian Constitution (forcing the Charter of Rights and Freedoms through in the process, though whoops!  Forgot to get Rene’s signature there….).  He centralized the powers of the Canadian Government, and made deficit spending a credible economic strategy.  Oh, and he alienated voters in Quebec and Western Canada with his centralist federalist policies.

Voters did rebuke him once, when he was exiled to nine months of Joe Clark minority government purgatory.  However, this was forgiven in 1980, when he was given another mandate by the Canadian people (and no seats West of Manitoba).  And when he finally took his “walk in the snow” and handed the reigns over to the as-exciting-as-dry-toast John Turner, the Liberals were primed for defeat.

However, to paraphrase the immortal words of Bob Dylan (Nobel Prize Winner Bob Dylan!), the Tories, they were a changin’.  After the 1980 defeat to Trudeau, and in a bout of hubris, Clark decided having 67% of his party’s support was inadequate for him to continue, so he resigned and called for a leadership review.  The party thanked him for his party-first loyalty by electing Brian Mulroney.

As Canada became more diverse, and as baby boomers grew up, the Progressive Conservatives needed to broaden their appeal to have a hope of being elected.So we ended up with a coast-to-coast coalition of East Coast conservatives, disaffected Quebec Separatists, Ontario purples (blue and red, depending on the political climate), and disaffected Westerners.

And for a time it worked.

This coalition held together for two full elections, delivering an historical majority to the PCs in 1984, and a strong majority in 1988 (my first federal election I voted in).  There were wins and losses for the PC governments (FTA = win!  Cod = loss!  GST = win, yes it was a win!  scandals = loss!  Meech=loss!  Charlottetown=loss!), but the party’s utter decimation in 1993 ended the Progressive Conservative party as we knew it.

We were now left with three parties as direct descendants of the PC amalgam – the Bloc Quebecois, the PCs, and Reform, each a fractured remnant of the coalition that spawned them.  And despite all of the opposition, the PC party survived, though it never held more than 20 seats in parliament.  Not to state they did not still get a good chunk of the popular vote (18% in 1997) but vote splitting between them and Reform/Canadian Alliance allowed the Liberals to walk to victory in 1997 and 2000.

So as one would naturally expect (and after some major promises broken to David Orchard), the PCs merged with Reform/Canadian Alliance to form the Conservative Party of Canada.  After increasing its seat total, and helping cause a Liberal minority in 2003, the Conservatives were elected to their own minority in 2006, an additional minority in 2008, and finally, a majority in 2011.

And with every electoral step forward, the Conservatives became more socially conservative.  With every electoral step forward, the Conservatives began engaging in very un-Canadian activities, such as robo-calling in contentious ridings, omnibus legislation (which included removing health care for refugees), crippling the state-funded broadcaster, muzzling state-funded research scientists, generally abusing the civil service, and experimenting with race and religion-based politics.

After witnessing this, it became clear to me that the the Conservative Party was no longer Progressive.  The words and actions of the current crop of leadership contenders has only reinforced this (google Kellie Leitch or Brad Trost).

So as someone who grew up in an era where being Conservative did not mean one could not be Progressive, what is one to do?

Because I believe in fiscal accountability, it does not mean that I wish our most vulnerable citizens to be at risk.  Because I disagree with paying people to not work, it does not mean that government should not invest in eliminating the causes of poverty.  And although I believe government should have less a role in our lives, business alone should not be expected to provide the social safety net to Canadians.

Although the eventual fate of my blog may just be to allow me to publicly ruminate about the state of Conservatism in Canada, I want to encourage a discussion about its future.  I’d like to explore what alternatives us old progressives still have while staying true to fiscal conservatism.  And I’d love to encourage all of us progressive conservatives out there to take action for our country’s future.

Our current government spends like a sailor on shore leave, funding its public image on the backs of people fortunate enough to have made it to the middle class.  The Conservatives continue the politics of division and scientific denial.  And as it was forty years ago, there are no real other alternatives.

So I hope to update this blog weekly with my discussions, and I hope you all join in too.  At least we have three years to try and figure this out.