Where is modern civilization heading?

As a society are we heading in the same direction as the ancient Romans? If so the question becomes.......

Are our leaders fiddling while civilization burns?

While we ponder the question I will post my personal thoughts on this blog. Often I will focus on current events that catch my interest, however I am not and do not pretend to be a news organization. I'm simply a guy with his own thoughts on issues that I believe affect our country and society.

Be forewarned, I have been accused of being a right wing thinker and if that is offensive please move on. Remember, this is my blog and my opinions, and unlike many facets of our already over-governed modern society they are not being forced on anyone.

However, please feel free to leave your comments, good, bad or indifferent, after all this is a free society we live in (at least for now).

Saturday, March 24, 2012

A taxpayers prescription to doctors and government, take on a daily basis.....

Image Courtesy of Acclaim Clipart

Doctors for Fair Taxation, a group of Canadian doctors is "prescribing" increased taxes on Canadians in higher income brackets. Promoting the slogan "Tax us. Canada's worth it!", the group is suggesting that both the Federal and Provincial levels of government raise taxes on the top 10% of wage earners in Canada.

"We are pleased that so far most of the health care system has been spared the cuts made to other sectors. But we see the impact of these cuts in our patients who lack the community services, housing, and income to be full participants in Canadian society," the group states in an online petition addressed to the federal and Ontario governments. "When a family faces a loss of income it doesn't resolve the crisis by denying food to one its members. A functional loving family makes the existing food go further. Our country should similarly find ways to best use our existing resources so no Canadian will be deprived of their health and security," said the group.
(Hold your horses Docs, since when did an individual citizen's earning become a national "existing resource"?)

In a nutshell, they suggest the following tax formula,
Canada's top 10% of wage earners, those who make more than $100,000 a year would see a 1% tax increase. But it doesn't stop there, they also suggest a 2% tax hike for the 1% of Canadians who earn more than $170,000, a 3% tax hike for the 0.1% who make more than $640,000 and a 6% hike for the top 0.01% who earn more than $1,85 million.

Now, some Canadians may look at the above proposal as being fair and just, after all why not take more from the "rich" (they can afford it, right?). Personally, I have some serious issues with the way that our progressive taxation system penalizes (via higher tax rates) individuals for taking risks and achieving success. But that's only part of the reason this proposal stinks......

This group of Ontario "Sawbones" estimates the federal government would collect an extra $3.5 billion per year and Ontario would raise an extra $1.7 billion by taxing the "rich". Just for fun, lets put these amounts in perspective particularly in regards to Ontario. Here are some facts about Ontario's current financial situation.
  • Ontario pays $10.3 billion ($28.2 million per day or $327 per second) a year in annual interest on its debt (we are not addressing the "principal owed" here, just the interest paid!). This dollar amount exceeds what the Ontario government is spending annually on children and youth services, post-secondary education, and a host of other services.
  •  Ontario’s debt is increasing by $59 million per day and the pace will jump for 2012-2013 to $66.8  million per day
  • The province’s total debt has increased by $110 billion since 2003 (just a scant 9 years ago).
  • Ontario has become a “have-not” province for the first time in its history, receiving equalization payments  (to the tune of $2.2 Billion annually) from more fiscally stable provinces like Alberta. 
So the sad reality is that the $1.7 Billion that this suggested tax grab would raise for the province would barely pay 60 days of interest on the provinces debt ! Not a penny of it will go into health care or any other program. Now I realize that someone is bound to suggest that there is a flaw in my logic in the sense that if this money went to interest that would free up $1.7 billion to spend elsewhere....Think that one thru, a good chunk of every dollar the province currently spends is freshly borrowed as they continue to run deficits each year, so there is no money "to free up" for spending. Only the very slim prospect of slightly less borrowing, as history has shown us so often when you provide the government with more revenue they simply spend more.

The bottom line is that Ontario has become a financial sinkhole for taxpayer money, the provincial governments spending is far outpacing any amount of taxation they can realistically hope to collect without further damaging their own economy. Again, some perspective, Ontario whose population accounts for about 38% of Canada, has a Provincial debt equivalent to about 45% of what the Federal government owes (see Federal Debt Counter at right).
(Two things to keep in mind, the big number is billions of dollars, and the "small" number is per Ontario resident!)

The reality, which this particular group of doctors fails to recognize is that Ontario is not suffering from a "revenue issue" per say, the province is paying the price for out of control spending by a series of fiscally irresponsible provincial governments and being crushed under the weight of the debt incurred. How can such well educated individuals be so naive to believe that simply raising taxes will be the cure all? This misguided group of physicians would be more productive if they petitioned their provincial government to, curtail spending, balance the budget using current revenue, and pay off the debt.

At the rate Ontario is going the province might want to consider relocating their capital from Toronto and moving it officially to Athens, Ontario. That way the province would have two things in common with Greece, a capital city named Athens and a talent for fiscal mismanagement. While I am not suggesting Ontario is destined to face the same level of crisis as Greece, the flashpoints will be the same unless the province gets it's financial house in order. The common critical areas are:
- Trouble with the bond market, where the province borrows almost half as much as the federal government in some years (ouch, i just realized I own Province of Ontario Bonds!)
- Showdowns with public servants over wage and benefit cuts (you know this is coming)
- Anger from special interest groups and citizens facing big austerity measures and new fees on services.

Now, one of the other things that bothers me with this group of doctors and their entire proposal is the very fact that it is doctors suggesting it. Doctors as a group over the years have become master manipulators of the tax system for personal gain. How so?

To steer clear of higher tax brackets the vast majority of doctors have incorporated their practices, this allows them to take advantage of a lot more write offs (car allowances, income splitting, partial mortgage write off, etc) than say the bus driver down the street can ( maybe not a good example, when has a bus driver ever been able to afford to live "down the street" from a doctor). The end result of this is that they pay lower taxes than say an individual earning the same income off a standard paycheck.

So, while as a  group, doctors use the avenue of incorporation to dodge taxes, Doctors for Fair Taxation feels that other segments of society should pay more. Now if Doctors For Fair Taxation truly has the strength of their own convictions I suggest that their members may want to start by dissolving their tax-haven corporations and pay taxes as individuals, this would certainly result in a higher rate of taxes for both levels of government. Unfortunately, most people in society seem to endow upon doctors a level of respect and trust that no other profession can lay claim to, this in turn means that very seldom is their wisdom or their motive called into question. After all, they take the "Hippocratic Oath", however maybe when it comes to paying personal taxes the correct word might be Hypocritical.

Now at the beginning of this piece I did mention that "I have some serious issues with the way that our progressive taxation system penalizes (via higher tax rates) individuals for success". Currently an individual (one who is not an incorporated doctor) in Ontario pays 46% on their income over $132,000. In the simplest of terms, that's almost half! I don't know about anyone else but from my point of view that is akin to robbery at gunpoint. The good news is that so far Doctors for Fair Taxation does not appear to be getting much support for their on-line petition, at last count I pegged the signatures at about 350.

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