Micro-Economics for the Canadian Taxpayer

Are we doing well Economically?

Coming to the end of another year I try to take stock of how I’m doing financially.

Without going on about how to add up all the taxes, surtaxes, fees and surcharges from receipts and the income tax calculations I can quickly sum up what I find.

A middle income earner in Manitoba will pay More than half of what they earn in taxes!

Imagine that you were paid in cash and that the government had a bunch of guys waiting outside the pay office. On payday you show up, collect your little envelope and as you walk out the door the government guys force you to hand over more than half of it! They give you back what’s left and send you on your way with a friendly admonishment that you are doing a great job as citizen and don’t worry we will spend your money wisely and for all the right things!

This would be a lot simpler than the reality of how it is done. But the reality is that you and me and most everyone else in this country who works for a living is in that situation.

Just think about it! Over the last few decades we have gone from an effective taxation rate of 30% to over 50%. I’m Not sure about the dates but lets just say that for the sake of argument we go back 30 years and do some calculations.

Lets say the income in 1975 was 25k$ and the tax rate 30% then real earnings were = $17,500

Lets say that today we have 50k$ at 50% then today’s real earnings = $25,000

However, 25/17= 147% or in other words the retained income has gone up by 47%.

So while pay earnings have doubled taxation has held the real gains to less than 50%.

This does not take into account the negative effects of inflation!

This also assumes that the person in question has spent their entire income on the necessities of life and whatever else they needed or wanted to purchase with their income.

Now lets do some averaging. If the averaged income was 37,500 and the average rate of taxation 40% then 37500 X .40 = 15000 so the government has reaped 15k$ per year from this taxpayer.

This adds up over 30 years to = $450,000 that the government has reaped from the labour of this worker.

If we start these calculations from today and assume that taxation rates stay as they are now.

We get 25,000 X 30 = $750,000 from the worker.

Now the reality is that these figures assume lower than real taxation rates and a higher than average income ( but still in middle class/ middle income range ). The effects are just as insidious or somewhat worse on the lower income earner and for higher earners. These are facts that can be confirmed.

Now lets talk about what effect this situation has on our economy and our well being.

1 – Every one of us has a reduced opportunity to Save and Invest.

2 – Every one of us has less opportunity to spend and enjoy our money.

3 – Every one of us has to work longer for less money to meet our needs and objectives.

4 – Every one of us will suffer more stress and suffer more poor health because of it. This means that more of us will die sooner. But maybe that’s the plan so there won’t be a bunch of sick broke people around to care for at the expense of the government.

Now ask yourself some questions:

1 – Is all this money actually being used wisely and prudently?

2 – Are you getting good value for the money you have turned over to the government?

3 – Do you think that the various governments actually need that much money to provide the services you want?

4 – Have you in fact gotten or used 450k$ in government services ( assuming you are around 50yr )

(But you can make adjustments for younger or older!)

5 – Do you think that you will ever see or get to keep more of what you earn?

6 – Which political parties have been responsible for most of this taxation?

7 – What do you think you will pay in taxes before you are dead?

8 – Do you think this is fair? Or Right?

9 – Have you ever voted for a politician or party that had higher taxation as part of their platform or agenda?

10 – Is there a choice?