Tuesday, September 26, 2006

Where The Money Comes From - And Goes.....

Lesson Number One:
The government does NOT have any money! The government takes money from the citizens in the form of taxes and borrows money from a number of sources to cover expenses that exceed its means.

Facts About the Federal Budget:

With a current debt of about $486 billion this means a debt load of about
$32,000 for each working person in this country.
Current costs of maintaining this debt are around
$34 billion anually.
This means that taxpayers are coughing up about
$2270 each year to pay the interest.

*Note Correction Here Sept.28/06*
With a total budget of around $ 220 billion we have federal government spending at about
$ 7 thousand for each living body in this country every year.
Click the title above or the link below to see the "Budget In Brief" at Department of Finanace!

Lesson Number Two:

Why do we have a budget surplus? Because we are being over taxed by the government!
The government is taking more money than it needs to operate.

Facts about the Surplus:

Current budget surplus $13.2 Billion. This means that every working person in this country has been taxed $900 dollars more than what is needed operate all of the current programs the federal government is running.
The surplus is not necessarily a bad thing in the short term. As long as the surplus is used to pay down the long term debt we can expect the surplus itself to become a thing of the past.

Lesson Numer Three:

Paying down the debt puts money in the federal treasury.

Facts about the Federal Treasury:
The federal Treasury is NOT a piggy bank for the Government!

The federal treasury is like a current account for the nations citizens that is run by the government.

The treasury holds all of the revenues and the accounts payable and the accounts receivable of the citizens of Canada. It is the account from which all cheques are written and all deposits made to on behalf of the citizens of Canada.

Just as ALL of the money in the account belongs to Canadians so too does ALL of the Debt attributed to the account.

When the total amount of debt is decreased the Net Worth of all Canadians is increased and the interest on the debt is decreased.
When the interest on the debt is decreased the Net Worth of all Canadians is increased.

Paying down the Federal Debt allows the increased positive cash flow to be used for things that Canadians need WITHOUT increasing taxes on Canadians.

With the effect of increased cash flow available a carefully managed budget will allow BOTH reduced Taxes and Sustained operation of necessary and valuable programs.

I was really pleased to see the Government of Canada announce yesterday that the entire Federal Budget Surplus will be used to pay down our National Debt.



Blogger Mac said...

Simple truths which always seem to escape those who believe taxation is the well which never runs dry... Thanks, OMMAG!

9/27/2006 1:17 a.m.  
Blogger vicki said...

I'm looking forward to changes in taxation now as well.
Thanks for that very clear breakdown of numbers with the facts....haven't heard any economists mentioning it ...but has the economy been improving since July...when families with young children were given back some of their tax money? It works.

9/27/2006 8:06 p.m.  
Blogger Mac said...

According to Garth Turner, if the National Debt was wiped out, we could eliminate the GST. Mind you, I'm not sure that's such a great idea. I'd rather see income taxes rolled back and the GST reduced than simply wiping out the GST.

9/28/2006 12:43 a.m.  
Blogger PGP said...

Consumption taxes like the GST are the most easily managed and fair of all taxes.
Income taxes are far too arbitrary and punitive.

Pay for what you use and don't buy or use what you can't pay for.

This would be an ideal approach to conservation as well..come to think of it GST is a conservation friendly tax!

9/28/2006 7:13 p.m.  
Blogger PGP said...

Are we getting benefits from recent tax changes? Short answer is it's too early to tell. There are simply too many other things going on to tell what is affecting the overall economy.

Remember that our overall taxation rates have not changed much and are still high compared to nations we compete with. We are at a disadvantage in areas like this so more work has to be done to better our overall situation.

Economic numbers in the short term are never clearly attributable to factors like small tax cuts or income subsidies like the child tax rebate.

Although I will not benefit directly from the child tax credit program I am confident that families who have children in the right age group and are in the appropriate tax bracket will see a positive difference.

Our economy is being propped up right now by big demand for resources and related commodities that we produce.
Due to shrinking margins many areas of Manufacturing are in a downward slide or at least stagnant and not growing. This in spite of a generally strong economy.

9/28/2006 8:37 p.m.  
Blogger PGP said...

GST and other taxation...
If the debt were gone what could we do?

Actually there will allways be a certain amount of debt because of treasury bonds and savings bonds..which I think are a good way of stimulating savings and safe investment for certain groups.

But if the burden were reduced to a manageable level there is a lot that could be done.
My personal view is that more money needs to put into healthcare...but first the Provinces have to get their act together to better manage the resources they have. There is a lot of waste and mismanagement and the Provinces share the blame for that along with local health administrations.

Just think what another 7 or 8 billion$ would do for the number of doctors, nurses and hospital beds.

9/28/2006 8:45 p.m.  
Blogger Mac said...

I'd like to see improvements in the system but I don't see it happening anytime soon. Health care has been a moneypit of long standing. Having hypocrites like Taliban Jack dancing around screaming against private clinics and two-tier systems doesn't help that.

I think Garth was making the point that the hated GST could be gone if we got our debt under control. Those cuts could easily come from income taxes as well. Garth is big on splitting income and other forms of income tax reform.

9/29/2006 11:52 p.m.  

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