Monthly Archives: November 2011

You Can’t Nationalize Carbon Costs

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Whether you’re in the carbon credit market or the car or you’re simply looking for ways to generate revenue, it’s not a good idea to think of a carbon tax as a solution, even though some Canadians think it might be the only way to go.

Why?

It’s morally absurd to nationalize (or localize) carbon costs when the local government might be hosting the producers of carbon, but they’re not reaping all of the benefits.

Allow me to explain …

Say you’re a big country with a whole pile of natural resources.  Let’s remind everyone that very few of these natural resources are actually currently owned by the people of that country.

And let’s say that in order to produce, export and consume those products, people already pay an excise tax that is designed to simply extract cash from the pockets of those people to pay for things that they may or may not want, like crappy jets and useless prisons.

And let’s finally agree that the corporations that extract these resources are already getting a free ride because they pay a minimal amount of royalties, all of which are deductible against absurdly low corporate income taxes, most of which are negative because of the vast array of ridiculous writeoffs that we create for these welfare slobs.

And now … we introduce a carbon tax on the people that might use the carbon-based products that non-Canadian companies overcharge us for.

What an insult.

It’s time we got the formula straight.

I will pay carbon taxes when I know that the companies like Shell, BP and Exxon pay a flat tax to the people of Canada for the privilege of extracting our resources.

Until then, adding another tax to Canadian citizens is just another insult to our pocket books and will do nothing – I repeat nothing – to solve the environmental tragedy known as the Tar Sands.

Economics, Media and Mass Manipulation

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I don’t recall where I got the link for this site, but the context of this article on Economics, Media and Mass Manipulation is riveting, despite the length.  It’s well worth the read, packed with data and the author accomplishes what they set out to do:  prove that change is coming, whether we like it or not.

The three pillars sustaining the American empire edifice of never ending war, ever accumulating debt and excessive consumerism are crumbling. The growing corruption and weight of un-payable debt have weakened the very foundation of our grand experiment. The existing structure will surely collapse. My entire adult life has tracked the decline of the American empire. I had become comfortably numb. I came to my senses and began to question all the Federal government/Wall Street/Corporate Media sponsored truths about eight years ago. Many others have also awoken and begun to challenge the false storylines dictated by those in power.

Yeah, right.  I can hear you now:  whispering about the pot-induced lyrics of Pink Floyd in context of ‘Comfortably Numb’, the chosen title of this piece, but it was this chart the reminded me that income opportunities, taxation and share of income is definitely not skewed in our favour:

superrich-graphs-motherjones

Every day we work, we lose money to inflation and taxation.  The cards are clearly stacked against us, but apparently things will be OK so long as we continue to inflate our debt, swap real assets for credit assets and keep track of what’s happening with ‘Dance with the Stars’.

What can I say?  Things are going to change.  If they don’t, things are going to change.

Tax Changes Worth Considering

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In the world of fiscal and monetary policy, once you make specific changes, it’s very difficult to turn back on them.

Unfortunately, this is true for reductions that we’ve seen in the past with specific tools like the GST (now HST) which was reduced by Stephen Harper, Dalton McGuinty and other leaders in an economically questionable tactic to get into office.  Today, our economic instability continues and yet our leaders still commit to reducing corporate tax rates, forcing us to shake our heads at the gross inequality of Canadian citizens compared to capital owners.

With this in mind, I’d like to spin the topic a little towards something more positive:  eliminating or reducing tax deductions.  I’m sure lots has been written about this, but I personally feel that little has been done to explore the impact of altering deductions when it comes to corporate and income tax policy.  Here are some standard deductions, all of which create questionable policy outcomes:

  • Car and gas:  the more I drive for business, the less I pay in tax.  Larger organizations would have entire ‘fleets’ that are deductible for tax purposes.  Also, allowing car, gas and other fleet deductions encourages the consumption of the wrong kind of transportation and carbon-based fuels.  My mind would change if someone actually developed a functional hydrogen vehicle or mode of transport that used an alternative fuel, but allowing these carbon deductions only keeps us stuck in the 20th century.
  • Meals and entertainment:  the more I eat and the more hockey games I go to, the less tax I pay.  This makes no sense.
  • Land and real estate assets:  I don’t know a lot about this, but my instincts are that if we taxed inactive land assets, they would be used for economic activity or put on the market.  While this might push down the value of land in the short-run, it would ease the cost for entrepreneurs to open up office space or local retail locations.  It would also help put an end to the miles of waste that we see everywhere now with closed offices, land for lease and excessive apartment costs.
  • Business losses:  my understanding is that business losses that are accumulated in any given year can be carried forward for use indefinitely years for the company in question and are also transferable to other subsidiary or parent companies.  Are there ways to proactively reduce losses that are carried forward against profitable organizations?  I know I’m playing with fire on this, but at what point should we just force unprofitable companies to be shut down?
  • Charity activity:  ‘charity’ runs counter to the goals of profit maximization, so why do we allow massive deductions against corporate activity (some might argue ‘meddling’) with charities and non-profits?  Why don’t we just increase the deduction at the personal level?
  • Professional services:  how many lawyers are enough?
  • Dividend tax preference:  once again, I’ll concede that the economics on this topic are grey, but giving preferential tax status to dividend income seems to run counter to income earned from non-dividend sources.
  • Special incentives and investment programs:  All levels of government are hobbled by excessive grant giveaways and most of the companies that benefit from these programs have shareholders that simply don’t need handouts from the public.  Great examples of this are the Canadian Magazine Fund and the Canadian Film and Video Tax Credit.  Do we really need to give CTV and Quebecor hundreds of millions of dollars each year to produce what amounts to propaganda?

Of course, most of you who are intensely more familiar with tax policy would quickly jump on me and argue that many of these deductions are equal in the sense that small businesses and co-ops can make use of them as much as a large corporation can.

Unfortunately, most small businesses can’t even afford these expenses and rarely take a moment to spend any more than a couple of hundred dollars per year on the odd hockey game or taking a buddy to brunch.  As someone who describes himself as a small business owner, I know this to be true.

All I’m suggesting is that we consider caps on these deductions and for some, look at ways to eliminate them all together as effective ways to shape social policy and reaction out of prudent fiscal measures.  For example, now that we live in the digital age, why do we need to drive to meetings?  Why don’t we just do more via Skype calls or by leveraging other video-conferencing tools?

In an ideal world, we address simply questions of ‘equality’ and ‘fairness’ by understanding that our tax system is excessively skewed to the benefit of those that own it:  governments and the corporations that own them.

Simple modifications will improve financial liquidity for our governments and ensure that fairness is restored to average citizens.  I think this is something we can all accept, possibly including those with #occupywallstreet.

Ultimately, any or all of these changes push the needle towards a flat tax, but that’s something best discussed in another article.

Is European Default An Option?

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This article from Michael Roberts offers up a reasonable background discussion on why default is an option when it comes to the European banking situation:

http://thenextrecession.wordpress.com/2011/09/11/an-alternative-programme-for-europe/

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Open The Books for Everyone

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Here’s a great piece from David Climenhaga contributing to rabble about fiscal openness.

While it’s extremely unlikely that the Harperites will follow his advice, I fully agree that now is the time to open all books for any organization that receives (or received) public funds of any kind.  If unions are being wrenched open – and I don’t see why they shouldn’t – then we have an opportunity to apply ‘what’s fair’ logic to the other organizations listed below:

  • Organizations like the bar, medical, engineering and other professional associations that members must join in order to practice in their fields
  • Private corporations that receive any form of subsidy paid by taxpayers
  • Private corporations that bid on any publicly financed contract
  • Any corporation or organization that exists for the purpose of influencing public policy, including lobbying firms and “think-tanks” not associated with public institutions, which have their own reporting requirements
  • Associations of corporations, businesses or individuals that by definition try to influence public policy and trade practices
  • Churches and religious organizations that raise funds for other than purely spiritual matters, including the operation of chartable, educational or public policy institutions
  • Any organization that can give charitable tax receipts for donations

I would add defense contractors and police organizations to the list, assuming the latter don’t already have to fully disclose details about spending activities (eg. G20 largesse) as part of annual budget reports.

It just makes perfect sense.  If you want to hide and recede from public scrutiny, then stop milking the public teat.  Stop accepting public funds.

If you want to get grants, subsidies or economic benefit of any kind, then accept the fact that the public has a RIGHT to see what you’ve earned, what you did with the money and decide if it was a good use of funds.

If we have this kind of openness, it’ll likely result in a significant reduction in the number of charities that have been set up simply to ensure a tax dodge for their creators and will go a long way to curbing the corruption that we’ve fomented in places like Montreal with programs like the Economic Action Plan.

The age of openness is upon us.  Conservatives ramming this aggressive ideological agenda down the throats of left-of-centre organizations like unions and the CBC will only cause grief for themselves as Canadians demand more insight into the rest of the organizations that they are involved with.