The Canadian Tax System Explained - In Beer

[Giveitago]

THE TAX SYSTEM EXPLAINED IN BEER

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...

If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7..
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,” but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"
The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

AUTHOR UNKOWN

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

[Darkwing Duck]

No for those who do not understand, they are NDP. Gimme Gimme Gimme

Love the analogy, Giveit.

[niss]

Except for the fact that the facts show the tax reductions do not work. Large companies benefiting from tax breaks showed an increase in Cash reserve, and no increased spending on equipment or personnel.

Have you ever called a call centre for Bell, Rogers, or any sort of Tech support? What country did you get?

[Siddley Hawker]

Alberta.

[Giveitago]

Have you ever called a call centre for Bell, Rogers, or any sort of Tech support? What country did you get?

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

Niss - No Beer For You!

[Beefitarian]

We're working with 8 because the top two guys have been drinking in Chinatown for decades now.

[Darkwing Duck]

Just realized that after the tax break it equals $79. Where is the missing $1?

[niss]

Have you ever called a call centre for Bell, Rogers, or any sort of Tech support? What country did you get?

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

Niss - No Beer For You!

Canadian companies have added tens of billions of dollars to their stockpiles of cash at a time when tax cuts are supposed to be encouraging them to plow more money into their businesses.
..
But an analysis of Statistics Canada figures by The Globe and Mail reveals that the rate of investment in machinery and equipment has declined in lockstep with falling corporate tax rates over the past decade. At the same time, the analysis shows, businesses have added $83-billion to their cash reserves since the onset of the recession in 2008.

http://www.theglobeandmail.com/news/pol ... le1972599/

[yyz monkey]

http://www.snopes.com/business/taxes/howtaxes.asp

[Giveitago]

http://www.snopes.com/business/taxes/howtaxes.asp

Fixed it for you.

[iflyforpie]

I wanted Scotch.

[Giveitago]

Perrin Beatty
President and CEO of The Canadian Chamber of Commerce
As Canada emerges from a global recession that damaged both businesses and families across the country, our political leaders are searching for strategies to balance the books again without the political pain that comes from major cuts in public spending.

Unfortunately, there isn't any easy way to get to where we need to be. And, when economics collides with politics, economics frequently loses.

Globalization has sharpened competition. Skilled workers, businesses and capital move easily across national borders, seeking the best economic opportunities. In response, even as the recession ravaged public finances, many countries have continued to overhaul their tax systems to improve their global competitiveness.

According to PricewaterhouseCoopers and the World Bank Group, between June 2008 and June 2009, 45 economies reduced the tax burden on businesses, broadened the tax base and/or made it easier to pay taxes, a 25 per cent increase from the previous year. Twenty reduced corporate income tax rates and nine reduced labour tax rates.

Over the past few years, Canada has moved to meet the challenge by reducing business taxes. These measures attracted new investment to Canada and have helped existing businesses compete. In a recent speech about how we can succeed in the global marketplace, Bank of Canada Governor Mark Carney pointed to our progress to date in improving our tax competitiveness and encouraging trade openness. According to Carney, "Staying the course in these regards is likely the single most important contribution of the public sector."

There are ominous signs in Ottawa that this progress may be lost. Unless policies change, businesses across Canada will be hit by a series of increased payroll taxes, starting in 2011 when the current employment insurance premium freeze ends. If these planned increases proceed, they will make it harder for businesses large and small to maintain their current employees, let alone hire new ones.

The government should take the economic cycle into account by lengthening the period for bringing the EI fund back into balance. Similarly, instead of proposing to renege on promised corporate tax reductions that businesses are using to decide whether to invest in Canada, opposition parties need to consider how paying $5 billion to $6 billion more per year will help Canadian companies survive international competition that intensifies by the day.

While it may be easier to increase the burden on businesses instead of cutting spending, like the law of gravity, the laws of economics are hard to repeal. Higher business costs make our country less attractive as a place to invest, expand and innovate. They drive companies from Canada to low tax-rate jurisdictions.

According to an Oxford University study, a $1 increase in corporate taxes tends to reduce real median wages by 92 cents. The American Enterprise Institute found a 1 percentage-point increase in corporate tax rates is associated with nearly a 1 per cent drop in wage rates.

Internationally competitive firms generate jobs. They attract the best and brightest people to Canada and ensure that our young people can have a bright future here at home. Business tax cuts not only give employers greater flexibility, but can also benefit consumers as firms pass on the savings. Additionally, as lower corporate taxes improve the long-term earnings outlook for companies and increase stock values, they help Canadians who own equity through pension plans, RRSPs and mutual funds.

If we turn back now as other countries continue to improve their tax competitiveness, we risk falling behind. Delivering on business tax relief is essential for Canada's prosperity.

[Dash-Ate]

EXXON MOBIL:The oil giant that was theworld’s most profitable corporation in 2008 has spent $5.7 million in campaign contributions over the last ten years and $138 million in lobbying expenditures. Its federal corporate income tax liabilities for 2009? Absolutely nothing. Not only did it pay nothing, but it also received a tax rebate the same year of $156 million.

http://www.truth-out.org/12-tax-dodging ... s-spent-1-

[Canuck223]

EXXON MOBIL:The oil giant that was theworld’s most profitable corporation in 2008 has spent $5.7 million in campaign contributions over the last ten years and $138 million in lobbying expenditures. Its federal corporate income tax liabilities for 2009? Absolutely nothing. Not only did it pay nothing, but it also received a tax rebate the same year of $156 million.

http://www.truth-out.org/12-tax-dodging ... s-spent-1-

And my comment for anyone dumb enough to swallow this line of thinking is a simple one.

Before you get irate over the net tax paid by the corporation, ask yourself what was the gross taxes generated by that corporations activities? How much tax was paid via payroll deductions of thier direct employees, and sales taxes on all the products consumed and sold by that company.

As individuals, we all try to structure our personal income so that we pay as little tax as legally required. Why would corporations aspire to pay more than they have too? If a tax credit is available and applicable to a corporation, they would be poor businessmen to ignore it.

[iflyforpie]

Funny, I could have swore you said that war was the most profitable industry in another thread dash.

Next you're going to say the most profitable industry is aviation.

[niss]

And my comment for anyone dumb enough to swallow this line of thinking is a simple one.

Before you get irate over the net tax paid by the corporation, ask yourself what was the gross taxes generated by that corporations activities? How much tax was paid via payroll deductions of thier direct employees, and sales taxes on all the products consumed and sold by that company.

As individuals, we all try to structure our personal income so that we pay as little tax as legally required. Why would corporations aspire to pay more than they have too? If a tax credit is available and applicable to a corporation, they would be poor businessmen to ignore it.

I understand how a corporate tax break is supposed to work. They are supposed to get more money to spend on jobs, more people get hired and the tax base increases, etc.

The problem is that this doesn't happen, the companies still outsource their labour overseas due to labour prices, not just tax breaks. And they pocket the tax return into their coffers.

Someone still has to pay for this country and that just ends up being you and me. We have to potentially pay more taxes if we want to maintain our social programs and all we end up doing is subsidizing giant corporations.

Conversly give tax breaks to the consumer, and tax the companies more, they will still outsource their labour but the idea is that if the consumers have more money, they spend more, buy more things and theirfor provide an incentive for companies to stay.

I am sick and fucking tired of being taxed what I am, then while being gouged out the ass by Bell, Rogers, Insurance companies, etc and knowing that I am subsidizing their profits with my taxes.

Taxes in an ideal world are supposed to be an exchange. We are supposed to give money to the government and receive a country. If the government gives back it is because it expects something (Job creation, lending, etc).

The government fucks us over enough with our own tax dollars, why allow corporate giants to do the same thing. At least put limitations and restrictions on the break.

[mcrit]

We have to potentially pay more taxes if we want to maintain our social programs and all we end up doing is subsidizing giant corporations.

Wow, some of us have gone right down the socialist drain. Being allowed to keep the money you make is now a subsidy. Wow.

[niss]

We have to potentially pay more taxes if we want to maintain our social programs and all we end up doing is subsidizing giant corporations.

Wow, some of us have gone right down the socialist drain. Being allowed to keep the money you make is now a subsidy. Wow.

Read it again. Someone has to pay for this country, if the corporations get cuts we are left paying for the rest. But if the corporations don't reinvest in the economy, which they don't, then we just subsidies their pocket books.

[mcrit]

Read it again. Someone has to pay for this country, if the corporations get cuts we are left paying for the rest. But if the corporations don't reinvest in the economy, which they don't, then we just subsidies their pocket books.

Reading it once was more than it deserved. Your rebutal is a non-sequitur. Who does or does not pay for the country has no bearing on the fact that getting to keep what you make is not a subsidy.

[Shiny Side Up]

We have to potentially pay more taxes if we want to maintain our social programs and all we end up doing is subsidizing giant corporations.

Wow, some of us have gone right down the socialist drain. Being allowed to keep the money you make is now a subsidy. Wow.

Hardly socialist. One must remember that corporations reap the benefits of of our social programs just like individuals do, though not usually in a direct means. A good example would be tax dollars spent on public education. A corporation benefits by having a pool of more capable workers to draw labour from. There's two ways one can look at the issue. Corporate tax breaks are ideally supposed to increase the profits of the corporation which ideally are supposed to trickle down to the workers - anyone remember the trickle down effect Reagan espoused? In practice this doesn't happen too often extra profit gets funneled into the hands of the few. On the other hand individual tax breaks are supposed to encourage consumer spending - this also benefits corporations - if the consumer has more money to spend corporations ideally should also make more money. Of the two choices this is generally the more capitalist oriented one - the consumer should be empowered to make the choices of what is going to succeed in the market, not the producers. Tax breaks to corporations really leads more towards what may be termed corporate feudalism, where individuals become more and more tied to relying on who they work for (if the government takes a more active role in enforcing how the corporations operate in the market it works closer to corporate fascism - speaking mostly in its economic principles rather than political ones - but one leads to the other).

The consumer/individual being empowered also has its downside unfortunately. While theoretically this should spur competition and improve the product and service the consumer gets, its been proven that the consumer doesn't always spend his money wisely in such a fashion. A good example of this is if the population is wealthy they spend a lot of their take home dollar on alchohol and if times are bad they also spend more of their dollar on the same. While this is always good if you're in the industry of vice products (and hence the high sin taxes. When the consumer is at his highest or lowest the govenment is going to endeavor to take advantage of this) It doesn't bode well for the rest of industry.

What this means is any government has to tread a fine line when it comes to whom to tax. Tax business too much and it declines. Tax it not enough and you empower it over the people. The people also need to be taxed - they got to pay for their own stuff they want after all. They want roads, they want education, they want to be defended, they want someone on their behalf to negotiate stuff, and in this country they want decent healthcare too. Corporations benefit from all these things too. In Alberta don't think that all our good roads are there because the government is really concerned for us as individuals to get around. I used to live at the end of thirty miles of gravel until they put some wellsites around and suddenly Alberta Transportation decided that road needed to be paved.

One must remember what the purpose of Government is. Its there to do stuff that we as individuals or family groups can't accomplish. Its there to protect us as its people from larger entities which we can't protect ourselves against individually. Private enterprise while in some ways more efficient doesn't always have the people's interests at heart. Government by its nature is supposed to, although being made up of individuals is subject to the faults there of.

[mcrit]

One must remember what the purpose of Government is. Its there to do stuff that we as individuals or family groups can't accomplish. Its there to protect us as its people from larger entities which we can't protect ourselves against individually. Private enterprise while in some ways more efficient doesn't always have the people's interests at heart. Government by its nature is supposed to, although being made up of individuals is subject to the faults there of.

+1

Well put.

[AuxBatOn]

In this economic climate, the issue is not wether or not the tax breaks are reinvested in Canada, but rather if the tax breaks will keep the companies in Canada. If we don't give them tax breaks, they WILL move somewhere else where it's more profitable for them and canadian jobs will be lost. That is cost of higher taxes for corporations.

My POV: Nothing in life is equal. We are not even born equal. Our system shouldn't try to equialize everything. So, in life some people will perform well, others won't. While some people may not perform well simply because of bad luck, most people don't perform well because of the decisions they made throughout their life. I condone personnal responsability. If you make a decision and it ends up being a bad one, you live with it and do your best to overcome the situation. For those people, the government should not have to pay for those bad decisions. Policies should encourage personnal responsability, and not reliance on the system to bail them out. One of the funniest thing I have read in this campaing is from the Liberal Platform

Meanwhile, contribution levels to Registered Retirement Savings Plans have not
grown over the last decade, with only 1 in 4 taxpayers actually making RRSP contributions.

[...]

A solid pension plan should be available to all,
not just a luxury for a fortunate few. The most
reliable and affordable way to achieve that is by
enhancing the trusted and cost-efficient CPP
that has served Canadians so well.

The message I read in there is: "Don't bother saving your money for retirement. Spend it all on the big toys. The government will be there for you when you retire." Take from the smart, give to the dumb.

If you are dumb enough to spend 10 000K on a Jetski and not put a dime in a RRSPs, you shouldn't be allowed to get money from my taxes, because you made bad decisions when you were younger. I'm willing to bet a paycheck that if we were to completery remove the CPP and, thereby giving an extra 1500$ a year or so in everybody's pocket, a very small amount of people would actually put that money away for retirement.... Again, personnal responsability.

[Shiny Side Up]

In this economic climate, the issue is not wether or not the tax breaks are reinvested in Canada, but rather if the tax breaks will keep the companies in Canada. If we don't give them tax breaks, they WILL move somewhere else where it's more profitable for them and canadian jobs will be lost. That is cost of higher taxes for corporations.

That's what the corporations want you to believe, and to be honest they've done a good job making us think that. Fact of the matter is that most Canadians are still engaged in primary resourse related industry or in service of said industry. The corporations are here for the oil, the coal, the trees, the fish, the gold, the diamonds, the uranium, the list goes on. They have to be here because here's where the stuff is. If they decide to drag up and not take advantage of a resourse, someone else will take their place. We have to tax them a lot more than we are to ever make it unprofitable for them.

My POV: Nothing in life is equal. We are not even born equal. Our system shouldn't try to equialize everything. So, in life some people will perform well, others won't. While some people may not perform well simply because of bad luck, most people don't perform well because of the decisions they made throughout their life. I condone personnal responsability. If you make a decision and it ends up being a bad one, you live with it and do your best to overcome the situation. For those people, the government should not have to pay for those bad decisions. Policies should encourage personnal responsability, and not reliance on the system to bail them out.

I'd tend to agree on the part about personal responsibility. There's other ways to look at the problem of what to do about those who fall into the bottom sectors of society. Its sucks if one looks at it in th eclassical sense of the ant and the grasshopper story. You're a busy ant why should others profit from your labour? Unfortunately the fact of the world is there will always be people seeking to take advantage of the system. The rest of us will be picking up the cost for them in one way or another. I do like to think the system now does for the most part keep those who by misfortune have fallen down from falling too far. While life ain't fair, its easy to say when most of us here have certainly been fortunate enough in the random chance of the circumstance of our births. What do people think becomes of the unfortunate? They just eventually die and disappear? Anyone here know what happens when a majority of the population starts to fall into the "unfortunate" category? It would be a mistake to assume that most people fall down into this category because they're unwise or lazy. Historically what breeds revolutionaries? (hint: Its not corporate taxes!)

One might say if one was wealthy you have a vested interest in maintaining social programs, but obviously you don't want them to give out too much.

Which brings us back to why corporations do business in places like Canada in the first place. Peace and stability are certainly bonuses to doing business.

[AuxBatOn]

I'd tend to agree on the part about personal responsibility. There's other ways to look at the problem of what to do about those who fall into the bottom sectors of society.

Some people started at the very bottom of the society and made it all the way up the top. With efforts and focus, everything is possible.

Its sucks if one looks at it in th eclassical sense of the ant and the grasshopper story. You're a busy ant why should others profit from your labour?

I didn't say we should not invest taxes in social services. I say we shouldn't fund social taxes that encourage lazyness, bad decisions and non-creativity. I may sound drastic but I don't think we shouldn fund services that help a single mom/dad with 5 kids before she/he made bad decisions in the last 10 years. From the mouth of someone I know "The first one gave me a lot of money but the second one made me rich." Mind you, it's in Quebec... I have lived in every province west of NB and by far, the one with the most reasonable government programs is Alberta. Quebec has got to be the worst...

In the end, we are a Capitalist country. Those that have the drive to succeed generally will. Those that don't generally don't.

[Shiny Side Up]

Some people started at the very bottom of the society and made it all the way up the top. With efforts and focus, everything is possible.

This is by far the exception rather than the norm. Its a nice story to keep those at the bottom working hard for those on top. Lord knows how many times in this life I've been fed that bullshit line. While it is possible, the probability is low.

I didn't say we should not invest taxes in social services. I say we shouldn't fund social taxes that encourage lazyness, bad decisions and non-creativity. I may sound drastic but I don't think we shouldn fund services that help a single mom/dad with 5 kids before she/he made bad decisions in the last 10 years.

The problem there is who makes the judgement? My Grandmother was a single Mom, was it just bad judgement to marry a soldier? Maybe a special case, but you get the idea. Personally I'd rather the system catch the deserving people and haul along a few undeserving ones than be so onerus that the ones who need it don't get it. That of course is just my POV. Personally I also think that tightening up the system is going to cost us more so as to defeat the point of tightening it up.

I have lived in every province west of NB and by far, the one with the most reasonable government programs is Alberta.

I would debate that, but that's really outside the scope of this discussion.