Taxpayers, you're the chumps

Column -- If you had to guess the tax burden split between individuals and corporations, you might guess that corporations pay the most. That's because Corporate Canada is always whining about its tax load, which it claims is uncompetitive and sends jobs overseas. You'd be wrong. The chump is you, not the corporations. The public accounts show that the total corporate tax revenue is about 30% of the total personal tax revenue. In the early 1960s, it was 60%. The tax burden on the individual has, relatively speaking, doubled since your parents' generation. But this week, Finance Minister Jim Flaherty said he's going to take care of you. He's swimming in surpluses - $13.2-billion for the 2005-06 fiscal year. That amount will be thrown at the federal debt. He also promised to cut your taxes. “We think the people of Canada are overtaxed,” he said. They may or may not be. What is absolutely certain, however, is that “the people” are wildly overtaxed compared with corporations. So will Flaherty balance the equation and not just give individuals lower tax rates, but lower their share of the total tax burden? Forget it. If anything, the pendulum is swinging even farther in corporations' favour. They will pay relatively less, you will pay relatively more. If it doesn't sound fair, it's because it isn't. But look what's happening. Every week the corporate tax bill, proportionately speaking, becomes slightly smaller and it's not just because corporate tax rates have fallen in recent years (they have).

It's because Canadian companies are turning into income trusts, which are structured to avoid paying tax, and because other companies are bought by foreigners and restructured to minimize the tax hit. Unitholders pay tax on the trusts' distributions, so tax is still being paid. But there's some “leakage” (blame the pension funds and the foreigners who own trust units). University of Toronto tax guru Jack Mintz estimates trust conversions are depriving federal and provincial governments of about $500-million a year in revenue. The figure is bound to rise as the trust wave swells. In 2000, the TSX was home to trusts worth $18B. Their collective value is now about $200B and rising rapidly. The tax losses from foreign takeovers are much harder to quantify. But the losses are certainly real. Generally speaking, a foreign owner loads its new Canadian subsidiary with debt. Since interest payments are tax deductible, tax bills can plunge. And foreign companies went on a hunting spree in Canada this year. If Flaherty really thinks the average Canadian is “overtaxed” he would restore the balance between individual and corporate tax payments.
(Globe and Mail 060928)

This is hardly a surprise to anyone. Corporations and government are fuck-buddies, while the rest of us get beat into submission. Have you seen the number of Income Trusts on the TSX these days? I wonder how much backbone the government has to close up these loopholes? Most likely none. I'd be very surprised if there is ever any movement on this. Further to Nat's discussion on institutionalized slavery, anyone that thinks the system is fair and just for any of those making less than a bazillion a year is very, very deluded. The capitalist economic/political model is getting more and more out of balance with every passing year. The rich are getting richer, the poor are getting poorer. What happened with the idea of protecting the inputs into the system? Without them, the entire system falls into chaos - the base of the pyramid disappears and everything collapses. The corporations and governments are looking to rape you any chance they get (especially the car rental companies! Oh, and of course don't forget the banks), while trying to convince you that the status quo gives you, the individual, everything you could possibly need. How benevolent of them. Hey, wait a minute - they're lying to us!