Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, January 10, 2012

Cost of inequitable tax loopholes increases

Finance Canada published its annual Tax Expenditure Report for 2011 and it shows that the cost of some of the most inequitable tax preferences and loopholes continues to rise.

For instance the stock option deduction, which allows CEOs and executives to pay tax at half the rate of ordinary working income, is estimated to cost the federal government $725 million last year.

I'd written about the major problems with this tax preference a number of times before. Not only is it highly inequitable, but it also fuels speculative behaviour and short-term behaviour.

Now even Roger Martin, dean of U of T's Rotman School of Management, says they should be eliminated, while well-known McGill business prof Henry Mintzberg wrote in the Wall Street Journal that they " represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy."

Hugh Mackenzie's annual report on CEO incomes for the CCPA shows just how much stock options provide as part of total compensation for CEOs. Even the Globe and Mail's conservative columnist Margaret Wente has argued that they should be eliminated.

Analysis of the CRA's income tax statistics for 2009 shows that over 95 per cent of the value of this tax preference went to the 2 per cent of tax filers with incomes of over $150,000 and close to 90 per cent went to the less than 1 per cent of tax filers with incomes of over $250,000.

The cost of related tax preferences for capital gains also continued to increase. The half tax rate for capital gains in relation to personal income was estimated to cost $3.6 billion last year while the similar half tax rate for capital gains from corporate income is estimated to cost the federal government $3.9 billion last year. In total, the stock option deduction and preferential rates for capital gains cost the federal government over $8 billion a year. These tax preferences also cost provincial governments billions as they generally use the same tax base.

These tax preferences for stock options and capital gains were largely rationalized because it was argued that they would boost investment and thereby productivity and economic growth in the economy, as supply-side economist Herb Grubel argued a decade ago when the inclusion rate was reduced from 75 per cent to 50 per cent.

That clearly hasn't happened. It's time that the stock option deduction is completely eliminated and that capital gains are taxed at the full rate, after adjusting for inflation, as the CCPA's Alternative Federal Budget has argued for many years.

If the federal government followed the advice of AFB and these esteemed business professors, it would be many billions better off -- and we'd have a more equitable, stable and productive economy.

Original Article
Source: Rabble.ca 

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