Why we can’t have good government policies (or a random collection of my thoughts on tax policy)

(Note: parts of this are most likely factually incorrect and I’ll try to update it as people flag those to me but for the sake of brevity I didn’t start every sentence with “From what I understand” but feel free to add that when you read the post)

Recently-ish the government tried to close a bunch of tax loopholes that disproportionately benefit the rich (For the purpose of this post rich means having income greater then $100 000). The gist of it is that if you had a business (or in many cases made a bogus business who’s sole purpose is to save you money) you could delay paying taxes / pay a lower rate on income from investments. Now there was some grumbling among legitimate small business owners but it wasn’t as impactful as it might seem. The bigger concerns came from doctors.

There are a few problems at play here. The way doctors are paid is not a straight income and basically they run a business except the government decides how much they get paid for various things. So you go see your family doctor that price is fixed for what the government pays you for that. Now it gets a bit complicated but the general consensus is that in most provinces rates have not been following inflation for a while, meaning that in effect doctors have been getting paid less and less over the years. The problem then is that the doctors relied on the tax shelters to make what I think we would say is a fair salary for their work. In my view, the problem should be solved differently then not making these tax changes (They changed the changes to be that the first 50 000 of passive income a year is taxed at a lower rate and then a sliding scale to 150 000). Now we got way more complicated taxes, which of course is what everyone harps about how needlessly complicated it is. And in this case the solution should of just been a across the board increase in the fee we pay doctors. Now that sounds like a great simple solution! But the problem is that the tax changes are coming from the federal government, which (theoretically) doesn’t have an impact on what the provinces pay the doctors.

All that to say that the reason we can’t have simple and straightforward policies for anything is that they will always impact someone (often unintentionally) and we’ll then make small tweaks for that instead of trying to address how those people are impacted in a more global way.

Personally I think trying to make small changes to the tax code one at a time is a losing battle. You’ll always have people complaining loudly when they lose something. I’d argue making wide sweeping changes that would greatly benefit most people such as greatly cutting income tax for the first $100 000, increasing the Goods and service tax and including it in all prices advertised ( [this would help distinguish items that are taxed and those that aren’t [vegetables vs a box of cookies], I’d argue that we should potentially raise the tax drastically like ~15-20% but this would be pretty hard / unrealistic without more enforcement at the border), implementing basic income (even if it’s starting lower then what it “should” be), and implementing pharmacare for everyone.

The only way I think it would work would be if we communicated to everyone exactly how this change will impact them. So for example send every Canadian a letter from the Canada Revenue Agency telling them what their tax refund would of been for last year with the changes. That way it’s not a “I’m going to be paying 10% more on my ice cap but rather holy bananas I would of gotten $5 000 more (or really, paid $5000 less in taxes during the year).

This would make it really hard for special interest groups to take over the conversation since it’ll make it clear to every Canadian what not going thru with the changes would mean for them and they’d put up a fight to get those changes in.

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