Warren Buffett has been saying to the media he thinks the American Tax rules are flawed if he ends up paying less tax (as a percentage) than his secretary does, and while I applaud his sentiments, I think he is blustering for the media (i.e. he knows the rules aren’t going to change quickly, so he can say what he wishes about this topic).
President Obama has taken Buffett’s statements a step further and has dubbed his push for tax reform as the Buffett Rule, where as a percentage rich folk should not pay less than folks who work for them. A good explanation I heard was we shouldn’t people who make money from money less than those who work for a living.
Is this a problem in Canada? Yes, wealthy Canadians can have a lower tax rate depending on how they work the system, but is that a problem?
A few examples of this would be:
- Living on Dividend Income, you will pay less (as a percentage) than someone who earned the same amount in salary. If you make less than $40K it’s almost a negative tax (wild)
- Capital Gains laws are such that if you make money on the sale of stocks, or other capital gain devices, you will pay less than someone who earns a salary.
- Donations and RRSP tom foolery can lower their income as well, as well as trusts and such too.
I have only scratched the surface, there are many more tax swerves out there that really are only available to those who the money to use them (i.e. not for we poor folk).
Should Canada think about a Buffett Rule? I am not really too sure on that one, our tax rates are still pretty darn high (even for the rich, compared to American tax rates, Canadians are paying significantly more), and more power to you if you can dodge the tax man has always been my view of things. Should we eat the rich with taxes? Your opinions?
I think the tax systems are different enough that this sort of rule isn’t overly logical in the CDN system.
@MJM or Mr. Buffett could pay his secretary in dividends or stock? 🙂
Canada needs a flat tax, pure and simple. No exceptions and deductions. Then everybody pays the same percentage, and we ALL save because the government can shrink the tax collection staff by 90% and the courts will save big-time and think of the accounting fees that we can all put to better use.
The only negative of a flat tax is that it would hit the poorest people very hard, so it should only be applied starting at a certain amount: $25,000, perhaps? $20,000? $30,000?
So the entire tax form would read something like this:
How much money did you take in? ____________
Subtract $25,000 ______________
Multiply by 20% _____________
Pay now.
There would even be enough room left on the post card to add a Canadian trivia question, so that people can learn something about their country.
I think Buffett is genuinely trying to help Obama push through his plan to add a modest tax increase for incomes over a quarter million per year. This woould’t make Buffett pay the same rate as his secretary, but it would close the gap a little.