This is an interesting topic for me. I am asking specifically, why does a Government tax Benefits that they pay?
An example is the Child Tax Benefit is not taxed (i.e. you don’t pay income tax on it), however the Universal Child Care Benefit is taxable income. The benefits themselves are quite similar, yet one is calculated on the basis of your previous year income and may (or may not) be paid to you on that basis, tax-free because the other is a payment everyone gets that is then clawed back as it is counted as part of your taxable income (unless you make too much money, in which case you don’t receive it at all). It’s no wonder folks make mistakes on their taxes with these seemingly similar systems with wildly different tax rules.
How much does the government spend on collecting these taxes? The CRA is one of the larger government departments, and there must be a great amount of money spent on calculation of who owes what and collection of that money (in most cases), but what if all government benefits were effectively tax-free?
It is already being done with some benefits, why are some taxed then? I realize things like CPP payments, EI Payments and such being untaxed would take a big chunk out of the Government’s income stream, but if the Government simply paid less, would it not end up being the same thing? There must be a way to make this all a zero sum game (i.e. the Government gets to keep their money, but folks still get their benefits as well).
You give out money, and then you must figure out a way to take it back because you think the recipients didn’t deserve that much, seems a very odd way to do business (in my opinion), isn’t it? Yes I am being a little simplistic in my statements, but why must it be some complex an argument?