Polls Details

12 LAWS NOT LEGISLATED

The ordinary citizen may believe that their elected representatives seriously consider the implementation of all laws that affect them. This is far from the truth, some law is never considered by their elected representative. These laws are called regulations to statutes passed by the Legislature. But, the poor elected representative is the one held responsible for any wrongful effects of those laws. It was my practice in Caucus, to question the necessity , in all legislation, of the inclusion of a section that allowed the addition of regulations.

These laws are drafted by the bureaucracy and normally rubber stamped by the Cabinet. Supposedly, the Cabinet Minister fully understands the need and effect of the regulation that he brings to Cabinet. Maybe he does not. Maybe he has great problems on his mind. Maybe he is lazy. Maybe he is not familiar with some section of the public that will be adversly affected. And the other Members of Cabinet, they have the same limitations. But they also are reluctant to question the actions of their colleagues. 

Laws and, to an even greater extent, regulations, are usually created to reduce the freedom of action of a very small segment of people. The majority of laws that affect everyday life were never meant to affect the majority. Laws and regulations are in many cases a knee jerk reaction to an isolated happening. The happening may be the result of someone being careless, stupid, inconsiderate, or some other human frailty. But these human traits will always be with us. Many should be dealt with by applying penalties for the action, not trying in control of the majority, for the few who might act improperly. It should not be necessary to restrict the freedoms of many for the wrongdoing of the few. It may be something that reflects some local condition but not the whole jurisdiction. The regulation may impose costly action that in aggregate, for all those affected, far exceeds the cost of the problems it tries to correct.

These regulations are usually conceived and drafted by some member of the bureaucracy at their desk in head office. They may have school learning but may lack that uncommon trait of “Common Sense”. They may not lack common sense but may never have sat on the seat of a back hoe or dealt with a welfare recipient or handicapped person. They may have no concept of cost/benefit analysis. The regulations are often created by the bureaucracy to ease in administration. It is much easier for the bureaucracy to deal with statistics than human circumstances. It is wrong to set inflexible standards for flexible conditions. How can rigid regulations deal with the vast differences in people or conditions ?

Regulations should not be laws. They should be recommendations and guidelines. People, citizens and civil servants, should be able to use their experience and common sense as circumstances dictate. Deviations from the guidelines should be recorded. The recording of decisions that vary from guidelines would reflect on the evaluation of the individuals making the deviations. Such evaluation could indicate replacement or retraining of those who make no deviations, as well as those making bad deviations.

Regulations to Statutes, as much as the statutes themselves, affect people and should be legislated by the elected representatives, with input from those who will be affected. The creation of committees of elected representatives to assist the Ministers of each Department would provide the opportunity for regulations to be considered from the point of view of people instead of bureaucracy. The work of such committees, especially if the evil of politics were absent, would make better use of Members efforts.

13 Governmentn Jobs

s employment of people to do unnecessary work better than simply providing support for those in need? If you say yes to that, would you still say yes if that employment was in Government? Government employment can be cut, and should be cut, especially the high priced jobs that do little for the ordinary citizen. In Nova Scotia, to excerpt from the Chronical Herald, “Government jobs in Nova Scotia paid an annual average of 67.1 per cent more than private-sector jobs”. Provincial Government Jobs have grown by 20% since year 2000. Has this increase been really needed, or even wanted by the people or only to add to the numbers and power of our Government administration?

The article mentioned above indicated that Nova Scotia would have to reduce its Government employment numbers by 14,000 to meet the national average. Would any of our political parties have the will to undertake such an effort? They would not, because they can not see beyond the status quo. They fail to look at the basic need to serve people, not their bureaucratic systems. The systems that have more interest in control over people rather than respect for people.

The welfare system has a line up of people waiting for someone behind the desk to judge them and decide what is good for them. The welfare system is made up of many sub systems with their own bureaucracy and terms of payment. Why not a simple weekly credit to a debit card for an amount determined by their lever of income? Nlet the computers do it all. In days past wages were paid in cash every Saturday. People could budget on a weekly basis. Now the Government and others pay by checque on a less frequent basis. People find it hard to cash a cheque and a business has sprung up where large fees are charged for cheque cashing for cash to go from payday to payday. Has our Government personnel no concept of those less well off then they are?

The health system has a most disgraceful bureaucratic overload. What a horrible mistake Government made by setting up this expensive bureaucracy. How simple it would have been to limit itself to its true function of helping those in need. If Government paid medical costs in excess of, say, 10% of the annual income of an individual, and left provision of the care to others, everyone would have medical coverage and the excessive costs would be avoided. People would control costs themselves. Now we have both medical personnel and administration by threat and intimidation pushing up costs, because of the vulnerability of politically dominated Government.

As I often contend, all laws, both those passed by our elected representatives and those imposed by the bureaucracy, erode the freedom of all people, even if only intended to affect the few. Those 14,000 excess and unnecessary jobs could be eliminated while making people more satisfied with their Government.

14 INCOME AND STANDARD OF LIVING

If one excludes things such as enjoyment of family, nature, exercise, friends and such non monetary elements in defining “Standard of Living”, we are left with money or its equivalent ( In Canada, dollars). We then can define differences in standard of living in terms of dollars, just as we determine “income” in dollars.

For living, one uses goods and services normally provided by others for which are paid dollars. The higher one's “Standard of Living” rises, the more goods and services are consumed, and the more dollars spent.

One,s efforts provides goods and services, for the standard of living of others, for which one receives as many dollars as the others will pay. Those goods and services are created by one's labour or return on capital (savings and investment), and is income.

The dollars of Income and dollars for standard of living of anyone need not be the same amount of dollars. One can defer spending on their standard of living and save and invest, which becomes their wealth. One can also have a higher standard of living by borrowing money. Under the income base of taxation there is no tax, or deferred tax, on this decrease of wealth for standard of living. The wealth of any country or society is the combined wealth of all members of that society plus the wealth held in common by Government.

One can then conclude that one's income reflects what goods and services (wealth for them and their country) they have produced and their standard of living reflects what goods and services (wealth) others have produced for them to consume. I believe that it is obvious that any society would be stronger if less wealth was consumed and more was saved and invested in improving that society by investing in it's productive capacity, and quality of infrastructure and environment.

If one accepts that a Government is necessary and that taxation is essential to support it, and that it should be levied fairly and efficiently, careful consideration should be given to the tax base and method by which the tax burden is levied. It has been generally accepted that a graduated tax based on ability to pay is preferable in determining rate. The graduated rate meets the criteria of fairness since ones income level is largely dependent on the society or country of domicile as much as personal traits or abilities.

The income tax base means that one is taxed on what they produce, the wealth that they have the choice to either consume or add to the total wealth of the country. To tax at the point of creation is to reduce the wealth that could be left to combine with the productivity of the individual to create more wealth. The exclusions, under the current calculation of the tax base, of so many types of income, results in higher rates of tax on productivity. There is also the dampening effect on the product creation of the individual.

The adoption of a standard of living base would mean that one is taxed on what they consume of the wealth that others have produced. Greater choice would be given to taxpayers, the choice to work harder, the choice to spend less, the choice to defer spending, all to increase the personal and country wealth, instead of consuming.

When compared with the present extremely complicated determination of Income Tax, the calculation of tax based on the standard of living base would be unbelievable easy to calculate. The receipts and payments of money is already fully recorded for business and tax calculations. All savings and investment records are maintained. The one basic determination would be “was the money spent on the standard of living or to increase the wealth of the country”.

Having spent many decades contemplating the present tax policies and their effect of favoritism to the wealthy, I will be returning to this topic.

 

15 BUSINESS AND CORPORATIONS

Corporations are not people. Businesses are not people. Corporations are not always businesses. Businesses are not always corporations. Businesses and corporations may or may not be created with the motive of making profit. They are like a mixing bowl. Things are put into them and changed to something else which is taken out. Corporations and businesses can do no wrong. People can do wrong.

Profits do not belong to corporations or businesses. Profits belong to the owners. Profits can be taken from the business by the owners. Profits can, or sometimes must, be retained in the business, or business corporation, for business growth. Or they must be retained because inflation has increased the dollar cost of their business assets. It is a great wrong that inflation creates taxable income of a business.

It is understandable that ordinary people fail to realize that the taxation of business income is counter productive to society. It increases the cost of the goods and services produced by the business. If the money is paid for taxes, it is just another amount that has to be recovered from the selling price of the goods and services produced. If there are profits not required to be retained for business use, they will be paid to owners. They will be subjected to tax at that level, either with an income tax or a standard of living tax.

There should be a tax on the wealth or redundant assets of corporations or businesses. Tax should apply to “failure to produce” rather than“production”. The tax on business decreases the ability to compete with goods and services on which no such tax is levied. The tax is particularly detrimental to small businesses whose sources for financing is restricted.

If the taxation base is Standard of Living (consumption) then a business should not be taxed because it is not living or consuming. Its owners, (proprietors, partners or shareholders) are living and consuming and should pay tax on their standard of living. There is already provision that money laid out by a business that is not necessary to earn income, but of personal benefit to a person, is included in the taxable amount of that person.

Especially for small business, the real driver of economic growth, the taxation of the income, as calculated by income taxation rules, is without any justification. Money spent on purchases and labour is not considered a business expense if has not been sold. This puts the business in the position of paying tax on revenue not yet received. The business owner is placed in the position of paying tax on money that he is not able to consume.

16 SMALL BUSINESS

This is how Government should promote small business. Government should have a simple policy that assures people that if they take the risk of investing in a business, they should first get back, without it being taxed, the money that they have risked. Only then should Government take its tax from any excess over the amount that has been put at rick, that the investors receive. It has been proven that a large proportion of business start up end in failure or bankruptcy. It also been seen that many successful entrepreneurs have failed in one or more of ventures that they have tried. One of the main reasons for those failures is that income taxes have been paid on unrealized profits tied up in work in process, inventory and other business outlays.

Government seems to think that it helps small business for the taxpayers to pay for programs, run by bureaucrats, to help entrepreneurs and small business. I remember a client saying to me “Please, not another program to help small business, if they help us any more, we will be out of business”. What government can really do is do away with regulations that cost small business time and money. They can also stop taking away money from small business needed to make their businesses grow. Small business is taxed on money that they have not received or on things needed by the business that has paid out. Small business is taxed on money owed to them for things they have made or bought and then sold, but for which they have not received payment. Small business is taxed on things that they must purchase like supplies, raw materials, new equipment that they have on hand. Small business must even pay tax on the wages that they have paid their workers but whose products have not yet been paid for from their customers. It does not seem right that government should claim how great the economic growth resulting from small business is and yet restrict that growth by their tax policies.

Government sets up programs to help small business but they do more to distort the business environment than help. They pay big money to staff, that, if they have any business ability, would be better left to use their abilities to create businesses themselves.

Government has developed many programs to help the rich invest in a variety of businesses. Schemes that have resulted in the rich accumulating wealth by gambling in the stock market or the derivatives lotteries. But the very backbone of our country, small people and businesses, where Government should be providing encouragement, is taxed on money it never receives. Of course, it is big business and rich people who control our political parties.

All of these harmful taxation policies would be done away with if the tax base was changed from Income to Standard of Living (a graduated tax on consumption). With tax on consumption there only need to be one thing determined, was this money paid out for personal consumption or was it paid out to earn income. All money received must now be recorded and reported, as it will remain in the future. If paid out for business supplies or wages, or even paid out to buy a business, there would be no tax due. If paid for personal use it would be. It is wrong to tax money before it is spent.

Think how much better it would be for small business, and the economy, if friends and neighbors could invest some of the money they save in a business they know, rather than with the stock market gamblers. Think what it would do in our local economies. The RRSP scheme might be just another scheme to fill the pockets of the paper pushers in their towers.

 

17 REGISTERED RETIREMENT SAVINGS PLANS

The concept of RRSP is a good one. It recognizes the need to protect the part of savings that would otherwise be taken by Government as income tax to disappear from our economy. Where RRSP fails is in the restrictions on how it is invested. The rules put it into the hands of the paper pushers who have been renounced not only for poor choices of investment but have spawned the biggest crooks in our society. Instead of investment in the most productive sectors of our economy the money goes into financial instruments. The people who benefit most from peoples RRSP savings are the brokers and traders whose main objective is their own profits.

The poor politicians have been mislead again by the elite who have led them to falsely believe that they must protect the people they serve from themselves. It is this intellectual elite, with their high education,that feel that the rest of society are not as smart as they are. As my father said, “You can educate fools, but you can not make them smart”. They have set up the RRSP scheme believing that people are not responsible enough to make their own savings decisions. If Government was doing its job, they would make sure that people are protected from the swindlers.

There should be no need of an RRSP. A saving is a saving. Any savings should be eligible to avoid taxation. The saver has no benefit from the amount saved until they “unsave” it and spend it. While it is saved, wherever it is invested, in a bank account, in their business or in a neighbors business, it is all money that is wealth to be used for the benefit of all the rest of us in society.

If individuals were free to make their own choices, choices would be made based on more than the gambles of paper pushers. They would invest close to home, with things they know and people they know. Small business would have a source of funds that are denied them by the banks and those in the big office towers. People would have the choice, they could decide where their savings are invested or take their chances with the paper pushers.

If it is worthwhile to encourage people to invest in a Retirement Savings Plan, what is wrong with the plan to build up their business, which also builds up the economy and productive capacity of the country. Those in small business expect that business to provide for their support in old age. Whereas a salaried person is able to save tax by investment in an RRSP, a small business that always needs capital, can better use his savings to build the business. ( and create jobs) How many small businesses would have survived the competition of the big businesses, with their ability to get money from the big financial institutions, if they had been able to add productive machinery or inventory without having their money taxed before they invested it.

Why will Government not understand that we should tax people only on what they spend. What they earn and fail to spend is money available for use by the rest of society and available to them upon retirement or when they need it, at which time the rest of us would have the benefit of their tax. Government has no business trying to do things for people that they are able to do themselves.

18 RICH PEOPLE

I would like the society in which I live to have a majority of rich people, not necessarily including me. I have tried but realize that I have not had, and do not have, the ability to be rich. My enjoyment was in doing, and starting something. There was always some new venture that appealed more than continuing one after the start up and it was usually before the money resulted. I have had business partners that were rich and that I helped to become richer. The rich people I have known were all likable and I never envied them their riches. They were the creators of wealth, they enjoyed the creation.

There are some who think that the income of the rich is their motivation for doing the work they do to earn it. This is very far from the truth. The creativity, the challenge, the recognition, the power, the competition are all better reasons. That is what keeps them at it long after they have more than they need for even the highest standard of living. We should be thankful that they continue to work, to increase the wealth of our society.

If many of a society are rich, the society is wealthy. With the rich to pay for the benefits they receive from being a member, everyone is better off. The infrastructure is better, there is more to help those in need. The wealth of a society is the combined wealth of all its members and the wealth that has been invested in the infrastructure. It takes wealth to produce wealth. It takes savings. The problem is that Governments have fostered the accumulation of wealth in a very small segment of the people. They have enabled, or encouraged, this to happen through policies that favour the few and restrict the majority. They had to do this to maintain wealth in our economy. They had to do this because they had a tax base that taxed production instead of consumption.

The rich have wealth, wealth is necessary to create production, production is necessary to create wealth. But work is also required to create production. What ever ones income is, it is what society is willing to pay for ones work and the use of ones wealth. That is their income. I do not have a problem with how much income they have, it represents the worth of what they produce for society. I have a problem with what they take out of our society, the wealth that our society no longer has to produce more wealth. The amount they consume or otherwise remove move out of our society is what should be taxed.

The problem created by government taxation and regulations is that the rich are able to dissipate the wealth they receive not only by their standard of living, (consumption), but by moving that wealth from our society. It would not be so bad if the tax was on all of the income, the wealth, that they consume. But they can consume income (wealth received) from capital gains, inheritance, and exemptions from taxation for depreciation, selected investments, etc on which no tax is paid. The vast majority of members of our society are unable to benefit from such schemes.

19 THREE TAXES

I have been writing and speaking about what is wrong with taxing income for many decades. The very concept is contrary to reason. Our income is a what society pays us for what we produce. One could consider tax on income to be a penalty for producing, would it not be better to penalize for consuming. For another thing, in order to try to make a tax on income less unfair, and less detrimental to our economy, the determination of taxable income has become beyond the ability of almost all taxpayers. If all those tax accessors, accountants and lawyers were to apply their abilities to productive use, a great deal of wealth would be created in our society.

I propose the replacement of a tax on income with three taxes, (1) a graduated tax rate on standard of living, (2) a fixed tax rate on wealth and (3) a fixed tax rate at point of sale.

The amount of “standard of living” is the total that we spend in a year. This amount is the total cash we receive in a year from any source, less the amount we still have at the end of the year. All transactions are necessarily recorded for income tax purposes and would be equally available for any tax scheme. There is also records of all the money and property that has been saved or invested at the end of each year. Two simple questions that a taxpayer must answer: (1) how much did you receive during the year and (2) how much of that do you still have at the end of the year. None of the complications of income determination required by income tax would be required. Having accepted the concept that people with higher income should pay a higher tax rate, it is equally valid that a graduated rate on consumption should apply to consumption.

Since the services provided by Government are of greater value to those with the higher standard of living, and with more wealth to protect, the tax base of consumption should provide recovery of the costs of Government, without deficit financing, on an annual basis.

The second tax would be a tax on wealth. It is wealth that determines the standard of living of a country. Any country with little wealth has a lower standard of living, in spite of all the labour it might have. The public infrastructure of a country plus the aggregate wealth of its citizens is the wealth of the country. There has to be some balancing of both to support an economy. Private wealth that does not produce more wealth is of no economic use to a society. When income tax was first introduced, it was conceived as a tax on wealth. A low fixed rate of tax on private wealth should be levied to be used only to pay the direct costs of adding to public infrastructure.

21 NS TAX REVIEW REPORT

The Nova Scotia Tax and Regulatory Review report does not, in my opinion, go far enough in correcting the problems in our taxation system. Granted that it can not go far enough while the Federal Government continues to use the complicated tax base to which the Provinces are tied. As long as political parties are in control and fail to make major changes, our economies will continue to deteriorate. Until the legislative bodies have enough members independent of the political parties, the interest of our Government will be political reelection not good government.

The first comment on the report that I heard on radio was a lady, of low income, complaining about the removal of rebates of HST on some goods. The news reporter did not point out to her, and the listeners, that the report also included correction of the refunding of HST/GST tax to low income families. I did not hear any politician stepping forward to make a correction to such misleading reporting. People are fair and reasonable enough to understand and accept change if its need and results are fully explained. Our political parties must think the people are all stupid and unreasonable. They are not, but they have watched the politicians over the years and the record has not been one to attract trust.

The report is obviously based on an assumption that the elected representatives will continue to make political decisions rather than the proper ones. Graham Steel comments that the politicians will probably kill even the mildest corrections to the tax system. In the typically misguided thinking of Government, the tax system is foremost in their thinking, not the people taxed. The exclusion of any consumption from point of sales tax is most harmful to those who can least afford to pay it. The ones who save the most tax on exempted goods are the ones who buy more of and more expensive goods. If all expenditures were taxed, the tax rate could be lower and still raise the same revenue. Those with insufficient funds to pay for their needs receive financial support to the extent that our society demands. Very few wish to see people freezing to death in their homes or starving in the streets.

The second wrong caused in legislating for tax systems instead of for people is that peoples buying choices are influenced. Peoples consumption needs and choices differ. Some people choose less costly food in order to have funds available for something more important to them. Those with the money need not make consumption choices, so the exemption from tax means nothing to them. Our society enables their standard of living, it seems just, that there is a pay back to society.

One of the evils of politics is that its control of elected representatives takes away their ability and duty to lead the people, to make clear the effects of their actions, and then to do what is right instead of what is popular. Let me repeat two wise comments; “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy." and. “A representative must be sensitive of the views of the people, and sometimes must run the risk of their displeasure, or he will never do them any good in the long run.”

22 GOVERNMENT PROGRAM REVIEW

It is always a pleasure to listen to Don Connolly interviewing Graham Steel. This morning dealt with Program Review by the current administration. The background information on the conduct of Government, that was the topic this morning is helpful in understanding the procedures within Government. It pinpoints that Political Reasons are paramount in every action taken by our elected representatives. That a Program Review Committee should meet in secret is the logical and correct practice when considering options that may never be chosen. How wonderful it would be if such a committee included representatives of all Political Parties, and a “No Politics” group, not interested in their political affiliation, but only what is truly good for the people they represent. The leaders, and members, of all parties are as smart, and as dedicated, as the party with the majority of seats. They are all getting paid to represent the people, not to assure their, or their party's reelection.

The following quote should be kept in mind by elected representatives “A representative must be sensitive of the views of the people, and sometimes must run the risk of their displeasure, or he will never do them any good in the long run.” One might add that many of the electorate would empty the treasury without regard to the welfare of their country or of their descendants. Political Parties lack the moral strength to resist the temptation to buy peoples support with their own money.

Programs should be reviewed with the primary question being, “How does the program benefit each and every citizen, and, how much freedom and money does it cost each and every one of them?” It is not the program that should be the concern, it is the people. Might it not be better for the people if the program, with its administration costs, were canceled and the total cost put in the pockets of those it is meant to help?

There are so many programs that distribute buying power to those who need it, might they all be canceled and a simple “reverse income tax” pay them the funds. Government has been proven less capable of “doing for people” than people can do for themselves. There is an intellectual elite who mistakenly think that they know what is best for people. Most of them have never “walked in the shoes” of those people. The best society is the one which provides maximum freedom of choice, with the means for at least a minimum standard of living, to all members.

Lets do away with the costs of any “programs” that provide and control people and instead provide the means for our people to provide for themselves. It will be the intent of future articles here to look at areas in some of these programs where Government is trying to do for people, what they would be better off doing for themselves.

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