Thinking can be easy. Based on fast, effortless memory recall and associated with feelings instead of knowledge and reason, such thinking reverts humans to their primitive roots. It seems that most citizens of our country today are satisfied to take this easy path. Voters today, and the people they elect, have been encouraged to ignore Informed and rational thought for reliance on mind control, advertising, by the political parties. There are many Government policies that deserve the effort, logic, reason, skepticism, self awareness, slow and controlled consideration of alternatives. All of the following alternatives are based on factual information, data and reasoning, readily available through research and study. All MPs, and voters, should have the intelligence to understand all that follows, if they make the effort.
Let us look first at the creation of money. Money is not wealth, it is simply a means to quantify the production and value of wealth. Work, capital, demand and the social environment, produces something of value ,wealth, and the value is expressed as the amount of money paid for that value. The food, services or things produced are eventually bought, paid for with money and consumed. Money is presently created by private banks, without any foundation of production or wealth. In order to create money the banks also create debt. If you doubt this statement of fact, just “google” it. The banks like to create money, and therefore debt, because they can then collect interest on it. Where do the banks loan this money. They make stress causing loans on credit cards and on high cost homes to individuals. Also, loans to Governments causing stress to taxpayers to pay the debt charges. But worst of all, loans to speculators in financial instruments which add no productive wealth to the nation. Instead, such loans create economic bubbles in the economy that lead to recessions. Uncontrolled creation of money by banks, without corresponding creation of wealth, creates inflation.
Rational thought leads to the alternative. Instead of money being created for debt, create money only for wealth. Between 1938 and 1974 the Government of Canada had the Bank of Canada create the money to pay for the conduct of wars, the construction of publicly owned infrastructure and the introduction of health and education services. This was done without Government debt and with little family debt. Those were called the “Golden years of Canada”.
The Bank of Canada should be the sole creator of money and only for the creation of wealth. The wealth created for war was destroyed by war, leaving nothing of value to the country. The same amount of wealth could be created to provide benefit to the country and its people. The Bank of Canada could also create money, that required in excess of their equity and deposits, for use by the banks. By charging the bank's interest, at least an equal rate to that paid to people on savings, the monetary system would treat the banks and people equally. Savers would receive value for their savings. Banks would still be able to apply a “spread” on the money they loan. This would encourage saving and the deferral of consumption to future needs. Only through judicious application of both fiscal and monetary policy can employment and the economy be strong and balanced.
There has been less rational or reasonable thought given to taxation than to any other responsibility of Government. Expenditure by Government is freely debated. Taxation is wrongly thought to be too complicated to debate. It need not be as complicated as it presently is. The basics are quite simple. The society we live in should allow all members to share in the wealth created because of living in that society. The wealth created, as represented by an amount of money, can be spent, saved and invested, or paid as taxes.
One would hope that our society, together with the work performed by its members, assures the necessities of life to everyone. Unless a guaranteed income is paid directly to each citizen, the first claim on the money value of income must be the cost of basic necessities of life. The second claim is payment for the benefits of living in the society, the taxes. The balance of the money value of the wealth created (earnings, income) is available to be spent or saved by the individual. If any of that balance is saved (invested) it deprives individuals of immediate consumption, makes that balance of money available for productive use by others and increases the total of national wealth.
The first consideration in taxation is choice of tax base. The choice should be that which is most beneficial to the economy and still acceptable to the taxpayer. The taxation of income is harmful to the economy, by discouraging work and productivity, and is viewed as a penalty by the worker. Attempts to correct for the wrong choice of tax base has resulted in great complications in the calculation of taxable income. Whereas income results from the creation of wealth, spending of income is the decreasing of wealth. For the majority of taxpayers, the only difference between income and consumption is savings. Most of the complication in determining taxable income arises from taxing, or not taxing, income derived from other than wage remuneration.
The simplest and fairest tax is a tax on consumption, by means of a “cash flow” tax. The simplest concept is that ALL money, or value, received is either spent (consumed) or not spent (saved). Present record keeping requires reporting of all payments and receipts. If the receipts are not saved and invested they must have been spent and the wealth consumed, and should be subject to tax. Instead of taxing the wealth that is created in the society, the tax should be on the wealth taken from the society.
Once the annual amount of cash flow spent is the accepted tax base, the method and rate of tax needs be determined. The current method of graduated rates applied to brackets of income has been a long standing tax method, and considered fair and just by most thinking people.. Reasoning that one’s ability to earn and consume is, in large part, dependent on the past and present influence of society, increasing graduated rates should apply to predetermined increasing brackets.
The number and size of brackets over the last 50 years seem to have been adjusted as a method of increasing the tax burden on those with lower incomes while decreasing the tax burden for those with high incomes. The tax burden over the last 75 years, for those with lower incomes, have increased by 15% while those in the top bracket have decreased by 38%. This was accomplished by decreasing the number of tax brackets from 25 to 4 and decreasing the tax rate on the top bracket from 90% to less than 50%. It would seem that with the advent of computers and the publishing of tax tables, a fairer bracket distribution would be for 100 brackets.
It is not altogether clear what the government’s motivation is in providing tax inducement credits for savings. If it were to encourage productive investment, the inducements would be for investment in small and medium sized business, those that provide greater employment and growth. The RRSP and other schemes results in savings being invested in the least economically productive investment possible, in speculative trading in listed shares and financial instruments. If the intent was to encourage savings in order to help support those who might otherwise require government support at a later date, the greatest rate of inducement would go to those in the lower tax brackets, not to those with the highest incomes. Those in the higher tax brackets would save anyway. If the intent was to encourage savings in general, there would be no requirement to invest in funds charging costly maintenance to investors. A taxpayer declared and provable investment, even a bank savings account, would induce more low income taxpayers to save their smaller savings amounts, as well as encouraging the wealthy to invest.
There are tax sources, other than on income or consumption, that would be economically beneficial to our economy, as well as more acceptable to individuals. The purchase and sale of shares and financial instruments adds nothing to real wealth in the country. To quote the founder of the Vanguard Investment Group “We encourage investors to trade - - - - - - So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources”. A tax on every securities transaction, maybe excluding IPO’s, ( Initial Public Offerings which presumably increase productive capacity), would aid the economy, by reducing the tax on productive effort, and provide taxation revenue,
The purchase of financial instruments add an equal benefit to the production of wealth in the economy as the purchase of a lottery ticket. They both provide only remuneration for the middleman. The purchase of a lottery ticket pays 45% of the purchase price to Government. It has been stated that the stock market is more subject to dishonesty and manipulation than lotteries or casinoes. Why should the poor, who attempt to receive a something for nothing gain, from their investment in a piece of paper, pay a 45% tax to Government while the rich investors pay no tax on their purchase of a piece of paper?
The cost of every item manufactured, processed or grown in Canada bears a portion of the cost of maintaining our society. The taxes and withholdings from employees, the tax paid on the assets used, business taxes, corporate taxes, utility costs, municipal taxes, HST on the goods bought by employees, and these same costs for each rollover of money, are all lost if the goods are imported . 100 years ago over 75% of tax revenues were from custom and excise taxes. Manufacturing and the economy, and gainful employment, expanded. Canadian workers can produce just as cheap and efficiently as any others, it is only the added costs of Government that allow imports to sell cheaper. All imports should bear the same tax load as those produced in Canada. Then Canadian workers could compete on a fair and equal basis.
The taxation treatment of food fails the rationality test. The exemption of food from point of sale H.S.T. tax seems to be another example of favouring the richest segment of society. The exemption enables those buying the most, and most expensive, foods to save much more than those on low income. Better to increase support for those on low incomes to cover the tax cost and to levy the tax on everything purchased. If there was an import tax on all foods, there would be increased demand for local production. Imported foods should bear tax at an equal level with locally grown and processed.
Our politicians agreement to multi government trade agreements are treasonable actions. The multinational corporations are creating and controlling elite tribunals to override domestic laws, including environmental, health and other wishes of the people. They are transferring jurisdiction over our society to multinational corporations and financial interests. Canada is being left with nothing to support its foreign trade but the depletion of our natural resources. Most of the value of our resources is being surrendered to foreign and international speculators. It is not even necessary for resource developers to use only Canadian labour. The consumption of unnecessary imports, destruction of manufacturing export ability, expansion of unfunded liabilities, debt, infrastructure deterioration and diminishing natural resources should not be our legacy to future generations.
What can induce our elected representatives, and the electors, to even think about rational alternatives? How do we overcome the influence by the moneyed corporate and financial elite over our political leaders and followers? I do not know, do you?