Monday 17 December 2018

I love paying my taxes. You should, too.

I live in Toronto, Ontario, Canada, and I recently received the following notification from the Toronto Revenue Services.

As you can see, the property taxes on my apartment building are being reduced. As a consequence, I am eligible for a reduction in my rent. My monthly rent is currently $1,065.43. The indicated reduction of 0.58% works out to a savings of $6.18 per month, or $74.16 per year. A savings is a savings, and money's money, right?

My personal confession: I'm not happy about this. I like paying taxes. Sometimes, I would be willing to pay more.

Am I crazy?

The government makes money through taxation. We could say that taxes are the government's income. We all need income to pay for stuff, and if we need stuff but don't have the money, we have to borrow to pay for it. That produces debt. Debt isn't always bad, but we all need a plan to deal with debt and make sure we don't end up bankrupt.

Headlines this week said Ontario's deficit is estimated to be $12.3 billion. (CTV News, 2018-12-10) Note: I just said deficit, not debt. The total debt of the province for 2018-2019 is estimated at $325 billion. (Wikipedia) It was reported that the bond rating agency Moody's has downgraded the province from Aa2 to Aa3, "citing the province's $14.5-billion deficit in 2018-2019 and projections that it will continue to post deficits in the coming years". (CTV News, 2018-12-14)

My course in Macro-Economics
A requisite of my business degree was economics where I learned that people and companies can go bankrupt but a government can't. Why? Because a government has the power of taxation. Need money? Make a new tax or increase an existing tax.

While sort of being logical, there always seemed to be something odd about this to me. Never go bankrupt? Is it really never or does it just take longer?

Government debt imposes real costs on individual Canadians and their families in the form of interest payments. Governments must pay interest on their debt—it’s not a choice. And the more money governments spend on interest payments, the less money is available for the programs and services that matter to Canadians. -Fraser Institute, 2017-01-23

In 2017, the GOP passed a $1.5 trillion tax cut in the United States. Now, they realise their deficit is exploding and are considering chopping various programs like Medicaid and Social Security. Please note that this situation gives to the wealthy and takes away from the poor. It also saddles future generations with the burden of debt.

My View
I'm not rich. I don't own a mansion. I don't drive a Porsche. And I don't vacation on the French Riviera.

But I don't need $6.18. In fact, I could walk into Starbucks, go for an Espresso and a bagel, blow through six bucks in the blink of an eye, and not think twice about it. In other words, $6.18 to me is insignificant. It's meaningless. If the government had some sort of "tax donation" service to contribute to paying off debt, I would give my rent reduction immediately.

Am I a nice guy or a sucker?

Maybe a bit of both.

For every dollar of my taxes that is used to service the debt is one less dollar devoted to public parks, road maintenance, electricity, water and sewage, museums, health care, etc. I enjoy my country. My country is good to me. It supports me. I want to support it. Collectively, we all benefit by paying our taxes and working together for the common good, the good of each one of us.

I'm not rich. But I'm okay. I can afford $6.18. I can actually afford more. I know that for some, $6.18 can be significant, so I say to not give me $6.18, but give it to somebody who needs it. I don't.

And of course, give it to the country. I want to continue to enjoy the public parks, health care, and a host of other pluses living in Canada. Tax me. I want to pay it forward.


CBC - Feb 23/2018
Where your tax dollar goes
The federal government spent $311 billion in the fiscal year 2016-17.

Financial Post - Oct 19/2018
Ottawa's annual spending breaches $300B for first time, pushing up Canada’s debt ratio
Federal spending continued to rise over the last fiscal year, ballooning to over $300 billion for the first time and helping push up Ottawa’s net debt-to-GDP ratio, long touted by the Liberals as evidence of their controlled spending habits.

The federal debt-to-GDP ratio now stands at 31.3%, up from the 30.4% projection in the 2018 budget

Wikipedia: Canadian public debt
The Canadian government debt, commonly called the "public debt" or the "national debt", is the amount of money owed by the Government of Canada to holders of Canadian Treasury security. In 2014, this number stood at CAD$1.4 trillion across federal and provincial governments. With the total GDP somewhere around CAD$1.8 trillion, Canada's overall debt/GDP ratio is around 77%. "Gross debt" is the national debt plus intragovernmental debt obligations or debt held by trust funds. Types of securities sold by the government include treasury bills, notes, bonds, Real Return Bonds, Canada Savings Bonds, and provincial government securities.

The annual government "deficit" is the difference between government receipts and spending.


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