Tax blogging 1: Dumbing down the anti-tax demagoguery for the working stiff.
For all its ideological anti-tax spin -- complete with a nice plump for a flat tax and the bizarre tangential argument that government regulations should be considered a form of tax because they're distortionary -- the Fraser Institute's TaxFacts (this year's findings summarized, badly, in this Globe and Mail piece) do contain lots of valuable and accessible information, particularly since Canadian statistics of this sort tend to be bloody hard to track down relative to American ones.
None the less, this, on page 49 of this year's TaxFacts, is just amusing:
The calculations in this chapter underlie our calculation of Tax Freedom Day, the day of the year when the average family has earned enough income to pay the total tax bill imposed on it by all levels of government. We are occasionally asked why we calculate Tax Freedom Day using cash income rather than total income before tax. We use cash income because the main purpose of Tax Freedom Day is to convey the total size of the tax bill imposed on Canadian families in a format that is easily understood... Cash income is a useful tool in describing the tax burdan because it does not force people to go through arithmetic gymnastics to get an idea of how large the total tax burdan is.
And here I thought the main purpose of Tax Freedom Day was to hammer home the essential, universal point that you ought to be OUTRAGED at how much those politicians ARE STEALING FROM YOU.
Actually, though, my favourite bit of drive-by demagoguery comes from TaxFact's handy comparison of how the "average family"'s taxes keep going UP while the amount of money the "average family" spends on neccesities is going DOWN. Here's how they put it on page 46:
By 2005, the situation had gotten worse. Whereas the proportion of income consumed by taxes had continued to increase, the fraction of income spent on necessities (shelter, food and clothing) had dropped dramatically. The average family spent 23.2% of its income on the neccesities of life while 29.8% of its income went to taxes.
This is funny for two reasons. First, from the numbers Fraser gives elsewhere in the report, taxes paid have not noticably increased as a percentage of the "average family"'s total pre-tax income since around 1974 (see the figures on page 40). The increases in per-household dollar amounts paid since that time are basically due to a combination of inflation and the fact that the "average family" has gotten a whole lot richer in the past forty years. Second, and in spite of this, the writers seem to be heavily implying that taxes have become so burdensome that they're crowding out expenditure on the "necessities of life" -- and that the situation just keeps getting "worse". In fact, as the writers of the report know perfectly well, just the exact opposite is true: falling income shares to food and housing are a sign of increasing descretionary wealth, not of the iron-toed boot of the taxman pressing ever closer against the Canadian throat.
Still, the information is well worth the spin.
None the less, this, on page 49 of this year's TaxFacts, is just amusing:
The calculations in this chapter underlie our calculation of Tax Freedom Day, the day of the year when the average family has earned enough income to pay the total tax bill imposed on it by all levels of government. We are occasionally asked why we calculate Tax Freedom Day using cash income rather than total income before tax. We use cash income because the main purpose of Tax Freedom Day is to convey the total size of the tax bill imposed on Canadian families in a format that is easily understood... Cash income is a useful tool in describing the tax burdan because it does not force people to go through arithmetic gymnastics to get an idea of how large the total tax burdan is.
And here I thought the main purpose of Tax Freedom Day was to hammer home the essential, universal point that you ought to be OUTRAGED at how much those politicians ARE STEALING FROM YOU.
Actually, though, my favourite bit of drive-by demagoguery comes from TaxFact's handy comparison of how the "average family"'s taxes keep going UP while the amount of money the "average family" spends on neccesities is going DOWN. Here's how they put it on page 46:
By 2005, the situation had gotten worse. Whereas the proportion of income consumed by taxes had continued to increase, the fraction of income spent on necessities (shelter, food and clothing) had dropped dramatically. The average family spent 23.2% of its income on the neccesities of life while 29.8% of its income went to taxes.
This is funny for two reasons. First, from the numbers Fraser gives elsewhere in the report, taxes paid have not noticably increased as a percentage of the "average family"'s total pre-tax income since around 1974 (see the figures on page 40). The increases in per-household dollar amounts paid since that time are basically due to a combination of inflation and the fact that the "average family" has gotten a whole lot richer in the past forty years. Second, and in spite of this, the writers seem to be heavily implying that taxes have become so burdensome that they're crowding out expenditure on the "necessities of life" -- and that the situation just keeps getting "worse". In fact, as the writers of the report know perfectly well, just the exact opposite is true: falling income shares to food and housing are a sign of increasing descretionary wealth, not of the iron-toed boot of the taxman pressing ever closer against the Canadian throat.
Still, the information is well worth the spin.
4 Comments:
But wait a second: regulations, inasmuch they have a monetary impact (whether distortionary or not), ARE (stealth) taxes.
Indeed from the government's point of view these regulations are the BEST taxes, because they amount to unfunded mandates.
In other words legislators can give to Peter while not-so-obviously robbing Paul, and without looking robbers themselves.
Unfortunately regulations that are in effect unfunded mandates tend to have the opposite effect from what they are ostensibly for.
Consider for example the regulation that women are entitled ''for free'' to maternity leave: maternity leave is not free to the employer, and the effect of the regulation is that women employees are in effect taxed more than male ones, and companies become more reluctant to hire women and to give them raises and promotions.
Another way of looking at it is that such regulations are fines; maternity leave is a fine imposed on businesses that hire women.
The correct approach would be to socialize the cost of maternity leave, by raising the ostensible tax rate to pay for maternity leave out of welfare.
But of course this is not as attractive to legislators as imposing a stealth tax or fine on businesses that hire women.
This said, I am quite disgusted by the spin the site puts on their tax facts.
But then things like campaigns for flat taxes are based on attitudes like Rand's objectivism, which seems to state that poor people are undeserving thieves but stupid, and any sort of prevarication is then justified to fool them into stealing less from the virtuous and deserving rich.
Another way of looking at it is that such regulations are fines; maternity leave is a fine imposed on businesses that hire women.
I accept that; but regulations are not taxes in the same way discrimination is not a tax. Taxes involve the government (or a proxy, like a wheat board) getting revenue to spend on services. Regulations are distortionary, and they may act like a "fine", and they may in some cases be counterproductive (I can think of lots of examples). But they don't generate revenue for the government -- they're not a tax.
Not all distortions are taxes; and not all taxes are distortionary. But all taxes raise revenue for the issuing body.
«Taxes involve the government (or a proxy, like a wheat board) getting revenue to spend on services.»
That may be a technically correct definition, but the sort of people to which conservative tax spin is directed perceive a tax as being any sort of systematic taking without compensation.
Whether the taking goes to the direct benefit of the government's spending budget or to someone else's they don't care much...
Consider for example billeting soldiers in private houses, one of the grievances that led to the USA war of independence: the colonials thought that was a stealth tax, even if it did not involve giving cash to the colonial government for it to spend.
Unfunded mandates have precisely the benefit for politicians that they are not taxes, at least technically, so they do not appear in government accounts.
But they are still perceived as such, or at least as stealth taxes or fines, by those that have to pay their costs.
«But all taxes raise revenue for the issuing body.»
Sure, technically so. Now suppose that the government mandated that each person or business in a province had the duty to maintain a stretch of road in that province in proportion to their income; would that be a tax? Well no. But tell that to the people so impacted.
It is on that kind of perception that conservative arguments about regulations as taxes are built. To me they are hard to dismiss, even if they technically incorrect.
Ok -- it might be optimal for anti-tax conservatives to define anyz distortion in the economy as a tax; it's not much different that conservatives using jargon like "death tax" for "estate" or "inheritance" tax. But the argument is false. If a tax is anything that distorts the economy, then traffic lights are a tax because they impose a fee, in terms of time, on drivers. But they're not a tax, they're a regulation and that's what regulations do -- they distort behaviour and they penalize privately optimal, socially inoptimal behaviour.
It's more than just a technicality. It's a basic definition, and Fraser is screwing with it to get the anti-tax hackles up.
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