Thursday, 7 February 2019

Tax Credits: A Basic Primer

The CPC are on a strange line of attack. Andrew Scheer tweeted this out on February 5:



There are a lot of problems with this message. 

First, "the man who inherited everything he has" is inaccurate, and completely hypocritical, coming from a man who has been on the public payroll since he was 24 and has been living in tax-funded rent-free housing, with staff, for the past eight years. He, like many in his caucus, has amassed great wealth during his tenure as an MP. Make no mistake, for all of his finger-pointing, Andrew Scheer is not middle class.

In fact, Justin Trudeau inherited $1.2 M from his grandfather, but was not allowed to touch it until he was 40. He and his brother received a stipend of $20,000 annually. Now that's not peanuts, but it is far from the most extravagant inheritance in Canada. While Andrew Scheer went pretty much straight from university into politics, Justin Trudeau worked  a number of very real, regular jobs. He was a teacher of Math and French (not drama, as conservatives like to say: he filled in as drama teacher for a brief time). He was a bouncer at a bar, arguably one of the grittier, meeting the public up close, kinds of jobs. He was a ski instructor. These are normal jobs that regular Canadians do. Yet, he does not pretend to be middle class, unlike some....

But that is not what I'm here to talk about. Let's break down the fuss about taxes. 

Justin Trudeau said that Conservative tax breaks don't help the poor. And he is correct. If you make less than the personal deduction, you get all the tax that was taken off your pay cheques back during tax season. 

If you make more than the personal deduction, there are a number of other, refundable, deductions you can claim and get that money back too. You can claim for dependents, disability, and a number of other things. 

But the key word is "refundable". 

The CPC favours tax "cuts" or "benefits" that are not refundable. Take, for example, the child sports and arts benefit. In order to gain anything from this, you must:

a) have children under 18
b) have enough money to have those children in organized sports or arts programs
c) make enough money that this is going to kick in and actually reduce the tax you pay.

Because, this is not a refundable credit. You have to be making more money, and be taxed at a higher rate, before this lowers the tax you pay. Do you see how that works?

For the sake of simplicity, let's say all the refundable allowances and credits a person can get is $10,000. It is actually much higher than that, but let's use some simple numbers. 

If a person, in this scenario, earns $10,000, they will get back every cent that was deducted from their paycheque for tax. 

Another person earns $20,000. Again, in many cases the real numbers are much higher, this is just to keep it really simple. With refundable allowances and credits, they get all the tax deducted up to the point where they earned $10,000 back and then they pay tax on the remaining $10,000. Say the tax rate is 10% (just for the sake of simplicity). They would pay $1,000 tax on that $10,000 above the allowances and refundable credits.

But then the CPC introduce a tax credit where if you have a kid playing hockey, you get a credit for half of what hockey costs you. Say hockey costs $100. You then have a credit for $50. And so you would only pay $950 instead of $1,000. 

But the person who is already getting all their tax deductions back gets no benefit from this, even if they also have a kid in hockey. Which, incidentally, is unlikely because hockey is actually way more expensive than that. 

Now, you might be thinking, no one makes so little, so what does it matter? Actually, the most recent statistics I could find show that 4.8 Million Canadians (including 1.2 million children) live below the poverty line. For a single adult in Ontario, that line is at earnings of $22,133 annually. For a family of three, the line is at $38,335. That 4.8 million includes many living with annual incomes well below that line. 

The CPC is very fond of breaking the Canadian population down into small segments. They figure out what the triggers and concerns are for each segment, and for the ones they are interested in (i.e. the ones they think might vote for them) they devise messaging and baubles tailored to that group. The child sport and art tax credit was to get the hockey and soccer and drama class moms and dads to love them and vote for them. But only the ones making enough to benefit. You see, it appears that they are not really interested at all in anyone making less. 

I had a friend in university who was the grandson of someone far wealthier than the Trudeaus. He inherited a huge amount of money, enough to make Justin Trudeau's $1.2 million look like chump change. And he wouldn't touch it. He had a job. A regular, ordinary job. He didn't believe in inheritance. He wanted to be "regular people". Really nice guy. I don't know if he changed his opinion later, or if he wound up donating all, or most of it to charities, or set up some sort of charitable foundation... But the fact is, not all rich people are pricks. And not all poor people are good, decent, "salt of the earth" folks. The measure of a person't character is not based on how much, or how little, they have.

Everyone is different. And while there may be an apparent tendency for those who start out wealthy and get wealthier to have a lot of self-interest and be out of touch with the less fortunate, it is by no means a rule. There are many anonymous philanthropists who give large donations without looking for recognition. There are even more who give their name along with the money and, while that is less altruistic, they are still contributing to important causes.

There is a well-established idea in conservatism, which they don't talk about usually, but is obvious from their policies. That is, that the rich are rich because they are good and deserving, while the poor are poor because of some moral failing.

This seems contrary to the most recent CPC attacks, wherein they seem to be saying to Canadians, "look! Justin Trudeau inherited money! This makes him bad, this makes him incapable of understanding or caring about average people.He is wealthy, which makes him heartless and out of touch with what you are going through."

But, the CPC loves stereotypes. Stereotypes allow them to paint a picture for people using simple terms, and playing on existing heuristic cues. Or they invent the cues and repeat them over and over until they become part of the common zeitgeist. 

Here they are working on a trope they have been building since Trudeau became leader of the Liberal Party, or possibly longer. They want Canadians to see him as insubstantial, just a pretty face and nice hair. They want to play up fun socks and a winning smile as terrible attributes for a prime minister. They want to entrench the image of a stiff, awkward, boring man as being the appropriate type to lead Canada. It really bugs them that he is highly educated, personable, cares deeply, has energy and a sense of fun, is attractive, and genuinely likes people. 

And so, this latest round of attacks is highlighting that he inherited money, as if that automatically turns someone into Dr. Evil. At least we know where he got his money from. The same cannot be said of many of the CPC front-benchers who have amassed wealth which might be disproportionate to their MP salaries. 

But, for all they want to demonize Trudeau for who he is, the family he was born into, and the wealth that he inherited, their own policies do less to address the income inequalities in this countries. They do less to help those living below the poverty line, or to help the disadvantaged, vulnerable, and disenfranchised.

They prefer boutique tax cuts that benefit the affluent. They fiercely oppose programs that might actually make a difference, like a minimum income program. And many issues affecting those living in poverty are just not on their radar.









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