Tuesday, February 16, 2016

Tax the Rich

When people ask me if I am making money on the internet with my stock information posting, I tell them that I am trying not to make money. The problem is that for me to make money on the internet with postings, I would have to do some work, I would take all the risks and the government will take half of anything I earn. So I am just not interested. I rather do more socializing.

This is the problem with "tax the rich". If you want wealth creators to create wealth they need a reason. Yes there are probably people cheating on their taxes and other that are not "paying their fair share". Those sorts of people will always be with us no matter what the tax rates are.

Upping taxes does not always work. If taxes are high, a government can collect physically less money by increasing tax rates. On the other hand if taxes are high and they reduce taxes, a government can sometimes collect physically more money.

The Liberals have admitted that they will not collect as much as they said with the new "Tax on the Rich". This is hardly surprising.

Another thing about taxes is how little people actually know about them. I complained to a friend that I did not want to bother making money on the internet. She then told me that she would not take money from her RRSP before she absolutely had to because she did not want to pay 50% tax either. The thing is her marginal tax rate is a lot lower than mine so she would not be dinged as much. Do you know what I am talking about? Do you know what your marginal tax rate is?

A classic case of taking money from the rich to help everyone else was the Soviet Union. However, it did not help at all because the people who ran the Soviet Union did not run the economy well. If we elected people who did handle the economy well we would not have the problems we have.

The current problem is practically every country has too much debt. Increasing the taxes is not going help us get out of this current mess. If anyone thinks that more tax on the "rich" is going to help is dreaming in Techno color. Our governments have promised more in pension and health care than they can possibly pay for. I have no idea how this will be resolved.

I am not defending anyone or inequity or really anything. I am just saying what will not work. If we want health care and pensions, we will have to figure out how to pay for it ourselves. There is no magical way of getting money. We cannot forever increase our debt. It just is not going to work.

OAS is a non-funded liability. OHIP is a non-funded liability. CPP is partially funded. Extra premiums collected since 2000 has been going into a fund. CPP started as a pay as you go pension. This means that money being paid in pension premiums go to pension payments to retirees.

When a pay as you go pension has less money coming in than going out, you have a problem. To make things even worse, extra money paid in not needed to pension payments to retirees just went into government general funds. That is it was spent. Most government pension plans are pay as you go.

I do not mind paying taxes. We live a comfortable life in a safe environment. I just do not feel the urge to do more, to make more money just to have half of go to tax.

On my other blog I wrote Friday about Manitoba Telecom Services Inc. (TSX-MBT, OTC-MOBAF) learn more. Tomorrow, I will write about Absolute Software Corporation (TSX-ABT, OTC-ALSWF)... learn more on Wednesday, February 17, 2016.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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