From: abc@a123.ca   
      
   Let’s hear it for the 1%   
      
   William Watson  Jan 12, 2012   
      
   Occupy and ye shall receive. It probably doesn’t work exactly like that   
   but for whatever reason the federal Department of Finance has just   
   published a new study on the progressivity of the federal income tax.   
      
   There was a time, in the 1970s, when federal budgets routinely contained   
   analyses of how proposed measures would affect the distribution of   
   income. But for the last three decades growth has been centre stage and   
   redistribution off in the wings, if not out in the back alley. Now it’s   
   working its way back to the front (albeit modestly: The Finance study is   
   an appendix to the 2011 edition of the Department’s annual compilation of   
   tax expenditures). Though the tents have gone away the obsession lingers   
   on.   
      
      
   You wouldn’t expect a study of income distribution to smack of melodrama   
   but in fact some of the statistical tables read almost like drugstore   
   novels. But let me do a Coyne trick and return to that in a moment.   
      
   Related   
   William Watson: Your taxes at work   
   The study’s basic conclusion is that the income tax, which accounts for   
   55% of federal tax revenues, is indeed progressive. In total, 24 million   
   Canadians filed income taxes in 2008, the most recent year for which data   
   are available. Of those 24 million, only 14 million actually paid any net   
   tax. Fully seven million received net cash from the tax system, while   
   another three million neither received nor paid.   
      
   Understand that we’re not talking here about whether or not people “got   
   money back at the end of the year” but whether after all withholding had   
   been settled their incomes went up or down as a result of their encounter   
   with the income tax system.   
      
   The 1% of tax-filers, the 240,000 or so who made $216,412 or more in   
   2008, saw their incomes fall almost 20% as a result of federal income   
   taxes. At the minimum income for that bracket, 20% is $43,000, which   
   ain’t beanbag. And most people in that bracket paid more. For their part   
   the 2.1 million who made between $80,556 and $216,411 and therefore   
   constituted the rest of the top 10% lost almost 15% of their income to   
   the tax person.   
      
   At the other end of the distribution, the 4.8 million making less than   
   $10,354 a year and constituting the bottom 20% of tax-filers saw their   
   incomes rise by 22.3%.   
      
   The increase would have been substantially higher, though Finance Canada   
   doesn’t say just how much higher, for the bottom 10% or 5% or 1%. In this   
   bottom fifth the average tax rate was, as it were, -22.3%. (If you do   
   have to be taxed, opt for negative taxes!) In the great majority of cases   
   in this bracket people’s incomes rose because they were eligible for the   
   refundable GST Credit, the Canada Child Tax Benefit (really a tax credit)   
   or the Working Income Tax Benefit (likewise). Under these programs,   
   taxpayers whose income is low enough get cheques from the federal   
   government.   
      
   At first glance, it might seem outrageously unfair that “in a country as   
   rich as Canada” fully 20% of tax-filers make less than $10,354 (while   
   “Frank Stronach alone makes $62 million a year!”, as the chorus will go).   
   But these are tax-filers. They’re not necessarily full-time workers.   
   Rather, they’re anyone and everyone who made even a small amount of   
   money, possibly from a part-time or summer job, and who saw fit to file,   
   in many instances to take advantage of refundable tax credits. Some may   
   even have made no money but filed for the credits. Many who did make   
   money were likely the second, third or even higher-rank earner in their   
   family. The data, like the authors of this study, treat all taxpayers as   
   individuals.   
      
   The study also breaks things down by age and gender. This is where the   
   drugstore novel comes in. Of the more than 1.4 million taxpayers who in   
   2008 gave up more than 15% of their income via the income tax system, 1.1   
   million were men. On the receiving end, of the more than two million   
   Canadians who saw their income rise by more than 15% thanks to the income   
   tax system 1.5 million were women. Moreover, it tends to be older rich   
   men who are supporting younger women, many of them single women with   
   children. Some of this flow of funds undoubtedly is between former   
   spouses, though there’s no way of knowing exactly how much. The federal   
   government doesn’t actually take sides in these domestic disputes but   
   mechanically and anonymously moves money from top to bottom.   
      
   If you look at shares of income, the bottom eight deciles — i.e., the   
   bottom 80% of taxpayers — saw their share of income rise as a result of   
   the tax system. The top two deciles saw theirs decline. That doesn’t mean   
   all eight bottom deciles actually gained because of the tax system — only   
   the bottom four did — just that their incomes were cut proportionally   
   less than those at the top so their share of the after-tax pie was   
   larger.   
      
   Unless the recovery picks up speed and the unemployment rate starts   
   dropping fast — which is not the majority forecast but isn’t actually out   
   of the question for the next year or two — it looks like we’ll be   
   spending more of our time talking about redistribution. When we do so,   
   let’s not lose sight of the fact that we do a good deal of it already.   
   And that’s just through the tax system, without considering the effects   
   of free education, health care and more.   
      
   National Post   
      
   WILLIAM WATSON   
   fpletters@nationalpost.com   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)