Path: utzoo!attcan!utgpu!golchowy
From: golchowy@gpu.utcs.utoronto.ca (Gerald Olchowy)
Newsgroups: can.general
Subject: Re: Flat-Rate Tax
Message-ID: <1989Sep26.102844.6519@gpu.utcs.utoronto.ca>
Date: 26 Sep 89 14:28:44 GMT
References: <1989Aug26.214344.24140@utzoo.uucp> <1989Sep25.123029.20626@lsuc.on.ca>
Reply-To: golchowy@gpu.utcs.UUCP (Gerald Olchowy)
Organization: University of Toronto Computing Services
Lines: 63
Checksum: 16406

In article <1989Sep25.123029.20626@lsuc.on.ca> dave@lsuc.UUCP (David Sherman) writes:
>In article <1989Aug26.214344.24140@utzoo.uucp> henry@utzoo.uucp (Henry Spencer) writes:
>>jmsellens@watdragon.waterloo.edu (John M. Sellens) writes:
>>>>Ideally, business
>>>>income should be untaxed.  You can tax business income by
>>>>taxing the dividend and capital gains incomes of individuals.
>>>
>>>So that someone earning a lot of money in a business can just leave
>>>it there earning more money and delay paying any taxes for as long
>>>as he likes.  Make the poor pay! :-)
>>
>>Yup.  Clearly, creating jobs and investing in our economy is evil and
>>should be discouraged by taxing it.  Or rather, by taxing people who
>>are *successful* at it and therefore make money.
>>
>>And people wonder why our economy is steadily sliding downward...
>>
>>"Your deep seated resentment of people who make profits is showing."
>
>I think you're mistaken, Henry.  I'm all in favour of making profits.
>What you're overlooking is that if there's no taxation at the corporate
>level, there is a very strong incentive to leave funds in the
>corporation, whether they are invested in bank deposits, the
>stock market or anything else.  This would create a bias to
>investment over consumption.  It would also allow those who
>earn investment income through a corporation to effectively
>defer taxation indefinitely.  It would also be inequitable unless
>you allow those earning income directly (not through a corporation)
>to defer taxation on all invested income as well.  Kind of like
>no limits to RRSP contributions.  That kind of system has been
>proposed; when you examine it carefully you realize it's much
>like the GST -- a pure tax on consumption (i.e., everything you
>don't save).
>
>David Sherman
>{ uunet!attcan  att  utzoo }!lsuc!dave          dave@lsuc.on.ca


A couple of points:
1)As for leaving the funds in the corporation, the shareholders
will have something to say about that.  Companies that don't pay
dividends aren't likely to have a lot of people wanting to buy
their shares.  Tax the divedends.  If you tax the corporation and
then the dividend income of shareholders, you are taxing the same
profits twice.  Also, companies with large 'cash' balances tend
to be good fodder for raiders.  Raiders will tend to drive the
share price up....the government then can tax these hidden
profits by taxing capital gains on the shares.
2)I do agree that this is a bias for investment over consumption...
but (IMHO) this is what the North American economy desparately needs.
I would argue that the future properity of North Americans is being
jeopardized by over-consumption and under-investment---i.e. see
our huge budget deficits, our huge trade deficits, our low savings
rate, the high interest rates required to attract foreign capital,
our crumbling infrastructure, etc.
3)There are voices in Canada who constantly complain amount the
amount of foreign ownership and control there is of our economy.
Not penalizing investment over consumption would perhaps be one
way of reducing this.
 
Gerald Olchowy
Department of Chemistry
University of Toronto