Obama vs History: Taxing the Rich

If, as Sam Johnson and Bob Dylan maintain, “patriotism is the last refuge to which a scoundrel clings,” then taxing the rich is the first option of a faltering politician.  It doesn’t take a lot of planning; it’s easy to sound byte, and it makes good copy.  Journalist love tax stories because, since nobody likes taxes, they don’t need to waste a lot of time explaining economics to the iGeneration.  It’s either “tax breaks for wealthy friends [cronies in Canada]” or “making the rich pay their fair share.”  All journalists have to do is point to who’s getting screwed and go back to their Blackberries.  They don’t even have to look up.

When a faltering politician pulls the tax-the-rich rabbit out of his hat, he knows his days are numbered and he needs a ballot box bounce at the next election.  So when President Obama cranked up the teleprompter today, he wasn`t offering a bold strategy for economic recovery; he was starting his 2012 election campaign.

Actually, taxing the rich has a long and noble history.  It goes back to the days when Robin Hood and Maid Marian were playing Bonnie and Clyde with King John`s tax money.  In actual fact, though, Robin and his boys were a minor annoyance to King John; it was the rich northern barons who were the real problem.  John had been “making the [Saxon] rich pay their fair share” for years to cover the costs of his stupid wars.  Eventually, they got fed up with it.  In 1215, they raised an army, marched on London and finally cornered the King at a place called Runnymede.  Faced with involuntary abdication, King John signed the Magna Carta, a document that strictly limited the power of the monarchy.  The Divine Right of Kings was dead, western democracy was born and everybody (except John) went home happy,.  The Robin Hood story came centuries later and never really clarified just which rich Robin had been robbing.  Apparently, historically, taxing the rich has its disadvantages.

In the late 18th century, another British King, George III, was busy “making the [American] rich pay their fair share” to cover the cost of his stupid wars — and along the way maybe pay for their own defence.  This did not sit well with the local moneyed class of The Thirteen Colonies.  They got together in Philadelphia and decided to limit the power of the British king and the British Parliament — by getting rid of them.  On July 4th, 1776, they signed the Declaration of Independence, everybody went home to get their muskets, and the United States of America was born.  Meanwhile, George was left wondering if it was better to have taxed and lost than never to have taxed at all.

The modern version of “making the rich pay their fair share” first showed up in Britain, in 1909, when two wily Liberal politicians looked over to the left and saw the new Labour Party capturing the hearts and minds of British voters.  David Lloyd George and Winston Churchill decided it was time to redistribute the wealth of the Empire — and perhaps take a few votes away from the burgeoning socialist movement.  They concocted a People’s Budget which proposed an escalating Income tax, an Inheritance tax and a Land tax.  After a couple of years of political bickering and compromise, the budget passed.  Lloyd George described it thusly:

“This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.”

Unfortunately, their scheme didn’t work.  Despite Lloyd George’s optimistic oratory, taxing the rich didn’t lift the poor out of poverty within that generation or even the next one.  It would take two World Wars and a worldwide Depression to eradicate the worst poverty from the slums of Great Britain, and even then not completely.  The only real result of the Liberal Party’s People’s Budget was within a generation the Liberal Party itself was wiped off the political map and is now “…as remote to the people of [Britain] as the wolves which once infested its
forests.”

Today, President Obama is playing a losing game with history by introducing the Buffett Tax on millionaires.  He might get away with it for a while because most ordinary people truly believe that the rich aren’t really “paying their fair share.”  It’s a common myth that no amount of reasonable arguments have ever been able to dislodge.  Let me bore you with some numbers, though; these are figures from the American Treasury Department.  In 2005, the top 50% of American taxpayers paid approximately 94% of all taxes collected, while the bottom 50% paid the rest – a mere 6%.  Obama knows that politicking with these numbers is not very smart.  However, “making the rich pay their fair share” is a far more palatable catchphrase.  It’s probably the first sound byte of the 2012 presidential campaign.

Luckily, the minute Obama opened his mouth, this morning history was on our side.  Despite its tempting appearance, taxing the rich has never been the best political strategy for staying around the halls of power — especially not in the long term.

It’s starting to look like the White House might get a new tenant next year.

It’s Sneaking Up On Us: Tax Time

It’s April, and I don’t care how many elections are going on Canadians are tons more interested in The Playoffs (In Canada, you don’t really have to say “hockey”) and taxes. Both come around every year, and both leave us vaguely disappointed.  Personally, I don’t mind paying taxes.  I think we get a lot of cool stuff for our tax dollars; actually, way more than we deserve given the level of participation we-the-people have in our country.  Don’t get me wrong: I still think the government — any government — squanders most of our money.  We could have a virtual utopia around here with the coin we shell out every year — if those circus clowns in Ottawa would quit paying for crap nobody needs.  But that’s the people, not the system.  I kinda think, in general, our tax system is relatively fair.  (How’s that for a qualified statement?)  I’m not just sucking up to Revenue Canada, either.  I’m still pissed that when you phone the 1-800 number, they never seem to understand your question, and, regardless, you never get the same answer twice, anyway.  There’s really only one major flaw in our tax system, and every April it drives me nuts.

My problem is, for the life of me, I can’t understand why the Federales make it so bloody complicated to take my money.  You can decipher Bohr’s Theory of Atomic Structure faster than you can figure out your Income Tax.  And it doesn’t have to be that way because — wait for it – the government’s already got your money.  In Canada, the majority of people who work, work for somebody else, and the tax on their income (thus, “income tax”) is taken off their paycheque before they ever see it.  Am I the only person in this country who thinks it’s beyond stupid to sit down every April and figure out how much money you owe the government when they’ve already got it?  They’ve had the cash for months; actually, they’ve probably already spent most of it.  But there we are — every April 29th — scrambling around with T4s, T4As, RRSPs, and on and on and on, trying to figure out which percentage of what amount from Box A goes on which line on Schedule Q.

This is insane.  Why are we even involved?  We don’t do that with the GST.  We buy something, they charge us 5% more than it’s worth, and everybody walks away happy.  We never think of it again.  Chances are good we never even thought about it in the first place.  Doing our own taxes every year is like getting robbed and the robber suddenly stops in the middle and asks for some assistance to put bullets in the gun.  Asinine doesn’t even begin to cover it.

I realize the entire spectrum of our brand of taxation without representation is a lot more complicated than this.  Modern taxation methods and applications are an integral part of any national economy.  For example, adjustments within the tax system can be used to stimulate growth or harness inflation and even minor variations can produce disproportionate effects.  There are also other factors that ordinary people seldom see — like depreciation, energy credits, exploration expenses, security option deductions, etc. etc.: all have a bearing on taxation levels.  Yeah, yeah, yeah!  My point is most ordinary people never see these things.  Okay, if your name’s Lululemon and you need that kind of stuff – fine.  You’ve got a room full of lawyers and accountants who can handle it.  But if you work for Lululemon and get paid every two weeks, why does it even come up on the panel?

Honestly, 90% of the Federal Tax Package is useless to most people.  Besides, everybody already knows how much money you made and how much income tax you paid.  It’s on your T4!  It would be a lot simpler if the government just factored in all their phony-baloney expenses and deductions and came up with a real percentage.  They could deduct it off your paycheque — just like they do now.  Then, instead of dickin’ around with Schedules, Guides and Bulletins every April you’d be home and dry and watching the hockey game — your civic duty done – and everybody’s happy.

Here’s how Canada’s tax system should work.  There’s an average Canadian: we’ll call her Janey Canuck.  Janey has two dependents: Jane Jr. and Jack.  Janey works for Infinite Scoundrels Law Offices (It doesn’t matter where: anything from corporate lawyer to sweeping the floor.)  Janey owns a condo in a medium-sized city.  She takes the bus to work, and her kids go to public school.  That’s all you and I and the federal government ever need to know about any average Canadian like Janey.  Every April, Janey gets a letter in the mail:

Hi, Janey!

How are you?  Infinite Scoundrels Law Offices just sent us your T4.
You earned _________ dollars last year.
You paid __________ dollars in income tax, at a permanent rate of ______ percent.
Did you earn any other money we don’t know about yet?
If so, enter the amount here ___________.  If not, don’t worry about it, and skip down to the end.

Multiply that number by ________percent.
Enter that amount here___________ and send us a cheque.
Thanks, Janey.  See you next year.
Your friends,
The Federales
P.S. If anything changes, let us know.

By the way, if Michael Ignatieff or Jack Layton wants to take the Express Bus to 24 Sussex Drive, believe me, all he has to do is make something like this the cornerstone of his party platform, and the election will be as good as won!