Thursday, 1 November 2007

That tax cut

the amount that all Canadians can earn without paying federal income tax to $9,600 from the current threshold of $8,929, retroactive to Jan. 1, 2007

I hope someone will respond to this post, since I cannot for the life of me make sense of this. Why does the federal government think it should take taxes from people below the poverty level?

If you were lucky enough to have a full time job paying minimum wage that would be 1950 hours (52 times 37.5) at $8.00 or $15,600 a year before things like EI and CPP and so on. But apparently the Canadian government thinks you should give up 15% of the amount over the tax threshold - or around $1,000 a year. I have been trying to determine what we think is the poverty level - and all I can find are arguments about LICO and a family of four. It seems to me that an individual at this level would be living in poverty - even if they did not live in a city where the vacancy rate is so small it can't be measured meaningfully and rent would take up most of this take home pay packet.

I am not going to get into an argument about what the LICO should be or if there is a better indicator. I just want to know why we think that poor people should pay taxes and rich people should not.

Since GST is levied on nearly everything, it is a regressive tax. That is to say, it impacts more on those with low incomes, who can least afford it. On the other hand a drop in GST clearly benefits those who are about to buy "big ticket" items, like plasma tvs, than those who spend most of their limited incomes on essentials. And as long as they belong to families, they won't be paying GST on food. (If you live alone and have no liking for stale baked goods, you will pay GST on your single muffin, but a family of four - who will buy six or more at a time, won't)

So Mr Flaherty's tax cuts will benefit corporations - who pay very little in tax anyway - and the wealthy. But single people on low incomes will not get much benefit at all.

Not only that but EI and CPP are taxes as well - there is no way they can be avoided by those on low income - and they all reduce the amount available for food, shelter and other basic necessities. Is it any wonder that the UN is in town looking at our shameful performance?

UPDATED I was just idly Stumbling when this link popped up and confirmed my worst fears

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