Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

  • Last Updated:
  • Nov 19th, 2018 1:43 pm
Newbie
May 7, 2017
86 posts
35 upvotes
taxrage wrote:
Nov 4th, 2017 5:17 pm
A joint return could be made optional. In the US, couples can file as individuals or as couples. Canada could do the same.

Currently, families with one spouse earning most/all of the income pay a lot more tax - as much as $30K more. This problem is why this entire thread exists. Business owners have used family members who have no involvement in the business to reduce their personal tax liability. They'll continue to try and exploit this "loophole" forever. Eventually, government will see the light.
I don't think you understand my point or how taxation works as a closed system. If all these families with one spouse earning more get a new tax break (up to $30k as you say) there will be $XBillion less in revenues. A responsible government will need to raise somebody else's taxes to make up that money. Unlike cutting top marginal rates or corporate taxes this change would also not have any economic benefit. In fact it is likely to discourage some spouses from working so would further decrease revenues and the labour force.
I think if we are going to cut income taxes we should be incentivizing work not dis-incentivizing it.
Deal Expert
Feb 29, 2008
20270 posts
2225 upvotes
Montreal
onthefence wrote:
Nov 5th, 2017 2:45 am
I don't think you understand my point or how taxation works as a closed system. If all these families with one spouse earning more get a new tax break (up to $30k as you say) there will be $XBillion less in revenues. A responsible government will need to raise somebody else's taxes to make up that money. Unlike cutting top marginal rates or corporate taxes this change would also not have any economic benefit. In fact it is likely to discourage some spouses from working so would further decrease revenues and the labour force.
I think if we are going to cut income taxes we should be incentivizing work not dis-incentivizing it.
If one spouse stops working, there are a whole slew of deductions that disappear like the child care deduction.
Member
User avatar
Jan 15, 2017
472 posts
206 upvotes
onthefence wrote:
Nov 5th, 2017 2:45 am
I don't think you understand my point or how taxation works as a closed system. If all these families with one spouse earning more get a new tax break (up to $30k as you say) there will be $XBillion less in revenues. A responsible government will need to raise somebody else's taxes to make up that money. Unlike cutting top marginal rates or corporate taxes this change would also not have any economic benefit. In fact it is likely to discourage some spouses from working so would further decrease revenues and the labour force.
I think if we are going to cut income taxes we should be incentivizing work not dis-incentivizing it.
That's why the FTC represented a reasonable compromise. The $85K bus driver with a stay-at-home spouse had his extra $7K in tax (vs a couple each earning $42.5K) reduced to just an extra $5K.

Trudeau wants the bus driver - and everyone else - to ante up...unless your a pensioner, or a business owner who can find a way to shift income to a trusted person...or even a single parent, who receives an equivalent-to-spouse credit as their equalizer.

Canada already has more seniors than persons under-15. Just wait a few more years until seniors represent 25% of the entire population. There will be a hue and cry to reform the current 50/50 pension split, possibly along the lines of a joint return.
Newbie
Mar 16, 2014
64 posts
20 upvotes
Toronto
onthefence wrote:
Nov 5th, 2017 2:45 am
I don't think you understand my point or how taxation works as a closed system. If all these families with one spouse earning more get a new tax break (up to $30k as you say) there will be $XBillion less in revenues. A responsible government will need to raise somebody else's taxes to make up that money. Unlike cutting top marginal rates or corporate taxes this change would also not have any economic benefit. In fact it is likely to discourage some spouses from working so would further decrease revenues and the labour force.
I think if we are going to cut income taxes we should be incentivizing work not dis-incentivizing it.
Not sure why it would have to be an absolute tax cut with less revenue? As in, they take your spouses income, and if together you are >200K for example, then you pay a portion in a higher bracket.

Not exactly my priority for tax changes in this country, I agree I'd rather see changes that encourage productivity such as limiting top tax bracket, but hypothetically there is room here for couples that are probably undertaxed.
Sr. Member
Jul 20, 2017
514 posts
112 upvotes
Jermyzy wrote:
Nov 5th, 2017 3:22 pm
Yeah, let's go after small business, but let the big fish swim free.


https://www.theguardian.com/news/2017/n ... ise-papers


"Trudeau was contacted at his official prime ministerial residence, 24 Sussex Drive, but chose not to respond"
Just watched the same report on CBC. Trudeau and the liberals will not touch any taxes in the near future...No more mention in the liberal propaganda of loopholes, unfairness till the election...it would remind people that they are so tainted...
Deal Addict
Oct 7, 2007
4177 posts
1272 upvotes
Sebastian6300 wrote:
Nov 5th, 2017 10:20 pm
Just watched the same report on CBC. Trudeau and the liberals will not touch any taxes in the near future...No more mention in the liberal propaganda of loopholes, unfairness till the election...it would remind people that they are so tainted...
Can you please elaborate? Are you saying that Trudeau and co. are going to drop the whole plan to overhaul the tax system on small businesses that they have been pushing for the last 12 months or so?
Sr. Member
Jul 20, 2017
514 posts
112 upvotes
choclover wrote:
Nov 6th, 2017 10:14 am
Can you please elaborate? Are you saying that Trudeau and co. are going to drop the whole plan to overhaul the tax system on small businesses that they have been pushing for the last 12 months or so?
I think they will stop trying to make any new changes....they are so vulnerable because of all this revelations, that they will concentrate on the spending projects...transit, social projects, aboriginal etc
the usual one announcement a day, also some climate change stuff

Once they open their mouth about taxes. the opposition will start asking them about these things....and they will keep reminding the public how twisted this government is...
Sr. Member
Apr 14, 2015
538 posts
149 upvotes
Tsuu T'Ina, AB
onthefence wrote:
Nov 5th, 2017 2:45 am
I don't think you understand my point or how taxation works as a closed system. If all these families with one spouse earning more get a new tax break (up to $30k as you say) there will be $XBillion less in revenues. A responsible government will need to raise somebody else's taxes to make up that money. Unlike cutting top marginal rates or corporate taxes this change would also not have any economic benefit. In fact it is likely to discourage some spouses from working so would further decrease revenues and the labour force.
I think if we are going to cut income taxes we should be incentivizing work not dis-incentivizing it.
It sounds like you’re saying that having one half of a couple not work, or even work less than their spouse, is something to be discouraged at all costs. Consider that these people often have much to contribute to their children, families, aging parents, communities, local schools and maybe even the career of their spouse. Maybe we should be making it easier for people to be able to make these unpaid contributions to society, instead of more expensive?
Deal Addict
Feb 26, 2008
1821 posts
1260 upvotes
mr_raider wrote:
Nov 9th, 2017 9:03 pm
An interesting read on how juicy defined benefit plans are:

http://business.financialpost.com/perso ... -limit/amp

The article barely touched on "how juicy" defined benefit plans are. Instead, it describes how few people actually make use of the existing tax advantaged savings tools (rrsp and tfsa) and suggested that the contribution limits for rrsps be increased to reflect that asset returns are generally lower now than they were 30 years ago.

Fwiw, my experience has been that the "juiciness" of defined benefit plans is really about their simplicity for the recipient. The plan participant has his contribution automatically deducted from his pay cheque and therefore cannot neglect to save. Secondly, the plan administrators make the asset allocation decisions which relieves participants from the pain of making intelligent decisions about their risk preferences and making decisions about the comparative costs of investing. Finally, the defined benefit plan completely simplifies the distribution phase as there is a fixed formula to determine pension benefits (while everyone using an rrsp needs to actively make a decision about how to structure their withdrawals).

Given that most people struggle with deferred gratification and refuse to make a modest investment of time to become financially literate, the simplicity for the user is excellent. However, for those of us who are more financially literate and who are reasonably good at saving and investing, the rrsp route might actually be better.
Deal Expert
Feb 29, 2008
20270 posts
2225 upvotes
Montreal
kneevase wrote:
Nov 10th, 2017 4:36 am
The article barely touched on "how juicy" defined benefit plans are. Instead, it describes how few people actually make use of the existing tax advantaged savings tools (rrsp and tfsa) and suggested that the contribution limits for rrsps be increased to reflect that asset returns are generally lower now than they were 30 years ago.

Fwiw, my experience has been that the "juiciness" of defined benefit plans is really about their simplicity for the recipient. The plan participant has his contribution automatically deducted from his pay cheque and therefore cannot neglect to save. Secondly, the plan administrators make the asset allocation decisions which relieves participants from the pain of making intelligent decisions about their risk preferences and making decisions about the comparative costs of investing. Finally, the defined benefit plan completely simplifies the distribution phase as there is a fixed formula to determine pension benefits (while everyone using an rrsp needs to actively make a decision about how to structure their withdrawals).

Given that most people struggle with deferred gratification and refuse to make a modest investment of time to become financially literate, the simplicity for the user is excellent. However, for those of us who are more financially literate and who are reasonably good at saving and investing, the rrsp route might actually be better.
The article essentially argues that the RRSP contribution room needs to be doubled to match the equivalent defined benefit plan, yet still you don't get the risk mitigation available to pension plan beneficiaries.

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