Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

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  • Nov 20th, 2017 9:23 pm
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Jan 15, 2017
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kneevase wrote:
Nov 10th, 2017 12:31 pm
Yes, and we should not forget that DB plans tend to have cpp integrated, meaning that when you turn 65, your pension decreases by the value of your cpp cheque.
Hmmm, that may happen, but they are actually completely independent. CPP has no information on your DB pension, and your DB pension has no information on your CPP.

What happens is that some (not all) DB pensions have a bridge component, which is approximately the same as the CPP benefit. At age 65, the bridge benefit ends. That's it. You might have been drawing CPP at 60, 65, or not even started. The DB pension doesn't know - or care. If there is a bridge component, it simply ends at 65.
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taxrage wrote:
Nov 10th, 2017 1:30 pm
Hmmm, that may happen, but they are actually completely independent. CPP has no information on your DB pension, and your DB pension has no information on your CPP.

What happens is that some (not all) DB pensions have a bridge component, which is approximately the same as the CPP benefit. At age 65, the bridge benefit ends. That's it. You might have been drawing CPP at 60, 65, or not even started. The DB pension doesn't know - or care. If there is a bridge component, it simply ends at 65.

Yeah, I get that. The upshot is that your effective annuity is lower than what some people think. When you turn 65 sometimes your bridge ends, which means that the "juicy" db plan is not nearly as lucrative as some people might believe. People need to ensure that they're comparing apples to apples when they claim that a db blows away a fully funded rrsp. Without a doubt, the DB is a great way to manage longevity risk, but people forget that the flip side of that is that they are atrocious if you have a lack of longevity (and in cases of a lack of longevity, the rrsp gives your kids a nice pile of money eye).
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kneevase wrote:
Nov 10th, 2017 5:37 pm
Yeah, I get that. The upshot is that your effective annuity is lower than what some people think. When you turn 65 sometimes your bridge ends, which means that the "juicy" db plan is not nearly as lucrative as some people might believe. People need to ensure that they're comparing apples to apples when they claim that a db blows away a fully funded rrsp. Without a doubt, the DB is a great way to manage longevity risk, but people forget that the flip side of that is that they are atrocious if you have a lack of longevity (and in cases of a lack of longevity, the rrsp gives your kids a nice pile of money eye).
Yup, all true. Of course the bridge only applies (typically) to your YMPE, so if your best 5 is something like $200K, most of that benefit is paid for life. Of course, if you die 5 years in, that's usually it for the benefit, unless you have a spouse. A $2M RRSP sticks around, but is harder to accrue.
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taxrage wrote:
Nov 10th, 2017 7:01 pm
Yup, all true. Of course the bridge only applies (typically) to your YMPE, so if your best 5 is something like $200K, most of that benefit is paid for life. Of course, if you die 5 years in, that's usually it for the benefit, unless you have a spouse. A $2M RRSP sticks around, but is harder to accrue.

Best 5 average of $200k? That's 4 times the ympe. There are probably a few people out there who earn that much money, but they would be a very small minority. The much larger group are the folks who earn $80k or $100k. Those folks might expect a pension of perhaps $48k or $60k, and cpp represents a healthy portion.
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tdiddy23 wrote:
Nov 5th, 2017 1:03 pm
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.
Well a choice by definition leads to less revenue otherwise it isn't much of a choice is it. I completely agree with your second sentence and not only because it would benefit me personally. We also need to respond to US tax changes. If they cut corporate taxes we might need to at least match or we will lose almost as much revenue and lots of jobs.
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Operatime wrote:
Nov 6th, 2017 4:43 pm
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?
Should doesn't really enter into it for me. It is about revenues. If you give a tax break to one earner familes. Not only do you lose whatever you give but also you will have people drop out of the workforce. This is an immediate loss of revenues and as their skills degrade a longterm loss as well. The opposite effect is seen with childcare benefits or programs. Women go to work and the programs almost pay for themselves.

I don't really know what is "better" for kids and don't really care that much. I do think evidence is mixed.
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onthefence wrote:
Nov 11th, 2017 12:43 pm
If you give a tax break to one earner families. Not only do you lose whatever you give but also you will have people drop out of the workforce.
We already give breaks to 1-earner families. A virtual spouse is conjured up for single parents to treat them just like a 2-parent family with a stay-at-home spouse. That break is worth about $2,000. Pensioners can split pension income with their spouses. That break can be worth up to $30,000.

So, the question is not if, but whether all families with the same total income should have the same tax liability.
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taxrage wrote:
Nov 11th, 2017 10:24 pm
We already give breaks to 1-earner families. A virtual spouse is conjured up for single parents to treat them just like a 2-parent family with a stay-at-home spouse. That break is worth about $2,000. Pensioners can split pension income with their spouses. That break can be worth up to $30,000.

So, the question is not if, but whether all families with the same total income should have the same tax liability.
Pension splitting is totally unfair but they vote so c'est la vie. The virtual spouse to me demonstrates the whole folly of taxing a family vs an individual. Of course it seems unfair to tax a single mom more than a couple with a stay at home spouse. Why can't a single pensioner split their pension with a virtual spouse? If the millenials are too stupid to organize and vote and would rather protest I guess they will continue to get shafted as they move into prime earning ages.
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onthefence wrote:
Nov 12th, 2017 2:08 am
Pension splitting is totally unfair but they vote so c'est la vie. The virtual spouse to me demonstrates the whole folly of taxing a family vs an individual. Of course it seems unfair to tax a single mom more than a couple with a stay at home spouse. Why can't a single pensioner split their pension with a virtual spouse? If the millenials are too stupid to organize and vote and would rather protest I guess they will continue to get shafted as they move into prime earning ages.
Taxing a family isn't folly. It's what the US and other countries do. Benefit eligibility is based on family income, isn't it? Why should a family that pays $12,000 more in tax on the same total income receive the same benefit payments?

There is no virtual spouse conjured up for single pensioners because they don't have any dependents. The ITA conjurs one up to try and equalize the tax burden between a single parent and couple family. Under any tax system - except flat tax - singles will always pay more, since their ability to pay is higher for a given income level (no dependents).

Clearly there is a problem with tax rates and how they are applied (individual). It is the impetus for the whole small business tax package introduced by Morneau. When the tax differential can be close to 30% at what are arguably middle/upper-middle class family income levels, the system is broken. It needs to be reformed.
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taxrage wrote:
Nov 12th, 2017 9:05 am
Taxing a family isn't folly. It's what the US and other countries do. Benefit eligibility is based on family income, isn't it? Why should a family that pays $12,000 more in tax on the same total income receive the same benefit payments?

There is no virtual spouse conjured up for single pensioners because they don't have any dependents. The ITA conjurs one up to try and equalize the tax burden between a single parent and couple family. Under any tax system - except flat tax - singles will always pay more, since their ability to pay is higher for a given income level (no dependents).

Clearly there is a problem with tax rates and how they are applied (individual). It is the impetus for the whole small business tax package introduced by Morneau. When the tax differential can be close to 30% at what are arguably middle/upper-middle class family income levels, the system is broken. It needs to be reformed.
Let's agree to disagree on this point. I would hesitate to hold up the US as a model for anything taxation related though. They as in most things they are the outlier. Even though the US has joint brackets, 2 people making $100k each are still taxed very differently than one person making $200k.
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onthefence wrote:
Nov 12th, 2017 9:23 am
Let's agree to disagree on this point. I would hesitate to hold up the US as a model for anything taxation related though. They as in most things they are the outlier. Even though the US has joint brackets, 2 people making $100k each are still taxed very differently than one person making $200k.

Why castigate the US just because you can? It's a favourite activity of the intelligentsia in Canada and it's nothing more than intellectual laziness.

So, turn to the issue. What did the Carter Commission say about income averaging (this was a made in Canada report if it makes you happier)?

It really comes down to a pretty basic question, " Is a family an economic unit which shares resources, or are individuals firewalled from each other?". If you believe that a family is an economic unit which shares resources, then that is the appropriate unit for the state's intervention with policy tools. On the other hand, if you think that a family is not an economic unit and that individuals organize themselves independently for financial purposes then, the individual should be the appropriate unit for the state's intervention with policy tools.

What do we have in Canada? In my view, we have a god awful mess. For taxation purposes, we claim that individuals are firewalled from each other and are autonomous economic units. But then we turn around and declare that families are the economic unit when it comes to collecting benefits from tax and social policy.

So which is it? Does a family pool and share resources, or doesn't it? If spouses do not pool and share resources, then we should be completely comfortable to have a situation where one spouse makes $200k and the other collects welfare. And we should be comfortable with a situation where one spouse makes $500k and the other gets a HST credit due to a lower personal income. We should be comfortable with one spouse having a pension of $75k and the other collecting the Guaranteed Income Supplement. And we should be completely comfortable with kids getting student loans and bursaries even if their parents are rolling in it. But, you know what? None of those things are possible because we *know* that a family is an economic unit that pools and shares resources.

So let's be consistent, if a family is an economic unit, then tax it as such. Either that, or make all benefit programs available on the basis of individual income...

But in all cases, please do not automatically crap on something the US does. There's both good and bad south of the border and we don't help ourselves by dismissing something just because the Yanks do it.
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onthefence wrote:
Nov 12th, 2017 9:23 am
Let's agree to disagree on this point. I would hesitate to hold up the US as a model for anything taxation related though. They as in most things they are the outlier. Even though the US has joint brackets, 2 people making $100k each are still taxed very differently than one person making $200k.
Who are the people you're referring to? A family with 2 x $100K income would pay the same tax as one with a 1 x $200K income if both are filing jointly, would they not? In the 1990s they almost had a tax revolt over a $1,000 marriage penalty resulting from couples having to file jointly. Canadians would rejoice at only having to pay a $1,000 tax differential when family incomes are the same.

There are a lot of things wrong with the US tax system, but two families with the same aggregate incomes having the same tax liability is definitely not one of them.
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taxrage wrote:
Nov 12th, 2017 3:13 pm
Who are the people you're referring to? A family with 2 x $100K income would pay the same tax as one with a 1 x $200K income if both are filing jointly, would they not? In the 1990s they almost had a tax revolt over a $1,000 marriage penalty resulting from couples having to file jointly. Canadians would rejoice at only having to pay a $1,000 tax differential when family incomes are the same.

There are a lot of things wrong with the US tax system, but two families with the same aggregate incomes having the same tax liability is definitely not one of them.
-first of all there should be a a charter of the fundamental principles,
-things should be simplified.,..there is no point to have this unenforceable complicated rules
-the language of tax laws should be brought into the 21-st century... what is the point of having this layer limbo used for the rules???
-there should be a new class of corporations created with a simpler accounting...flat kind of tax...
-the whole concept of trusts and their legitimacy should be reviewed..
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onthefence wrote:
Nov 12th, 2017 9:23 am
Let's agree to disagree on this point. I would hesitate to hold up the US as a model for anything taxation related though. They as in most things they are the outlier. Even though the US has joint brackets, 2 people making $100k each are still taxed very differently than one person making $200k.
taxrage wrote:
Nov 12th, 2017 3:13 pm
Who are the people you're referring to? A family with 2 x $100K income would pay the same tax as one with a 1 x $200K income if both are filing jointly, would they not? In the 1990s they almost had a tax revolt over a $1,000 marriage penalty resulting from couples having to file jointly. Canadians would rejoice at only having to pay a $1,000 tax differential when family incomes are the same.

There are a lot of things wrong with the US tax system, but two families with the same aggregate incomes having the same tax liability is definitely not one of them.
To clarify, in the US two households each making $200K HHI can have very different tax burdens depending on their itemized deductions: mortgage interest, State And Local Tax deduction, medical expenses, etc. It also varies on whether they itemize versus take the standard deduction.

The same household (i.e. with the same list of deductions) should have roughly the same tax burden whether it's single earner or dual earner to reach its given HHI.

I still agree the US system may not be the model to hold up...
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I agree that it is difficult to compare U.S. and Canadian taxation because the U.S. is a capitalist country while Canada is more socialist.

A lot of U.S. taxes goes to fund military spending while a lot of Canadian taxes goes to fund socialized health care.

There is a lot of waste, fraud and abuse by government of our taxes on both sides of the border so not sure if that cancels out.

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