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Middle Class

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The Middle Class

The middle class.

This phrase is shrouded in mystery but typically refers to ones occupation, income, education and social status in relation to others.

Depending on the political party using the term, the underlying definition can change.

The Liberal Party has an entire section of it’s 2019 election platform dedicated to the middle class and people working hard to join it.

Unfortunately, the Minister of Middle-Class Prosperity has had difficulties defining the characteristics of the people she was elected to represent.

Excuse me if I’m a little concerned that the middle class might be forgotten as a result.

Tax Free

Making Life More Affordable

Any claims of government giving anything to citizens “tax free” should be met with scrutiny.

All government funding ultimately comes from taxpayers so to suggest that government can give you tax free funds is simply not accurate. Someone is being taxed in order to provide the benefits.

Effective for 2016 tax filings, the Liberal Government lowered the tax rate on income in the 2nd tax bracket by 1.5%. This bracket currently applies to income between $48,535 to $97,069. All other brackets have either remained the same or increased since that time.

For those earning up to the maximum of $97,069, this results in tax savings of $1,456.

In conjunction with the 1.5% tax drop, the Liberal Government removed the Family Tax Cut (FTC). This allowed families with children to notionally transfer income from the spouse with higher annual income to the other spouse.

Depending on your situation, this could result in a tax credit of up to $2,000.

Effective in 2019, the Liberal Government implemented an increase in the Canada Pension Plan annual rates. By 2023, this will result in additional annual employee contributions of $1,107 for those earning above the annual ceiling of $65,700.

The employer portion would increase in proportion, putting further pressure on small business cash flows.

While the Liberal Government may claim that they are “making life more affordable”, the numbers above paint a different picture.

Income Tax Act

What should the government do?

The Canadian Income Tax Act (ITA) has not seen a major review since the late 1960’s. It is now a patchwork of legislation that is difficult for even seasoned Chartered Professional Accountants to apply into practice.

Complexities within the ITA result in a significant added administrative burdens. Instead of focusing on growing your business, creating jobs or planning for retirement, significant time is lost navigating the ITA.

The government should immediately engage in a full scale review of the ITA. The review must consult the private sector and address all major industries across Canada. The revisions should be made in such a way as to allow for amendments in future as the economy continues to evolve.

Key areas that should be the focus of a review:

  1. Simplify: The tax system needs to be fair, efficient and competitive.

  2. Modernize: Tax policy needs to be able to keep up with the digital economy.

  3. Be Supportive: Changes to Canada Revenue Agency (CRA) policies that will ease compliance for taxpayers.

Keep it Simple

Simple:

In Alberta, there are now nine personal tax brackets, a patch work of credits and numerous complexities to navigate in complying with regulations relating to owner-operator business.

Serious consideration should be given to shift away from taxing income and toward taxing consumption instead. It is far more beneficial to tax activities that reduce the wealth of society, ie. consumption, rather than tax the creation of wealth.

The simplest way to make the shift to a consumption based tax system would be to increase the rate of federal GST. This would be offset with reductions in personal tax rates. The personal tax rate drops could be implemented in a manner that preserves the progressive tax regime, but with significantly fewer tax brackets.

For those in the lower tax brackets, the majority of their annual income is spent on non-GST’able expenditures such as groceries, rent and health care. Those with higher disposable incomes would contribute more to government revenues as a result. This preserves the progressive tax regime, protects the vulnerable and doesn’t penalize the creation of wealth.

More comprehensive reforms could also be analyzed to determine the best solution for Canadians.

Update

Modernize:

In recent months, there has been a growing call for government to implement a “wealth tax”. The New Democratic Party has suggested that a 1% on families with a net worth in excess of $20 million would generate net tax revenue of $5.6 billion in 2020-21.

As mentioned above, government should not introduce further tax on the creation of wealth. This tax policy will only further drive investment out of the country at a time that we can ill afford it.

Additionally, there have been calls to add an additional layer of tax on big tech companies, most notably Google, Amazon, Facebook and Apple. There is no doubt that these companies have seen record profits in 2020 but haphazardly implementing a 3% tax on the revenues of these companies will likely back fire.

The reason why large corporations are able to take advantage of low tax rates in foreign jurisdictions is due to varied rates across the globe. If one jurisdiction makes the decision to implement a tax increase, naturally, corporations will seek out lower tax jurisdictions.

If government is concerned with tech giants skirting federal taxes, they need to consult with all jurisdictions in which these companies operate. A unilateral tax will simply resulting in these corporations moving profits to lower tax jurisdictions.

Support

Be Supportive:

The Canada Revenue Agency is typically thought of with disdain by many Canadian taxpayers. Some of these feelings are self induced, others are not.

Much like the difficulties that individuals and businesses have in navigating the Income Tax Act (ITA), the same can be said for CRA agents. While the senior agents typically have specific training and field experience, the majority of front line CRA agents simply do not have the necessary training to effectively help taxpayers navigate the complexities of the ITA.

In order for the CRA to provide more supportive service to taxpayers, they too need to see a reform in the ITA. It simply is not fair to ask agents to be able to interpret the ITA and how it applies to each taxpayer they speak with.

Secondly, the CRA needs to revise audit training procedures for their agents that considers materiality of each case. Far too often I see audit cases that request significant amounts of supporting documentation in response to a taxpayers nominal expense claim. Some of these being less than $100.

This places a significant administrative burden on taxpayers, specifically small business owners. It also leads to a great deal of frustration, which further damages the relationship between this government agency and the general public.

 

Final Thoughts

Final Thoughts

Canada’s middle class has fallen on difficult times in recent years. This has only been exasperated by the impacts of COVID-19.

For far too long, Canada has lost investment and stymied growth due to its archaic tax regime.

The Liberal government has promised to “build back better” and create an economy that is just and equitable for all. Details of these plans remain to be seen.

Instead of grandiose plans stemming from pie-in-the-sky slogans, the government should immediately look to reform the tax system.

Focusing on simplicity, modernization and reducing administrative burden will give taxpayers the confidence to know that their hard work will translate into consistent after-tax earnings.

It’s time to unleash the power of the Canadian worker, supported by a competitive and modern tax regime. Future generations depend on it.

https://www.jaredpilon.com/

I have recently made the decision to seek nomination as a candidate in the federal electoral district of Red Deer - Mountain View. As a Chartered Professional Accountant (CPA), I directly see the negative impacts of government policy on business owners and most notably, their families. This has never been more evident than in 2020. Through a common sense focus and a passion for bringing people together on common ground, I will work to help bring prosperity to the riding of Red Deer – Mountain View and Canada. I am hoping to be able to share my election campaign with your viewers/readers. Feel free to touch base with me at the email listed below or at jaredpilon.com. Thanks.

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Former FBI Asst Director Warns Terrorists Are ‘Well Embedded’ In US, Says Alert Should Be ‘Higher’

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Chris Swecker on “Anderson Cooper 360” discussing terror threat

 

From the Daily Caller News Foundation

By Hailey Gomez

Former FBI Assistant Director Chris Swecker warned Friday on CNN that terrorists are “well embedded” within the United States, stating the threat level should be “higher” following an attack in Germany.

A 50-year-old Saudi doctor allegedly drove his car into a crowded Christmas market in Magdeburg, Germany on Friday leaving at least two people dead and nearly 70 injured so far. On “Anderson Cooper 360,” Swecker was asked if he believes there is a potential “threat” to the U.S. as concerns have risen since the “fall of Afghanistan.” 

“I think so,” Swecker said. “I mean, we’ve heard FBI Director Chris Wray talk about this in conjunction with the relative ease of getting across the southern border. And, you know, there’s no question that terrorists have come across that border, whether they’re lone terrorists or terrorist cells. And they’re well embedded inside this country.”

WATCH:

“I’ve worked terrorist cases. Hezbollah has always had a presence here. They raise funds here, and they can always be called into action as an active terrorist cell,” Swecker added. “So I think the alert here, especially around Christmas time, is elevated. It probably ought to be higher than what it is right now, because I mentioned that complacency earlier. And I fear that complacency as someone who has a background in this field.”

Concerns over the Biden-Harris administration’s handling of the U.S. southern border have raised questions over the vetting process of illegal immigrants entering the country.

On Tuesday United States Border Patrol (USPB) Chief Jason Owens announced in a social post that an unidentified South African national who was “suspected of terror”  was arrested in Brooklyn, N.Y. The illegal immigrant had originally been detained in Texas for criminal trespassing but was released due to the “information available at the time.”

In August an estimated 99 individuals on the U.S. terrorist watch list had been released into the country after crossing through the southern border, according to a congressional report. The report found that between fiscal years 2021 and 2023 USBP agents encountered more than 250 illegal migrants on the terrorist watchlist, with nearly 100 of those individuals being later released into the U.S. by the Department of Homeland Security.

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Alberta

Ford and Trudeau are playing checkers. Trump and Smith are playing chess

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CAE Logo

 

By Dan McTeague

 

Ford’s calls for national unity – “We need to stand united as Canadians!” – in context feels like an endorsement of fellow Electric Vehicle fanatic Trudeau. And you do wonder if that issue has something to do with it. After all, the two have worked together to pump billions in taxpayer dollars into the EV industry.

There’s no doubt about it: Donald Trump’s threat of a blanket 25% tariff on Canadian goods (to be established if the Canadian government fails to take sufficient action to combat drug trafficking and illegal crossings over our southern border) would be catastrophic for our nation’s economy. More than $3 billion in goods move between the U.S. and Canada on a daily basis. If enacted, the Trump tariff would likely result in a full-blown recession.

It falls upon Canada’s leaders to prevent that from happening. That’s why Justin Trudeau flew to Florida two weeks ago to point out to the president-elect that the trade relationship between our countries is mutually beneficial.

This is true, but Trudeau isn’t the best person to make that case to Trump, since he has been trashing the once and future president, and his supporters, both in public and private, for years. He did so again at an appearance just the other day, in which he implied that American voters were sexist for once again failing to elect the nation’s first female president, and said that Trump’s election amounted to an assault on women’s rights.

Consequently, the meeting with Trump didn’t go well.

But Trudeau isn’t Canada’s only politician, and in recent days we’ve seen some contrasting approaches to this serious matter from our provincial leaders.

First up was Doug Ford, who followed up a phone call with Trudeau earlier this week by saying that Canadians have to prepare for a trade war. “Folks, this is coming, it’s not ‘if,’ it is — it’s coming… and we need to be prepared.”

Ford said that he’s working with Liberal Finance Minister Chrystia Freeland to put together a retaliatory tariff list. Spokesmen for his government floated the idea of banning the LCBO from buying American alcohol, and restricting the export of critical minerals needed for electric vehicle batteries (I’m sure Trump is terrified about that last one).

But Ford’s most dramatic threat was his announcement that Ontario is prepared to shut down energy exports to the U.S., specifically to Michigan, New York, Wisconsin, and Minnesota, if Trump follows through with his plan. “We’re sending a message to the U.S. You come and attack Ontario, you attack the livelihoods of Ontario and Canadians, we’re going to use every tool in our toolbox to defend Ontarians and Canadians across the border,” Ford said.

Now, unfortunately, all of this chest-thumping rings hollow. Ontario does almost $500 billion per year in trade with the U.S., and the province’s supply chains are highly integrated with America’s. The idea of just cutting off the power, as if you could just flip a switch, is actually impossible. It’s a bluff, and Trump has already called him on it. When told about Ford’s threat by a reporter this week, Trump replied “That’s okay if he does that. That’s fine.”

And Ford’s calls for national unity – “We need to stand united as Canadians!” – in context feels like an endorsement of fellow Electric Vehicle fanatic Trudeau. And you do wonder if that issue has something to do with it. After all, the two have worked together to pump billions in taxpayer dollars into the EV industry. Just over the past year Ford and Trudeau have been seen side by side announcing their $5 billion commitment to Honda, or their $28.2 billion in subsidies for new Stellantis and Volkswagen electric vehicle battery plants.

Their assumption was that the U.S. would be a major market for Canadian EVs. Remember that “vehicles are the second largest Canadian export by value, at $51 billion in 2023 of which 93% was exported to the U.S.,”according to the Canadian Vehicle Manufacturers Association, and “Auto is Ontario’s top export at 28.9% of all exports (2023).”

But Trump ran on abolishing the Biden administration’s de facto EV mandate. Now that he’s back in the White House, the market for those EVs that Trudeau and Ford invested in so heavily is going to be much softer. Perhaps they’d like to be able to blame Trump’s tariffs for the coming downturn rather than their own misjudgment.

In any event, Ford’s tactic stands in stark contrast to the response from Alberta, Canada’s true energy superpower. Premier Danielle Smith made it clear that her province “will not support cutting off our Alberta energy exports to the U.S., nor will we support a tariff war with our largest trading partner and closest ally.”

Smith spoke about this topic at length at an event announcing a new $29-million border patrol team charged with combatting drug trafficking, at which said that Trudeau’s criticisms of the president-elect were, “not helpful.” Her deputy premier Mike Ellis was quoted as saying, “The concerns that president-elect Trump has expressed regarding fentanyl are, quite frankly, the same concerns that I and the premier have had.” Smith and Ellis also criticized Ottawa’s progressively lenient approach to drug crimes.

(For what it’s worth, a recent Léger poll found that “Just 29 per cent of [Canadians] believe Trump’s concerns about illegal immigration and drug trafficking from Canada to the U.S. are unwarranted.” Perhaps that’s why some recent polls have found that Trudeau is currently less popular in Canada than Trump at the moment.)

Smith said that Trudeau’s criticisms of the president-elect were, “not helpful.” And on X/Twitter she said, “Now is the time to… reach out to our friends and allies in the U.S. to remind them just how much Americans and Canadians mutually benefit from our trade relationship – and what we can do to grow that partnership further,” adding, “Tariffs just hurt Americans and Canadians on both sides of the border. Let’s make sure they don’t happen.”

This is exactly the right approach. Smith knows there is a lot at stake in this fight, and is not willing to step into the ring in a fight that Canada simply can’t win, and will cause a great deal of hardship for all involved along the way.

While Trudeau indulges in virtue signaling and Ford in sabre rattling, Danielle Smith is engaging in true statesmanship. That’s something that is in short supply in our country these days.

As I’ve written before, Trump is playing chess while Justin Trudeau and Doug Ford are playing checkers. They should take note of Smith’s strategy. Honey will attract more than vinegar, and if the long history of our two countries tell us anything, it’s that diplomacy is more effective than idle threats.

Dan McTeague is President of Canadians for Affordable Energy.

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