April 25, 2016

Are you a taxpayer or a tax recycler? Chopping down Canadians’ “money tree” myth

Sam SotiropoulosRebel Blogger

Many Canadians, especially public servants, have a queer understanding of where tax dollars originate. It seems more than a few believe in a money tree that provides for their escalating demands. This brief primer should dispel a few of the fables associated with taxation and its sustainability.

For starters, a distinction needs to be made between taxpayers and tax-recyclers. The former are people and businesses that do not receive income from the government, while the latter includes all public servants and tax dollar subsidized concerns.

Understanding the difference between the two will help frame the context of the current debate around deficits and debts incurred by states the world over, not just in Canada.

Taxpayers include anyone who does not work for, or depend upon, the State for their livelihood. These folk rely solely upon the marketplace fortunes of the entities that employ them. Whether they are in business for themselves or work for others, this category of individuals is the original source of tax revenues that governments depend upon, they are known as the “tax base." Without this group no government can survive for long.

Tax-recyclers are those who work for, or rely upon, the government to keep them "in the money" so to speak. Here in Canada, this category includes teachers, health care providers, welfare recipients (personal and corporate), civil servants, police, firefighters and a growing plethora of NGOs and charities to name just a few of the myriad beneficiaries of state coffers at all levels. Like any government, these people are ultimately dependents of the taxpayer class of citizen.

While taxpayers produce, tax-recyclers take; it is as simple as that. “But civil servants pay taxes too!” is a common rejoinder. And while technically true, the underlying fact of their employment belies their claim to membership in the taxpayer category. For, even tax monies that this class produces through returns on investments are not firsthand tax revenues, as they hinge on an original outlay of taxpayer money. This underscores the fact of inherent inefficiency in the recycling process as less than originally collected and paid is perpetually reclaimed.

All of which leads to the question of how government institutions, services and expenditures can continue to expand in declining or stagnant economies. Aside from selling off public assets to private interests or increasing tax rates, there is really only one other way: by incurring debt. Governments borrow to offset declines or shortfalls (in relation to their spending) in "real" tax revenues, i.e. those originating from taxpayer, not tax-recycler sources.

In practical terms, when a government engages in deficit spending to stimulate economic activity such that new or increased sources of "real" tax revenues can be realized, they are gambling. Government borrowing is not a risk-free undertaking. One needs only to consider the plight of Argentina, Greece, or even (increasingly) Brazil to understand the dangers involved in the practice.

So, while many Canadians are aglow with the prospect of "sunny ways" deficit spending, they may want to carefully consider whether the seeming short-term benefits will outweigh potentially long-term ill effects to Canada’s public interest.

As a cautionary tale, it may be wise to think about the fact that China now owns Greece’s largest port, and private businesses are leaving the country in droves. The Greek state is on life-support from the European Central Bank and the prognosis is not good. The nation that gave birth to Europe’s richest mythological tradition is learning the hard way that there is no mythical money tree. Will Canada continue to ignore this lesson?

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commented 2016-04-26 10:37:10 -0400
The tax base continues to decline. Worse, capital is portable and migrates, as mine did. At some point, government will declare that if you even have a job, you are rich. How’s that for getting the mob angry.

No problem. Once the collapse comes, people will be able to seize what is rightfully theirs. The government will be bankrupt and destroyed. Canada has no military or police of any significant value or threat. I know there are many Americans who will pounce on Canada at the first sign of its disintegration. Manifest Destiny is real and it belongs to the brave. Of course, there are no brave Canadians.
commented 2016-04-26 02:13:59 -0400
I used to pay a decent amount of taxes, until NDP killed the patch, now i pay pretty much nothing at my low paying job. So how does the government pay for all the services they promise?
commented 2016-04-25 21:41:36 -0400
When the tax payers start getting poorer and poorer , you will start to the road side dumps increase, as well ditch fills
commented 2016-04-25 21:12:08 -0400
Tax is levied on wealth. In a Capitalist system ALL participate in the wealth sharing system by way of both productivity and commerce. We produce tangible wealth which we spend as consumers (government does not participate in this wealth creation because wealth is created at the point of tangible production.)

Therefore government and its employees provably do not create wealth – their productivity is negative wealth creation because it is spent in confiscating tangible wealth. They may engage in commerce by spending confiscated wealth in the open market as they are a net consumer rather than a producer and consumer.

High school level Economics, (at least ir used to be) the fact that voting age Canadians don’t fully understand this simple economic reality is a testament to the dumbing down of the voter through inept public ed systems.
commented 2016-04-25 19:33:41 -0400
Oh btw I do give to the real needy and support the food banks. But it’s MY call not environutley or turdeu.
commented 2016-04-25 19:30:11 -0400
Great article……. I quit paying taxes the moment that the socialists took over. Catch me if you can ……. nipple heads.
commented 2016-04-25 19:12:09 -0400
I’m sure there are a million more such cases like this…including the failed welfare system that should never have been a ticket for life…I have seen children refuse to study math because their welfare mothers were already coaching them how to play the system…then there is WSIB the ticket for fraudsters and the failure to support the needy…
commented 2016-04-25 18:04:21 -0400
I am both.

I receive about 40K a year for my military pension.

The small company that I have an ownership stake in provided about 1.4 million to the feds and provinces in tax collection revenue – AFTER all of our company deductions.

So I think I can say we are putting back in to the government funding – I am simply not happy about how they are spending it.