Pay More Income Tax?

Brandon Sun, October 10, 2010 - David McConkey

“What! I have to pay more taxes?”

I hear this lament as I work as a tax preparer part time during the income tax season. Clients are shocked if they find out that they won’t be getting a refund, and instead, they have to pay more.

No one likes to pay taxes, or being hit with a surprise tax bill. Heck, grumbling about taxes can even be fun – like complaining about your boss over drinks on a Friday after work.

Yet, paying one’s taxes is part of being a citizen. And developing good tax policies is part of creating a good society.

Here are four observations I’ve had after working with people and their taxes:

Pay taxes?

Taxpayers often ignore the income tax that is deducted in the course of employment. We become so used to getting a refund that we almost can forget we pay taxes at all!

So I see clients startled when they have to pay more at tax time. This usually happens when they have income where no (or not enough) tax is deducted, such as from self-employment, investment income, or a second job.

People object when they are faced with paying additional taxes, or a higher rate of tax. Some even wonder about bothering to earn more if it means paying more in taxes.

This shows the poor policy choice of the federal Conservatives in cutting the GST, rather than reducing income taxes.

Although we especially like to gripe about the GST, it is still better to have higher sales taxes like the GST than higher income taxes.

Higher sales taxes may encourage people to think twice before buying things. That’s good.

Higher income taxes, on the other hand, may discourage people from increasing their income. That’s bad.

We don’t want to discourage those who might, say, launch a business or develop a rental property. Another example – and this is a growing concern in our aging society – retirees who might jump into a new job or other venture.

Give me more?

The tax system is a way for us citizens to contribute to our collective needs: from defence to health care to roads.

But politicians of both the right and the left want us to think instead that the tax system is there just to dispense free goodies.

Of course, we are all in favour of children’s fitness and home renovations, to name two of the Harper government giveaways on the tax return.

But while helping us send our kids to soccer, update our kitchens, and add decks to our cottages, the government is growing bigger and borrowing more than ever.

As the “Nanny State” expands, we become a bit less self-reliant, and a bit less ready to consider important challenges.

Let’s hope we can become more open to politicians who will tell us hard truths. Like how we citizens may just have to pay more in taxes, receive fewer government services, and do more for ourselves.

If we don’t face up to such realities how are we going to tackle big challenges like government deficits, environmental problems, and global disparities?

Discourage marriage?

I happen to believe, all things being equal, that kids are better off if their parents stay together.

So, I have a problem with one tax policy that benefits single parents more than married ones.

I do support helping low income parents better raise their children. But the “Eligible Dependant Amount” provides a tax credit only to single people, regardless of their income.

So, I am not happy when I see married parents who are separating now saving thousands in taxes every year.

Or, conversely, when I see single parents who are getting married now paying thousands more.

Good ideas?

Here are two new good ideas. One is from the federal Conservatives; one is from the provincial NDP.

The federal measure is the “Working Income Tax Benefit.” This helps low income folks who are working and are making the often difficult transition from social assistance to paid employment.

The provincial measure is the “Primary Caregiver Tax Credit.” This recognizes the important work that many people do to help a family member, friend, or neighbour live independently in their own home.