Tax Freedom day in Canada is June 6; in the United States it is April 12. In the United States, 50% of wage earners pay only 3% of the total income taxes. Do you see a problem?
In a post earlier today, I mentioned that VAT/GST/HST is unfairly excluded from the Foreign Tax Credit because it is not an income tax. This creates the possibility that US persons in Canada and Europe, are subject to double taxation, especially those with unearned income who live off of interest and dividends.
But don’t get me wrong. As unpopular as the GST/HST is, I am all in favor of it. It means that everyone who consumes products has to pay some taxes, though I do wish that the total tax burden in Canada was less. In the United States, there is no GST or VAT. That is part of the problem.
Tax Freedom Day is June 6 in Canada, and I wish it were in February. In the United States, Tax Freedom day is April 12. The IRS is coming after us Canadians to pay taxes, when the vast majority of Americans don’t pay as much as we do.
This problem is related to democracy. In order to get votes, if you are US congressman, you never raise taxes on the majority of your voters. The Bush tax cuts, for example, contrary to the constant rhetoric coming from the media, relieved those under the average income of virtually all federal income taxes (not payroll Social security, etc.). Consider this chart:
- The top 1 percent: Americans who earned an adjusted gross income of $410,096 or more accounted for 22.8 percent of all wages. But they paid 40.4 percent of total reported income taxes, an increase from 39.9 percent in 2006, according to the IRS.
- The top 5 percent: Americans who earned $160,041 or more accounted for 37.4 percent of all wages in 2007. But they paid 60.6 percent of the country’s total reported income taxes, up from 60.1 percent a year earlier.
- The top 10 percent: Americans who earned at least $113,018 paid 71.2 percent of the nation’s income taxes, up from 70.8 percent a year earlier.
- The top 25 percent: Americans who earned at least $66,532 paid 86.6 percent of the nation’s income taxes, up from 86.3 percent a year earlier.
- The top 50 percent: Americans who earned at least $32,879 paid 97.1 percent of the nation’s income taxes, up from 97 percent a year earlier.
- The bottom 50 percent: Americans who earned less than $32,879 paid 2.9 percent of the nation’s income taxes, down from 3 percent a year earlier.
This should make those of us in Canada extremely, outrageously angry. The IRS is coming after us for taxes. And yet we pay, we pay and we pay. But the 50 per cent of wage earners who are under the media income in the United States are paying only 3 per cent of the total income taxes in the United States (and no VAT or GST).
During Occupy Wall Street, we heard about the 1%, yet the 1% pay 40% of all income taxes in the United States. Seems to me that they are paying their fair share. When too much of the tax burden falls on the high income earners, they are tempted to expatriate their wealth, their businesses and the jobs they provide. The rich go away, and they hide their money in tax havens, and the IRS has to go after them with a great big club that whacks a bunch of innocent US persons living overseas instead. Such a solution is no solution but rather demagoguery.
Does this make you angry?