On the taking away OR how the BC Liberals screw the middle class (LONG)
Jason Moore
Here are some numbers I came up with. I looked at what the 2002 Liberal tax cut meant as compared to the tax rates that the NDP brought in in 2001. Then I also compared the PST based on the assumptions mentioned below. Finally, I adjust MSP premiums for the changes in the MSP premium assistance changes (this only applies to the "singles" scenarios at the very bottom).
Anyways, just so you know: In an earlier post I erroneously put
down "NDP 2000" which should have been "NDP 2001" as you see it below.
I have proofed this post so I'm fairly confident that I caught any other
stupid little mistakes.
Voila:
Scenario 1: Spouse 1 makes $40,000 in taxable income and Spouse 2 makes $20,000. They have two kids so they pay the family MSP premium. Furthermore, 15% of their total gross income is spent on PST taxable purchases:
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $3,731
$2,628
$2,628
MSP premiums 864 864 1,296
PST 630 630 675
Total
$5,225
$4,122
$4,599
Comment: We can clearly see that the original tax cut of
$1,103 has been reduced by the clawback of $477. This means that 43% of
the tax cut has been clawed back (477/1103).
Scenario 2: Spouse 1 has $125,000 in taxable
income and Spouse 2 has $25,000. They have two kids so they pay the family
MSP. Furthermore, 20% of their gross income is spent on PST taxable purchases:
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $18,917
$13,818
$13,818
MSP premiums 864 864 1,296
PST 2,100 2,100 2,250
Total
$21,881
$16,782
$17,364
Comment: We can see that the initial tax cut of $5,099 has been clawed back by $582. This is about 11% of the original tax cut.
Scenario 3: Spouse 1 makes $500,000 in taxable income and Spouse 2 makes NIL. They are a family and 25% of their gross income is used to pay for PST purchases:
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $90,809
$67,708
$67,708
MSP premiums 864 864 1,296
PST 8,750 8,750 9,375
Total
$100,423
$77,322
$78,379
Comment: It is clear that this breadwinner doesn't have a
clue about splitting income. That said, we notice that the original tax
cut of $23,101 is clawed back by $1,057. This represents about 5% of the
original tax cut.
Now for 2 other scenarios. These ones assume that the employer
pays the MSP premiums (hey, I wonder how they feel about that now that
they have gone up?). I have included the provincial income tax increase
AND the federal income tax increase since this is a taxable benefit. I
think it is only fair to include the federal tax increase since it increases
thanks the the BC Liberals increasing MSP.
Scenario 1: Spouse 1 has $40,000 and Spouse 2 has $20,000 in taxable income, MSP paid by employer on Spouse 1 and they spend 15% of gross income on PST purchases. The incremental increase in MSP premiums is assumed to be the increase for tax benefits (i.e. the $864 taxable benefit was included in the original calculation whereas the $432 increase to $1,296 is used to calculate the increase in federal and provincial income taxes. eg. 432*31.15% = $135 increase in federal and provincial tax).
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $3,731
$2,628
$2,763
MSP premiums N/A N/A N/A
PST 630 630 675
Total
$4,361
$3,258
$3,438
Comment: We can still see the tax cut of $1,103. However, it is only clawed back by $180 as the incremental increase in the MSP premiums affect income taxes and the increase in PST increases. This is a 16% claw back.
Scenario 2: Spouse 1 has $125,000 in taxable
income and spouse 2 has $25,000. Similar effect for MSP premiums as in
scenario 1 immediately above. PST purchases are 20% of gross income:
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $18,917
$13,818
$14,007
MSP premiums N/A N/A N/A
PST 2,100 2,100 2,250
Total
$21,017
$15,918
$16,257
Comment: We can see that the tax cut of $5,099 has been clawed back
by $339. This represents about 7% of the original tax cut.
For the guy who makes $500,000 the comment is: The original
tax cut of $23,101 is clawed back by $564 which represents about 2% of
the original tax cut.
Finally, 2 more scenarios for the poor single life:
Scenario 1: Single person who makes $20,000 per year, PST purchases are 10% of gross income and pays MSP premiums (note: discount applies on MSP premiums):
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $911
$791
$791
MSP premiums 346 346 259
PST 140 140 150
Total
$1,397
$1,277
$1,200
Comment: Thanks to the changes in the MSP assistance program
this person now save more money. From an original tax cut of $120 to $196.
Yippee!
Scenario 2: Single person who makes $15,000 per year, PST purchases are 10% of gross income and pays MSP premiums (note: discount applies on MSP premiums):
NDP planned 2001 Liberal planned 2002
Liberal Post Budget 2002
BC Income tax $518
$450
$450
MSP premiums 173 173 0
PST 105 105 113
Total
$796
$728
$563
Comment: We can see that the initial tax cut of $68 is increased
by another $165 for an effective cut of $233 dollars.
Overall conclusion: Those who do not get their MSP premiums paid for by their employer and make between $24,001 and $75,000 (I'm estimating here OK) a year are probably hurt the most by the BC Liberals. Those who make under $24,000 don't fair badly as some people will see a reduction in MSP and may even see some of the PST non-refundable credit as well.
Nevertheless, it is obvious that those making more will obviously
benefit more. I will let others decide if this is "fair" or not.
Once again some caveats:
1) All income taxes are given as BC provincial income taxes except for when accounting for the MSP premiums that are paid for by employers in which case the federal portion of the taxable benefit is also included.
2) Greenpoint software was used to perform necessary income tax calculations.
3) I do not work for and I am not affiliated with Intuit Greenpoint software.
4) The above numbers are for information purposes only.
5) Common sense rules apply to cover my ass. Please don't sue me ....
Moose
"Jason Moore" <Jason...@telus.net> wrote in message news:3C79D83E...@telus.net...
Moose
"David Cross" <dcr...@shaw.ca> wrote in message
news:INte8.142101$Cg5.8...@news1.calgary.shaw.ca...
> Jason's point (and you'll hopefully forgive me for jumping in, Mr. Moore
:) )
> is that the initial tax cut has, at various income levels above about
> $24000/year, been clawed back to different extents by the sales tax
increase
> and the MSP premium increase - but the general trend is that the claw-back
is
> regressive, in that it favors high-income earners more than lower-income
> earners.
Well, MSP and PST are supposed to be a fixed amount. The only way to change
things for the wealthy is to raise their income tax, which I'd disagree with
as I believe that a lot of that money goes back to the poor. As long as the
place has a good owner and manager, which most do. Not all, but most. They
will either create special social programs to give back to the community (it
isn't the first time that business' and corporations started social
programs; you just don't hear it in the media so much, as they far prefer to
find the negative stories than the positive ones), or they will higher more
workers, or raise wages, or a combination of a few. This won't happen right
away, but in time...
Yes, the MSP premiums increased for the middle class too. Well, they can
afford it, especially if they were able to remain as middle class under the
NDP. They still get more money coming in than they did under the NDP.
You'll also find many middle class with their MSP paid for by employers.
Upper class usually has to pay for it, and I'd really question an employer
if he/she actually paid for it for very highly paid workers. That'd be a
waste of money on the employers end. For the middle class, however, it can
help a bit, and it makes the workers happier... making them more productive
and efficient. So, yes, I'd understand employers paying for it with them.
With PST, I understand the raise. Not all things are taxed anyway, so for
the average person I doubt there'd be much of a change. For the government,
however, there will be a lot more money coming in. I also wouldn't be too
surprised if they reduced PST later down the line, when they are able to
afford to do so.
> He also showed that those at the very bottom end do, however, benefit on
> balance since the MSP premium sliding scale has been shifted upwards.
Can't
> seem to find out what the new minimum threshold is though.
Which is a good thing. And the Liberals found an affordable way to do so.
I hope that the Federals get to being just as smart.
Jason Moore
"Moose" <contik...@hotmail.com> wrote in message
news:jLme8.134713$Cg5.8...@news1.calgary.shaw.ca...
How are the middle class hurt? Your data shows that they are keeping more
under the Liberals than the NDP. You failed to prove your conclusion.
Yes, those making more money get to keep more. So? They worked and planned
their way up in the world. Not a lot of people understand how much effort it
takes to get your way up...
That and the more money they have, the more they'll pump into their business,
so the more jobs (and higher paid jobs) there will be. Sure, there is the odd
rotten business, but most aren't so bad. Most actually give a damn about
their workers. Of course, it could have to do with the fact that a happy
worker is a productive and efficient worker.
-----
Jason's point (and you'll hopefully forgive me for jumping in, Mr. Moore :) )
is that the initial tax cut has, at various income levels above about
$24000/year, been clawed back to different extents by the sales tax increase
and the MSP premium increase - but the general trend is that the claw-back is
regressive, in that it favors high-income earners more than lower-income
earners.
Thank you David. That is exactly right. A point that I notice Moose
fails to understand.
He also showed that those at the very bottom end do, however, benefit on
balance since the MSP premium sliding scale has been shifted upwards. Can't
seem to find out what the new minimum threshold is though.
As for the MSP:
Rates are prior to May 2002 and Post May 2002
Single
$36
$54
Family (2 person) 64
96
Family (3+)
72
108
Assistance:
% of premiums payable Adjusted Net family income
Before Changes After Changes
0 $12,000 or less $16,000 or less
20 12,001-14,000 16,001-18,000
40 14,001-16,000 18,001-20,000
60 16,001-18,000 20,001-22,000
80 18,001-20,000 22,001-24,000
Overall, the increase in premium assistance is a good move.
Nonetheless, I predict the economic recovery in West Vancouver is
well under way. Unfortunately, for the rest of us mere middle earners,
it is a little bit harder.
Jason Moore
How are the middle class hurt? Your data shows that they are keeping more under the Liberals than the NDP. You failed to prove your conclusion.
Jason replies:They are hurt because they will not receive anywhere near the tax cut Campbell gave them to begin with. Furthermore, my numbers clearly show the regressive nature of the tax increases regardless of who pays for the MSP premiums. Even those lucky enough to have their MSP paid by their employer will still see a higher proportion of their tax cut clawed back because they don't happen to be in a tax bracket that allows for increased benefits even in light of the recent changes.
The reason this is important is because the BC Liberals promised to only cut taxes on the first 2 tax brackets (i.e. up to approximately $60,000 of income). They came out and cut tax on all 5 tax brackets. What this all means is this:
The BC Liberals lied to the voters. They knew they couldn't get elected on the basis of their 1996 platform so they lied through their teeth. The strategy is simple: cut taxes for all to blow a big hole in the budget which can still be largely blamed on the NDP. Then clawback some of those tax cuts by increasing regressive taxes that affect middle income earners more so than any other group.
With this type of strategy I'm left wondering why bother to vote for the BC Liberals or the NDP. They are both the same: tax and spend and screw the middle income earner.
ro...@telus.net
wrote:
>The only way to change
>things for the wealthy is to raise their income tax,
That is of course false. The wealthy have a lot of assets, not
necessarily a lot of income. And those who have a lot of income may
not have a lot of assets. Think of a rookie pro athlete who may be
making six figures, but still lives with his folks in East Van.
Compare with a billionaire who manages his affairs so incompetently as
to have no income at all.
>Yes, the MSP premiums increased for the middle class too.
Of course. It's effectively a poll tax.
-- Roy L
Jason Moore
How are the middle class hurt? Your data shows that they are keeping more under the Liberals than the NDP. You failed to prove your conclusion.
Jason replies:
I didn't notice this in my first reply but it is related. I don't really care about how much one keeps related to the NDP. The NDP 2001 rates are used as a basis for the Liberal's tax cuts in 2001 and 2002. What is relevant is the fact that the BC Liberals not only said they would only cut provincial income taxes on the first 2 tax brackets (and not the five as they actually announced in July of 2001) but also then turned around and took back a significant portion of that tax cut.
This leads to questions such as:
1) If tax cuts are such a good idea why raise taxes after the fact?
2) How are people supposed to have trust in a government that will act first and ask questions later? The tax increases are a repudiation of the earlier tax cuts and everything they stood for.
3) Is it now self-evident that the BC Liberals are not financially competent or is it inherently evident that they have enacted their alleged plan from their 1996 platform that many people feared? Namely, tax cuts to the fat cats while the little guy gets little.You see Moose, these questions have everything to do with the BC Liberals and their "New Era" platform document and nothing to do with the NDP. To measure the BC Liberals to the NDP is not possible given how inept the NDP were; thus, one must resort to measuring the BC Liberals to their own election platform and by what I and others think is just plain good policy (in my opinion that is).
Moose
"Jason Moore" <Jason...@telus.net> wrote in message news:3C7AF1D5...@telus.net...
Jason Moore
I never said any of these questions were irrelevant. People are entitled to ask. I saw it as though the province ended up having many unexpected problems, so they had to find some sort of temporary solution because of the urgency for money. Of course, they released a political front like any party would, saying it was because of the doctors. Now, the doctors are probably part of the issue, but I'm sure it runs far deeper than that. If many of the issues that occurred did not (the softwood dispute, the fall of the world economy, etc), then I doubt they'd bother to raise the taxes. In fact, they'd probably consider lowering them even further. But these problems came up, so there is less money in the bank. And I believe it was far more urgent than they stated, as I said. But when things get back on track, I believe they'll remove them. This is how the "good" governments work. When things are bad, they'll admit to it... but they won't say just how bad it really is nor give proof. People don't want the proof, as it'll severely screw things up.
The BC Liberals have chosen to take a bath just like any other political party. They also chose to cut taxes for the well-off while clawing them back for the lesser-to-do. To claim this is good government is ridiculous.
The BC Liberals came screaming and kicking to admitting how bad things are. Collins, a certified flight instructor who claims to be our finance minister, predicted growth of 3.8% back in July of 2001 even when private sector economists were laughing at him. The problems have been here all along and the Liberals chose to ignore them in order to give their buddies in West Vancouver a tax break while the rest of us get thrown peanuts.
As for the doctors, I heard that Collins has budgeted $400 million but the doctors numbers show $528 million over 2 years. How am I supposed to have confidence in a certified flight instructor who screwed up on the tax cuts, was unable to foresee that 3.8% growth was laughable, has admitted that economist David Bond was right in that the tax cuts will not pay for themselves over 5 years and now is unable to calculate the cost of the doctor's settlement.
What I would give to have even Paul Martin in this province. At least Martin's lies are in favour of conservatism whereas Collins is reminiscent of Enron.
Moose
"Jason Moore" <Jason...@telus.net> wrote in message news:3C7C888A...@telus.net...
Jason Moore
I think the 3.8% was pretty realistic... before the number of problems we received. And I don't remember any economist laughing. In fact, I remember economists agreeing or predicting higher.
That's funny, Bruce Little of the Globe and Mail had a column about this in November of last year. It was clear at the time (July) and then that the 3.8% was too high. The consensus was much lower, I believe it was under 2%.
But then this wouldn't have been the first time that economists disagreed.
Ah, but the problem is that Collins should not have been so optimistic. The BC Liberals had been in opposition long enough to know what the problems were and are.
Anyway. What tax break did he give west Vancouver? I know people that live there, and they aren't wealthy by any means. The wealthy are spread out, not all cattled into one place.
The joke is that West Van has more wealthy people per capita than most parts of the province. Just because you know poorer people there does not discount the fact.
Also, they crawled back the tax breaks for the wealthy as well. Half of the money cut for all groups has been pretty much taken back. Well, except for the extremely poor. They get another break.
As I have already pointed out, these clawbacks are small relative to the huge tax cut that the wealthy received to begin with. I suggest you reread my post above to see the numbers for yourself. Hence the title "On the taking away OR how the BC Liberals screw the middle class"
I also suggest you figure out what regressive taxation means.