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Kim G C Moody’s Musings – 1-1-1 Newsletter For February 19, 2025
One Comment About Taxation – History Provides Lots of Guidance About Taxation….The Lesson? Canada Desperately Needs Significant Tax Reform
Over my career, I’ve had the privilege of knowing Arnold Sherman, one of Canada’s first international tax practitioners. Starting in the 1960s, Arnold built one of the most impressive taxation libraries in Canada—a collection I was fortunate to inherit upon his retirement only a few years ago. His library offers a fascinating look at taxation through the ages and in numerous countries.
This past weekend, as I often do and with a nice glass of wine, I pulled one of the books off a shelf from Arnold’s library. This weekend’s choice was “A History of Taxation and Expenditure in the Western World” by Carolyn Webber and Aaron Wildavsky published in 1986. It contains an impressive historical account of taxation, budgeting and finance from ancient times to 1986.
In discussing taxation during ancient times, the authors state:
“Archaeological evidence from Mesopotamia reveals that the earliest compulsory taxes were tithes, levies assessed on a fixed proportion of the total crop, based on some official’s estimate of what a man had harvested. A man who took gifts to the temple gave only what he could spare; but when the king demanded regular payments of a specified amount, a reluctant subject’s compliance could be achieved only by coercion. Thus a compulsory tax policy demanded multiplication of officials to assess and collect the crop.”
Not much has changed since ancient times, eh? Today, tax systems in most countries remain reluctantly paid and are enforced by a multiplication of officials. In Canada, compulsory taxes have exploded in both quantity and complexity under the current Liberal government. In addition, the number of “officials” at the Canada Revenue Agency has grown from 40,059 in 2015 to 59,155 in 2024 – a staggering 47.7% increase during that time.
Is it possible for a country to eliminate the “reluctance” of its residents to pay taxes? In my opinion, no. Anytime assets are taken from a citizen and paid to the state, there will be a general level of reluctance.
The book also provided a quote from Philosopher Edmund Burke: “To tax and to please, no more than to love and be wise, is not given to men.” This nicely captures the fact that taxation, like love and wisdom, is inherently difficult to balance in a way that satisfies everyone. Just as human nature makes it nearly impossible to be both deeply in love and entirely rational at the same time, it is equally impossible to impose taxes while keeping everyone happy.
Notwithstanding such impossibility, I think it’s always worth a shot for a country like Canada to try to balance the necessity to provide required public services while respecting taxpayers’ hard-earned dollars. For me, “respect” starts with controlled government spending. It then extends to a tax system that is approachable and understandable, is efficient in its administration, encourages and rewards hard work and risk-taking and is competitive with other countries.
A poor tax system is just the opposite of the above statements: complex beyond comprehension, bloated with too many “officials” and punishing hard workers and risk-takers. Canada’s tax system fits that description. I would also add that Canada’s taxation system has become a giant income and wealth re-distribution scheme that is designed to achieve political goals (get voters addicted to “cheques”) rather than achieve good public policy.
With Flag Day occurring on February 15, 2025, Canadians celebrated the 60th anniversary of the introduction of Canada’s first official flag. What many readers may not know or remember, is that the introduction of the flag was quite controversial. I don’t remember that since I was not yet born. When I was growing up, however, one of the records from my parents’ collection that my siblings and I used to often play contained a catchy tune “Rally Around the New Flag” by the Oh-Oh Brothers. The lyrics of the song captured the flag controversy at the time including this line in the chorus, “Rally around the new flag. It’s more than a mere piece of rag”. Coincidentally, that song was released in 1965, one year before the release of the Report of the Royal Commission on Taxation in 1966, which was the first and only time in our country’s history that we have had a comprehensive taxation review.
And that’s exactly what we need with respect to our tax system. We need to rally around tax reform…it’s more than a conceptual rag and long overdue. Like our country’s “new” flag, it won’t be without controversy. But, again, it’s an important next step.
To do so, Canada will need bold political leaders who are willing to take on an entrenched system and revamp it. And by revamp, I don’t mean tinkering here and there or scrapping one tax for another new shiny or hidden tax, I mean bold and significant changes that attempt to swing the pendulum back to balance and encourage less “reluctance”.
Is Mark Carney, the Liberal Party insider / advisor / leadership candidate, that person? No. Mr. Carney is a classic tax, spend and re-distribution person who has no intention of bringing back balance. He’s more interested in spending your hard-earned dollars to pursue questionable ideologies.
Like the lessons found in Arnold’s old taxation library, history reminds us that taxation, like governance itself, is always a balancing act—one that Canada has lost sight of. The growing complexity, inefficiency, and sheer weight of our tax system have made it more about wealth redistribution than economic growth. As we reflect on 60 years of our national flag, it’s time we rally not just around a symbol, but around a tax system that fosters growth, rewards hard work, and respects taxpayers’ contributions.
Tax reform, as proposed by the Conservative Party, would be a very positive step in that direction.
One Comment About Leadership – Grit is Critical to be a Good Leader!
In 2013, I watched a short TED Talk by researcher Angela Duckworth on the importance of “grit”. It was a fascinating short watch and if you haven’t watched it, I’d encourage you to take 6 minutes and watch it. Her premise is that people who have strong grit are those who will be more successful in life and be able to withstand a lot more. Angela defines grit as perseverance and passion for long-term goals. Such perseverance and passion allow leaders – and people in general – to navigate challenges, stay committed to their vision, and inspire others.
So why is grit important?
Well, leaders are faced with daily challenges…some small but many large. Having perseverance and passion – grit – is a trait that is helpful in dealing with such challenges instead of easily giving up.
There will be many setbacks along the way for leaders attempting to achieve their vision. Having grit is important to ensure that continuous progress is made towards their vision.
One of the most important leadership attributes is to lead by example – “walk the talk”. If leaders display grit in their walk the talk, it can be contagious. Having a gritty overall team can be very powerful.
For leaders, being resilient and adaptable is critical. Being gritty helps with this tremendously.
The benefits of grit go on and on. But the obvious question is how can one obtain or grow grit? As Angela says in her TED Talk, she is not sure. However, she mentions that a growth mindset is important in order to build grittiness. I agree. More on that below.
It also appears clear that developing grit is an intentional exercise. In other words, you are not born with grit. It is developed through consistent effort, discipline, and resilience.
Below are some quick strategies, accumulated from a variety of sources, to help develop grit:
1. Have a Clear Purpose
Not sure what your clear purpose is? Well, as I’ve stated many times in this newsletter, do yourself a favour and read Viktor Frankl’s Man’s Search For Meaning. It’s a landmark book on the importance of having a purpose. It changed my life and I’m confident it will change yours too.
2. Have a Growth Mindset
Continuous learning helps keep one young. It’s also exciting! As Dan Sullivan, noted entrepreneur coach, says: “Always make your future bigger than your past.” Totally agree…and it’s critical to develop grit.
3. Do Things That Are Uncomfortable
This doesn’t mean you should take crazy risks but allow yourself to venture into areas that you are not an expert. It will help you develop grit.
4. Develop Good Habits
Have you read the book Atomic Habits by James Clear about how to develop good habits? You haven’t? Again, do yourself a favour and read it….it will most certainly help you to be more gritty.
5. Embrace Failure
Failure can be your friend. The learnings from failing are invaluable and can certainly develop grit. Embrace it.
6. Surround Yourself With Gritty People
Do you know people who are resilient, passionate and can persevere through challenges? Of course you do! Surround yourself with such people. They are contagious.
There are other strategies and tactics, of course, but the above is a great start. Get out there and start developing your grittiness muscles! Already gritty?? Well, keep practicing and staying in “gritty shape”! It’s worth it!
One Comment About Economics – What Does ChatGPT Think of Canada’s Economic Situation?
Like many of us, I have been using many of the large language models to assist in my overall research tasks. My favorites so far are ChatGPT, Grok and Perplexity. No, I don’t use them to write my articles but I do use them to help me improve my grammar for certain sentences once in a while.
Earlier this week, I thought I’d see what ChatGPT thought about Canada’s economic situation today. I asked it the question, “Is Canada in good shape economically right now?” and you’ll see the response below:
As of February 18, 2025, Canada’s economic landscape presents a mix of modest growth and emerging challenges.
Economic Growth and Inflation
Recent data indicates that Canada’s economy is experiencing modest growth. The Bank of Canada has projected a GDP growth rate of 1.8% for 2025, slightly below the historical trend. Inflation remains relatively stable, with the annual rate edging up to 1.9% in January 2025, influenced by higher gasoline and natural gas prices. This rate aligns with the lower end of the Bank’s 1%–3% target range.
Monetary Policy
In response to the current economic conditions, the Bank of Canada has been adjusting its monetary policy. Since June 2024, the Bank has reduced its key policy rate by 1.25%, bringing it down to 3% as of January 2025. These rate cuts aim to stimulate economic activity by making borrowing more affordable for consumers and businesses.
Trade Relations and External Risks
Canada’s economy faces potential headwinds from international trade dynamics. Recent trade tensions, particularly with the United States, have introduced uncertainty. In early February 2025, the U.S. announced a 25% tariff on imports from Canada, excluding a 10% tariff on Canadian crude oil and energy imports. While these tariffs have been temporarily delayed for a month following negotiations, the situation remains fluid and could impact Canada’s export-driven sectors.
Currency and Investment Outlook
The Canadian dollar has shown resilience, stabilizing near an eight-week high against the U.S. dollar. This stability reflects cautious optimism among investors, though concerns about potential trade conflicts persist. Looking ahead, forecasts suggest that the loonie may strengthen further in 2025, supported by lower borrowing costs and a favourable investment climate.
Conclusion
While Canada maintains a stable economic environment with modest growth and controlled inflation, it must navigate challenges posed by international trade tensions and policy shifts. The government’s fiscal strategies and the Bank of Canada’s monetary policies will be crucial in steering the economy through these uncertainties.
As usual, ChatGPT lets it political bias show and I could take issue with some of its findings. For example, to say that our Canadian dollar has shown resilience is a nice manipulation of the data. The fact is that our dollar has dipped below 70 cents to the American greenback this year and overall is weak.
Notwithstanding, the above is a decent short shrift-summary of where Canada is at. It’s concerning. Combine this with Canada’s very significant productivity problem and we need good leadership at the helm to deal with these problems. If you’re not familiar with Canada’s productivity issues, ask ChatGPT to give you a summary.
Bonus Comment – Quote from the famous U.S. Inventor – Thomas Edison – About Resiliency / Grit
“Results! Why, man, I have gotten a lot of results! I know several thousand things that won’t work.”
Brilliant. Leaders, do you have several thousand things that you know don’t work as well? If not, get on it!
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