Kim G C Moody’s Musings – 1-1-1 Newsletter For January 22, 2025
One Comment About Taxation – A Return to Common Sense Taxation Policy Can’t Happen Soon Enough
Last week, Conservative Leader Pierre Poilievre came out with a clear statement that if the Conservatives form government that he would “reverse” the capital gains proposals. While one might quibble on what he means by “reverse” – and some have – I think his statement is quite clear that the Conservatives will either not proceed with the proposals (should they not be law at the time if and when the Conservatives form government) or they will unwind the proposals (if such proposals are effective law at the time if and when they form government). Presently the proposals are not law. However, it is still technically possible that a new Liberal Leader might strike a deal with the NDP to extend Parliament and try to get the capital gains proposals passed into law. Like many Canadians, I really hope that does not happen. Canadians need an election soon.
Mr. Poilievre used the opportunity to re-emphasize his Economic Vandalism video that he released last June 2024. In that video, he made an announcement that should the Conservatives form government, that he would convene a Tax Reform Task Force within 60 days of forming government. According to the video, the Task Force would be charged with coming up with ideas to: 1. lower taxes on work, hiring and “making stuff”; 2. reduce the share of taxes paid by the poor and middle-income earners; and reduce paperwork by 20% by simplifying tax rules. In summary – “lower, simpler, fairer”.
For a tax practitioner like me, I was pleased to hear about this last June and, of course, pleased to hear about it again last week. Our country’s taxation policies over the last 9+ years have been very destructive and damaging; in particular to entrepreneurs, the lifeblood of our democracy.
With much of the traditional media fawning over the Liberal Party leadership race, it’s worth a very quick review of the two front-runners’ taxation policies.
Mr. Carney has been an inside advisor (despite his loud assertions that he’s an “outsider”) to the Liberal Party and / or the government for the last number of years. He has been directly or indirectly involved in the implementation of some of the poorest taxation policies our country has seen in decades. Even before his advisory role, he has been a cheerleader to this government’s policies that have directly or indirectly attacked our entrepreneurs. Such attacks have led to an unprecedented departure of successful Canadians from Canada. While Mr. Carney has an impressive educational and career background, he appears to have zero entrepreneurial experience and little appreciation for how hard it is for entrepreneurs to be successful despite his assertions that he understands “how the economy works”. And there has been little attempt, as far as I can tell, for Mr. Carney to even attempt to connect with the entrepreneurial class.
With Ms Freeland, well, our country’s economy has been under her tutelage for the last 5 years. Under her watch, our economic performance has tanked to dangerously low productivity levels and she has introduced a multitude of ridiculous new taxation policies(as mentioned above). Her track record speaks for itself despite her recent attempt to try and distance herself from Prime Minister Trudeau.
Also last week, I received a surprise gift from a tax practitioner. Like me, he is a fan of the study of economics and the gift was the 2015 5th edition of American economist Thomas Sowell’s classic textbook “Basic Economics: A Common Sense Guide to the Economy”. Thomas Sowell, in my opinion (along with Canada’s own Dr. Jack Mintz), are geniuses when it comes to the study and common-sense application of economics. I spent some time with the book over the weekend reminding myself of Sowell’s comments on taxation. And his views on tariffs (suffice it to say he’s not a big fan).
So, in light of the above backdrop – Mr. Poilievre’s previous announcement of a Tax Reform Task Force should the Conservatives get elected, the Liberal Party leadership race, the looming imposition of tariffs by the Trump administration and the receipt of my gift – I thought it would be good to revisit a few of Sowell’s previous teachings on taxation policy since the focus on policy, rather than simple politics, is a good thing.
- “The real cost of taxes is not what we send to the government but what the economy loses because taxes reduce incentives for productive behavior.”
Absolutely agree. The last 9 years have been a textbook example of how poor taxation policy can drive undesirable behaviour. For example, as I stated above, the exit from Canada of successful Canadians has been unprecedented. We desperately need to reverse that.
- The politics of envy leads to very bad economics under the guise of fairness.
Again, absolutely agree. I’ve lost count of how many times over the last 9 years the word “fairness” and other divisive rhetoric have been used to try to justify poor taxation policy. The capital gains proposals are a recent example of this with Ms. Freeland pulling out some really doozy statements that still get me riled up every time I think about it. Not good.
- The tax code is so complex that it creates opportunities for evasion and wasteful compliance costs.
While the “tax code” is an American reference (in Canada, the “code” is the “Income Tax Act”), the implication is the same. And I wholly agree. There is not a single tax practitioner that I know of in Canada that thinks the Act, or its related administration, is “simple”. Such complexity makes our tax system unapproachable to the average Canadian. A significant effort to reduce complexity needs to happen.
With the above quotes in mind, I couldn’t help but notice that it fits nicely into the proposed objectives of the Conservative Party’s Tax Reform Task Force objectives of “lower, simpler, fairer” (with the word “fairer” certainly not being used in this context to promote the politics of envy).
A return to common-sense tax and economic policy cannot come soon enough.
One Comment About Leadership – Leaders, Learn From Your Mom!
No, we’re not close to Mothers Day. But this last Sunday, I was attending church as I always do and the priest had a great sermon about the lessons one learns from their Mother. While I have always been mindful of that, the story told by the Priest was a good one.
“Moms always know best,” he said. “My Mom is always praying for me. And while she is getting old and I’m here in Canada, whenever I go home to the Philippines, my Mom has me lined up to do numerous masses. And, of course, I can’t say no even if I’m exhausted”. I chuckled at his story and, of course, I can relate. He went on to tell stories about lessons that he’s learned from his Mom over the years.
My Mom is the best. At age 81, she is still very healthy, both physically and mentally. She’s well read and has her opinions just like I do! I don’t get to see her as often as I’d like but I try. While all Mom’s don’t fit that description, I’ve been lucky over the years and have learned many valuable lessons.
Leaders, if you’ve been fortunate like I have, what lessons have you learned from your Mom? For me, here are some obvious ones I have learned with the analogy for leaders:
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My Mom’s ability to understand and respond to her kids’ needs (I have 5 other siblings and now she has 16 grandchildren) is an example of Mom’s empathy and active listening. Leaders who connect emotionally with their teams build trust, loyalty, and a positive work environment;
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My Mom was a busy woman when she was raising my siblings and me. She would often juggle multiple responsibilities and incur significant obstacles. She was a model of resilience and problem-solving. This is a lesson for leaders since perseverance in difficult times inspires teams and demonstrates that challenges can be opportunities for growth;
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My Mom often puts her kids’ needs ahead of her own, showing the importance of prioritizing the greater good. Great leaders put their teams, organizations, or missions first which fosters collaboration and unity;
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My Mom is a natural teacher, guiding and nurturing her children – and now grandchildren – toward independence. Similarly, leaders, who mentor and invest in their team’s development create empowered and capable individuals;
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My Mom was and is great at adapting to unexpected situations, often improvising solutions with limited resources. Leaders can learn from this since they often must be flexible and innovative, finding creative ways to solve problems and lead in uncertainty;
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My Mom encouraged her children to believe in themselves, take risks and to speak up. Similarly, leaders who support their teams inspire confidence and encourage innovation, even in the face of setbacks;
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My Mom continues to this day to show integrity, value hard work, and compassion through her actions, teaching by example rather than words. Similarly, leaders earn respect by living the values they expect from others; and
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My Mom’s kindness is one that can transform relationships and foster strong connections. Similarly, leadership grounded in kindness and respect creates a culture where people feel valued and motivated.
I love you Mom! And I continue to learn from you every day. Leaders, if you’ve been fortunate to also have a great Mom, treasure that. If your Mom is still alive, give her a call and / or a hug today. If she is not, well, my sympathies…but hopefully you can honour her memory and teachings in some small way today and every day. Moms can be amazing examples of leaders.
One Comment About Economics – Tariffs – The ABCs According to Sowell
As I mentioned, I received a gift of the 2015 5th edition of Thomas Sowell’s “Basic Economics” textbook this past week. The textbook has some interesting history and commentary about tariffs in it. On page 495 of the textbook, Sowell gives a basic definition / description of tariffs as follows:
Tariffs are taxes on imports which serve to raise the prices of those imports, and thus enable domestic producers to charge higher prices for competing products than they could in the face of cheaper foreign competition.
On page 489, Sowell gives a very brief history lesson on the use of tariffs:
During periods of high unemployment, politicians are especially likely to be under great pressure to come to the rescue of particular industries that are losing money and jobs by restricting imports that compete with them. One of the most tragic examples of such restrictions occurred during the worldwide depression of the 1930s, when tariff barriers and other restrictions went up around the world. The net result was that world exports in 1933 were only one-third of what they had been in 1929. Just as free trade provides economic benefits to all countries simultaneously, so trade restrictions reduce the efficiency of all countries simultaneously, lowering standards of living, without producing the increased employment that was hoped for.
On page 491, Sowell states:
At any given time, a protective tariff or other import restriction may provide immediate relief to a particular industry and thus gain the political and financial support of corporations and labor unions in that industry. But, like many political benefits, it comes at the expense of others who may not be as organized, as visible, or as vocal.
Good wisdom from Sowell.
Last week, Jack Mintz wrote a very good article about tariffs and I’d encourage interested readers to access it here.
With President Trump threatening to enact new tariffs on February 1, 2025 on a variety of imports from Canada to the U.S. this week, one can only hope that saner heads will prevail with the lessons from history revisited.
In the meantime, buckle up….it’s going to be a bumpy ride.
Bonus Comment – Quote from American Economist Joseph Stiglitz – About the Use of Tariffs by Countries
“While tariffs may aim to protect industries or jobs, they create inefficiencies and often lead to retaliation, reducing the benefits of open trade for all countries.”
Yep, interesting food for thought. Watch the unfolding tariffs by the U.S. keenly!
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