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Kim G C Moody’s Musings – 1-1-1 Newsletter For June 19, 2024


Kim G C Moody’s Musings – 1-1-1 Newsletter For June 19, 2024


One Comment About Taxation – How Not to Implement Taxation Policy and the Need For Canadian Tax Reform / Review


The study and practice of taxation is complex.  And tough.  Frankly, it’s one of the most complex topics out there.  As Albert Einstein once said the hardest thing to understand in the world is the income tax”.  One can debate the context as to why he said that but, yes, I agree Albert.


Because of the complexity, it’s one of those topics that naturally breeds mythology.  For example, how many of you go to parties and the topic of taxation comes up?  I love those kinds of parties.  I tend to lurk and listen to see what kind of tax mythology is being talked about.  It’s inevitable that some “expert” spouts off and pretends he / she knows what they’re talking about.  In most cases, they simply have no idea what they’re talking about. I then have a decision to make:  do I butt-in and discuss the topic with them?  Or just leave it alone.  I often look for a polite way to get involved in the conversation since I greatly enjoy debating, teaching and educating about my favorite topic.


Taxation policy is critically important since it intersects with economic and social policy of government.  The ultimate funds raised through taxation by government supports programs (like social safety nets, pensions, income re-distribution, etc) and critical infrastructure.  Politicians often use tax policy to advance their agendas by pulling various levers like adjusting taxation rates, adjusting how taxable income is calculated, introducing new taxes, etc.  Balancing taxation, economic and political policies is very tricky.  I call it the Goldilocks Principle…getting it “just right” (yes, I know, that phrase is used in a lot of other disciplines too).  


For a number of years, the current federal government has failed miserably with the Goldilocks Principle as it relates to taxation policy.  From raising tax rates on so-called high-income earners, relentlessly going after small businesses, introducing flawed amendments to the alternative minimum tax and now the capital gains inclusion rate increase.  The government has been pouring lots of time and energy into its messaging about the capital gains measure by saying it only applies to 0.13% of people (a ridiculous and misleading falsehood), saying it is necessary for “fairness” (an overused phrase which means nothing other than trying to justify its need to raise tax revenues to cover its ever increasing spending) and comparing the taxation rate of a nurse to an investment banker (who apparently only earns capital gains / stock options which in real life doesn’t happen).  


The Finance Minister also continues to use class warfare messages to suggest the measure was necessary.  The social media accounts of the Finance Minister, the PM and many other people friendly with the Prime Minister’s Office have been relentless in spreading the false and divisive messages.


Some government flag-waving academics even go so far to suggest that the capital gains inclusion rate increase is a necessary measure to tackle income inequality and if people like me – who apparently don’t provide any other alternatives – oppose the measure then I don’t care about income inequality.  I have one word for that assertion:  hogwash.  And here’s a simple rebuttal:  income inequality is an overused phrase to try to justify income redistribution. Instead, hard work should be rewarded and not punished while providing the appropriate programs to ensure the vulnerable and needy are taken care of.  And by “vulnerable and needy”, I don’t mean people who are simply envious.  


As far as an alternative, well, I have a simple suggestion for that too: reduce spending, get our country’s finances back in line, reduce personal tax rates, eliminate corporate subsidies (like the ridiculous EV grants that is so far over $40 billion), look for ways to simplify our income tax statute and administration, and explore measures to improve our country’s productivity emergency (so that our overall population benefits from the improvements).  A lot of my suggestions could be taken care of by having the country engaging in income tax review / reform.  Many in the tax profession – including me – have been calling for such review / reform for years.


After the release of the capital gains increase legislation last week, I spent dozens of hours reviewing the material with colleagues.  I instructed a couple of courses on the material as well.  It’s horrifically complex.  Canadians have until next week to decide whether or not they will trigger gains on their properties before the new law applies. The entire roll-out, messaging and timing of this measure has been embarrassing.  Canadians deserve much better leadership and governance.


One good thing that came out of last week, though, was that the opposition Conservative Party came out with a statement that opposed the capital gains inclusion rate increase.  They supported such opposition with a 15 minute video about how poor our Canadian economy is performing and what needs to happen.  Included in the video was a promise that within 60 days of taking office, the new government would launch a Tax Reform Task Force to implement lower taxes on work and production, simplify tax rules, cut corporate welfare and reduce the share of taxes paid by the poor and so-called middle class.  


I love that commitment to tax reform.  Obviously, the devil will be in the details but tax reform is long overdue.  Our tax statute is very much a patchwork quilt of complexity.  It badly needs modernization and simplification.  


As the legendary Brazilian soccer star, Pele, once said: Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing or learning to do. As a country, we need to get back to rewarding and incentivizing hard work.  Without such rewards (such as reduced inclusion rates on capital gains, competitive personal tax rates as compared to our neighbors and a much simpler income tax system), I’m convinced that we’ll continue to see successful people leave Canada (or shun coming to Canada).  


Canadians, let’s get to work!


One Comment About Leadership – Leaders Take Care of Themselves


As I write this, I’m getting ready to attend a coaching session / retreat for my peer-to-peer learning group for MacKay CEO Forums.  As my regular readers know, I’m a big fan of peer-to-peer learning since it is a phenomenal way to learn form other leaders and entrepreneurs.  I’ve been involved in peer-to-peer learning groups for over 26 years and I owe much of my personal success and to it.  The theme of my upcoming session is The Importance of Your Mental and Physical Health.  


A foundational starting point for any leader is to ensure you are able to “show up” every day for the people that you serve.  And it starts with YOU!  Is your health as good as it can be?  For most, it takes continuous attention to take care of your mental and physical health.  


Thankfully, the stigma of struggling with mental health is diminishing.  In other words, it’s ok to not be ok.  Unfortunately, though, there are still many people who are reluctant to reach out to someone for help. For me, I’m not shy to tell people that I’ve been seeing a psychologist for over 20 years.  I get excited to go to my appointments.  I’ve been lucky enough to have a long-term relationship with one particular psychologist who “gets me” and is able to talk me through many issues, punch me in the face when I need it and provide me tools to help me.  I’m certainly not perfect but I’m very thankful for the wisdom and guidance.  


The same goes for my physical health.  I’ve always tried to take care of myself physically though careful eating and regular exercise.  However, it’s always been a struggle.  Most days are good but sometimes I struggle to achieve consistency.  


I’ve found the key to making progress on the above is consistency.  Even if some days are a struggle, I get up the next morning and try to make it better.  The tools provided by James Clear’s landmark book – Atomic Habits – particularly helpful.  


Here’s the bottom line:  if you’re not taking care of yourself, are you confident that you’ll be able to “show up” for the people that you serve?  Give yourself and your audience the best version of YOU by taking care of yourself consistently.


One Comment About Economics: The Economic Cost to Implement Auto-Tax Filing


I have previously written about automatic tax filing in this newsletter here.  I won’t repeat all of the pros and cons here but suffice it to say I’m an advocate of REAL automatic tax filing if proper safeguards are in place.  The existing system that Canada Revenue Agency has – SimpleFile by Phone doesn’t cut itnotwithstanding their recent announcement they intend to expand it.  

But what will automatic tax filing cost to implement?  That was the subject of a recent Report released by the Parliamentary Budget Officer on June 13, 2024.  

From the Report:

The PBO estimates that the cost of expanding the SimpleFile by Phone service will amount to $2 million over the projection period. Assuming that CRA deploys an automatic tax filing service through which it completes the tax return of all non-filers on whom it holds sufficient information, the total administrative cost of implementing and operating the service is estimated to range from $57 million in 2024-25 to $65 million in 2028-29.

Assuming such costs are handled much better than the ArriveCan fiasco, I would be in favor of investing that kind of money to improve Canada’s tax administration system.  The vast majority of Canadians have simple tax situations and, in my opinion, should not have to pay a lot of money to tax preparers to comply.  This assumes, however, that the proper safeguards to enable such taxpayers to carefully review and adjust for any errors made by the automatic system.

It’s time to get going on this.


Bonus Comment – Quote From Plato Ancient Greek Philosopher – About Taking Care of Yourself


The first and best victory is to conquer self.

Yep, totally agree!  Leaders, are you taking care of yourself / conquering yourself?

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