Kim Resources@2x

Kim G C Moody’s Musings – 1-1-1 Newsletter For September 27, 2023

One Comment About Taxation – High Personal Tax Rates

 Before 2015, Alberta had, by far, the lowest federal-provincial combined top marginal tax rate in Canada at 39%.  However, that year, the federal Liberal Party got elected to become the new government, and in Alberta, the NDP surprisingly came to power provincially.  The new federal government promptly announced that it was raising the rates on so-called high-income earners by “asking them to pay just a little bit more” (a ridiculous speaking point overused for the next four+ years) starting in 2016.  The Alberta government also introduced new higher rates for 2015 and 2016.  When the dust settled, Alberta’s highest marginal personal tax rate increased to a top end of 48%, – a significant increase from its previous low and significantly narrowing the gap between some of the provinces that had already increased their personal rates to over 50% (like Ontario and Quebec who had high marginal rates of approximately 53.5% and still do today – with BC recently joining that club – along with many of the Maritime provinces).

Bluntly, Canada’s marginal personal income tax rates are far too high.  When I mention this to some of my left-leaning friends, sometimes a person will rebut: “Kim, you realize that Canada’s highest marginal rates historically have been in the 80%+ range….right?  From that comparison, our current highest rates are a bargain”.  Technically, such people are not wrong.  Have a look at the table below.  This table is reproduced from a 1954 Canadian Tax Foundation publication – Finances of the Nation.  You’ll quickly see that the highest marginal rates were indeed over 80%, with the high being 97.8%!  But let’s put some of that into context:  first, Canada’s personal income tax system was relatively young from the 1930s to the 1950s.  The amount of actual taxpaying individuals, compared to the population as a whole, was very low compared to today.  In addition, capital gains were not taxable back then (capital gains did not become taxable in Canada until 1972).  So, of course, there was no shortage of gamesmanship taken for the small number of high-income taxpayers to convert their income into non-taxable capital gains.

Finally, in 1962, the federal government – led by PM John Diefenbaker – had the courage to convene The Royal Commission on Taxation to review Canada’s entire taxation system and make recommendations about what Canada should do.  In 1966, the Royal Commission released its voluminous Report and recommendations.  Regarding personal tax rates, the Report stated this in Chapter 11:

We are persuaded that high marginal rates of tax have an adverse effect on the decision to work rather than enjoy leisure, on the decision to save rather than consume, and on the decision to hold assets that provide monetary returns rather than assets that provide benefits in kind. We think there would be great merit in adopting a top marginal rate no greater than 50 percent. With such a maximum marginal rate, taxpayers would be assured that at least half of all gains would be theirs after taxes. We think there is a psychological barrier to greater effort, saving and profitable investment when the state can take more than one half of the potential gain.

In 1974, American economist Arthur Laffer discussed a similar topic when he discussed the relationship between taxation rates and the resulting levels of the government’s tax revenue. The “Laffer curve” assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, meaning that a tax rate between 0% and 100% maximizes government tax revenue.

In my experience, personal behaviours significantly change when personal tax rates approach 50%.  People will search for ways to lower their tax bills, especially when the perception is that there is not much value compared to the cost.  There is a reason why significant amounts of high-income earners have been leaving Canada (whenever I raise the alarm bell to certain academics or politicians, I routinely get a rebuttal that I’m exaggerating – I’m not).  And it’s the same reason Canada has a difficult time attracting top-end talent in medicine, bio-tech, technology, professional athletes and other industries.

Canada needs to take a hard look at this issue to lower personal tax rates and ensure people that “at least half of all gains would be theirs”. And it might go a long way to improve Canada’s lagging productivity.


One Comment About Leadership – Treat Others Like How You Would Like to Be Treated

 To be a good leader, it’s my opinion – and many other leadership authors – that a leader should treat others how they would like to be treated.  That’s easier said than done.  Especially for an authoritarian type of leader who prefers to command.  So, what are some common and simple things a leader can do to treat others like they would like to be treated?  Here are three very simple ideas:

  • When you run across a team member in the hallway, don’t ignore that person or rush past with a short “hello” or awkward pass-by. Instead, provide an enthusiastic and genuine greeting such as: “Hello, Jane! How are things?  How are your kids these days…energetic as always?  How are they doing in school?”.  Like Dale Carnegie wrote, there is nothing better than asking someone about themselves. People generally like to talk about themselves and having someone genuinely interested in them creates a bond.  When people genuinely ask about me and/or my family, I enjoy that. And it’s how I like to be treated.
  • Use humour to your advantage. This is a tricky one, especially these days when people can get easily offended, so be careful.  There are some great books, courses and blogs on this topic, but in my experience, humour can’t be a forced issue. It has to be natural, genuine and deployed carefully. I’ve certainly made my fair share of mistakes with this one, but I keep working at it because generally people like to laugh.  I certainly do…if someone can make me laugh, then I have a bond with that person.  And it’s how I like to be treated.
  • Make your teammates feel genuinely special. If they have done a good job, then praise them.  If it’s their birthday, how about writing them a handwritten note (much better than a text or cold email) and hand-delivering it to them?  If a teammate has made a mistake, take the time to teach the teammate how they can do it better next time.  For me, I enjoy feedback, having people recognize special days or efforts and being taught how I can do better next time.  This helps me feel genuinely special and, thus, efforts are made by me to do the same with my teammates. And it’s how I like to be treated.

Leaders, find ways to treat your teammates like you want to be treated.  It’s critically important.


One Comment About Economics – Government Waste

Late last week, I became aware of the cost of the new Canadian passport design.  I won’t comment much about how I feel about the ridiculous new design other than I think it is ugly and certainly not comparable to our country’s current passport design.  I became aware of the cost as a result of a posting by a Canadian Member of Parliament, Tom Kmiec.  A freedom of information request was made regarding the new cost and the answer was posted by Tom on his LinkedIn account.  The answer – $284 million.  Yep, you read that right – Canadian taxpayers shelled out $284 million for “the development of the designs.”

When I read that, I was shocked.  Government waste is not a new phenomenon.  In fact, it’s very common. But this kind of apparent waste takes it to a new level.  I posted a video about this where I discussed my feelings and recommendations, and I’d encourage you to have a peek.

It wasn’t that long ago that the media was in a fury over a member of the previous government consuming a $16 glass of orange juice while travelling.  But where’s the outrage about spending $284M on the passport re-design?  There isn’t any.  The simple fact that there is little, if any, media coverage on this issue begs the question as to why.  Media bias appears is one answer and the ridiculous journalism tax credits provided by the federal government certainly don’t help quell media bias.

In the meantime, I encourage readers to keep educated on government waste.  It’s your tax dollars that are being frivolously spent. And Canadians, overall, are worse off for it.  We need transparency and accountability.


Bonus Comment – Quote From Socrates the Ancient Greek Philosopher, About How to Treat Others

 “Do not do to others what angers you if done to you by others.”

Yep…totally agree!

Hope you enjoyed this edition of 1-1-1…please sign up to my mailing list today!