Benson's piee 0 By EMIL BJARNASON (“The Fisherman”) The government’s tax reform pro- posals, as outlined in the White Paper by Finance Minister Benson, represent a compromise between the principled consistency of the Carter Commission proposals and the political expediency typical of Trudeau Liberalism. The government can no longer evade the issue of tax reform. The present income tax system, with its built-in in- ducements to evasion and corruption, have brought tax law into virtually total disrepute. The moral fabric and rationale of Canadian capitalism, such as it is, was being torn to shreds. But perhaps more important than the moral imperative is economic neces- sity. The Canadian people are heavily, cruelly taxed, and the needs of govern- ment keep growing. The hard fact faced by the Trudeau regime is that the existing tax rules, which virtually exempt the rich from taxation, have imposed limits to tax revenue within which government can no longer func- tion. e The Income Tax Act is a bulky volume. A few pages set out the basic rules of taxation. All the rest defines the exceptions and loopholes, available to capital but not labor, by which those rules can be evaded. The Carter Commission attacked the problem boldly. In six fat volumes it produced and justified a totally new system of taxation which would have implemented, in the context of the pre- sent day economy, Adam Smith’s basic principle of taxation according to abili- ty to pay. ; Carter’s recommendations were not perfect. They contained some features to which legitimate objections could be made. But they represented such a vast improvement over existing legislation, here and elsewhere, that progressives could do nothing else than demand their implementation, in toto as Carter said they’ should be. And, predictably, they proved to be too sweeping for the Trudeau regime. Nevertheless, stark necessity has dic- tated that Benson should adopt much of what Carter proposed, including much that is fundamental. BASIC EXEMPTIONS AND PROGRESSIVE RATES Personal exemptions under the Act have not been changed for 20 years, except for some adjustment of the allowances for children. Yet .the pro- gress of inflation has, in real terms, cut the exemptions in half. For if it could be argued that $1,000 was a rea- sonable tax exempt income in 1949, the equivalent in terms of present day prices could certainly not be less than $1,700. The White Paper goes about half way towards meeting the cost of living in this respect by raising the ex- emption to $1,400 for a single taxpayer and $2,800 married. But with a kind of legic of which only finance ministers are capable, exemptions for dependent children are left unchanged. The principle of ability to pay also requires that the rate of tax shall rise progressively with rising income. Al- though this has always been a feature of the system, tax increases in recent years have been regressive, i.e., they have borne most heavily on the lower incomes. Thus the percentage increase in tax from 1965 to 1969. has been four times as great for incomes of $5,000 as for those of $40,000. Mr. Benson’s zeal for reform has not carried him so far as to correct this abuse. On the contrary, he has com- pounded it. For in his proposed sched- ule, he increases the rate on the low- est bracket of taxable income by near- ly 50 percent, and as income increases, PACIFIC TRIBUNE—JANUARY 9, 1970—Page 6 Jan LOUCFUEEUEUENENENONNUOUUEUOOUOOOOOQOUEQCOOEC0000000000000000000006000800 00000000000 JUREDEGUOUACGOCUOUAGURGOOREDROSUOUEDOLGOGUUUROERDECOROGEOROGEEEEOEUOUGEOO DIOLS the rate increase falls off until at $24,000 there is no increase, and above that level, the rate of tax is actually reduced. Further, he proposes a max- imum marginal rate of 51.2 percent” compared with the previous maximum of 82.4 percent. The justification of this 50 percent ceiling proposal (which was also a feature of the Carter Report, although with a different scale of rates) is that, with the introduction of a capital gains tax, the total taxes paid by the rich will increase in spite of the lower rates. If the capital gains tax is honestly ap- plied, this will undoubtediy be true, but it still does not justify a policy which would increase the burden on the lowest bracket by 50 percent while reducing it on higher incomes. ° The following table shows the dif- ference between the Carter and Ben- son approaches, with respect to single taxpayers. As may be seen from the above, Carter’s proposal contemplated that the new (capital gains) taxes on the rich would reduce taxes on the poor. Benson, on the other hand, proposes to increase taxes on the poor and to give virtually the full benefit to the rich. For married taxpayers, the larger increase in exemptions makes Benson’s proposed taxes compare more favor- ably than the above (single) rates in- dicate. Also, those able to take advan- Res tage of the new deductions will get further relief. But for hundreds of thousands each year these advantages - will be more than cancelled out by the . provision which makes unemployment °* insurance taxable. CHILD CARE EXPENSES One of the glaring injustices of the old Act was the refusal to recognize the cost of child care as a charge against the income of working mothers. These will now be allowed up to $500 per child or $2,000 per family. EMPLOYMENT EXPENSES The class nature of taxation has in the past been underlined by the fact that business and professional people have been allowed a wide range of de- ductions for real and mythical “ex- penses” but workers have been denied the right to deduct even the most ob- vious and legitimate expenses. This is to be partly mitigated by allowing em- ployees to deduct three-percent of in- come to a maximum of $150, while business and professional people will lose the right to deductions for “enter- tainment,” club fees and convention costs. UNEMPLOYMENT INSURANCE On the principle that “a buck is a buck,” the Carter Commission recom- mended taxation of Unemployment In- surance benefits, life and sick insur- ance, insurance dividends, M.P.’s ex- pense allowances, workmen’s compen- Present Income Tax $ 2,500 250 $ 5,000 - 842 $ 10,000 2,260 $ 25,000 8,698 $100,000 52,781 Carter Benson Recommendation Proposal 211 248 714 910 1,943 2,568 6,747 8,993 40,090 47,372 By BRUCE MAGNUSON (In a social system resting on class — antagonisms we have to struggle if we want to combat slavery not only by works, but also by deeds.—K. Marx, N.Y. Daily Tribune, July 14, 1853. True, that was a mighty long time ago—nearly 117 yars. But the economic and political battles are still with us. We still have capitalism to contend with, even though the social composi- tion of the working class has changed immensely since the days of Karl Marx. The best reminder of this was the immense and hard fought strike move- ment of 1969. This strike movement was characterized by a new type of militancy. The growing power of the rank-and-file members in the unions was evident in the numerous votes to reject settlements. recommended by union leaderships. Never has there been greater solidarity and determination to ‘stick it out in strikes until objectives are won. This rank-and-file pressure extends beyond economic issues and into the political arena. It finds expression in the rejection of an incomes policy which allows prices, rents, interest and profits to rise, while seeking to depress labor income. It was evident in the mili- tancy and the turn to the left at prov- incial federation conventions. It was also evident inside such movements as the New Democratic Party, both prior to and during the Winnipeg Conven- tion of that party. POUEREUUUGUEUUAUACUUUUCEEEEDEDED TELE MMT he As we enter 1970, more than six mil- lion, workers in the U.S. and one and one-quarter million Canadian workers will face stiff bargaining for new con- tracts. This is about one-half of the unionized labor force in this citadel of world imperialism. Industries automobile and electrical manufactur- ing, timber, pulp and paper, construc- tion, mining, chemical, air transporta- tion, public utilities, federal, provincial and municipal employees, shipping, railways, communications, clothing, re- tail trade etc. Collective bargaining today takes place on the background of a fierce campaign to promote the idea that or- ganized labor’s claim for more wages to meet soaring monopoly prices and living costs, is the “cause of inflation.” Prime Minister Trudeau hypocritic- ally declares his government to be the champion of unorganized workers against the power and the “greed” of the “big unions.” “Because they have strong bargaining power,” he said on a CBC telecast last Nov. 2, “they are trying to get a big slice of the cake and pass on the result of their greed to the little people.” But who, except the little people are being hurt by Tru- deau’s austerity drive and deliberately planned unemployment? About one-half million Canadians are now out of work, and the ranks of the unemployed will swell in the com- ing months. “But if people think we are going to lose our nerve because of involved in Canada are. ~~. »)