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June 30th., 2015
Volume 19, Issue 1
Dear Friends and Partners,
I was going to start talking about death, but I figured what the hey, let’s lighten up the mood a bit and talk taxes. That seems to be the order of the day. With our new NDP government here, we quake with worry at every exhale of impending tax increases. With the federal election looming in October, we hear talk of taxes. Even in my fair city (or should I say, especially in my city…) talk of a staggered, three year (18%) property tax increase to fund the Valley LRT is probable. Some taxes are necessary and good, others…. not so much.
If you haven’t read this fun parable on explaining taxes, have a read now. It’ll bring a chuckle or a tear to your face. Happy Canada Day!
The cost of dinner - The Globe and Mail Tim Cestnick
"Each and every day, 10 men go to a restaurant for dinner together. The bill for all 10 comes to $100 each day. If the bill were paid the way we pay our taxes, the first four would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The 10th man – the richest – would pay $59. Although the 10 men didn’t share the bill equally, they all seemed content enough with the arrangement – until the restaurant owner threw them a curve.
“You’re all very good customers,” the owner said, “so I’m going to reduce the cost of your daily meal by $20. I’m going to charge you just $80 in total.” The 10 men looked at each other and seemed genuinely surprised, but quite happy about the news.
The first four men, of course, are unaffected because they weren’t paying anything for their meals anyway. They’ll still eat for free. The big question is how to divvy up the $20 in savings among the remaining six in a way that’s fair for each of them. They realized that $20 divided by six is $3.33, but if they subtract that amount from each person’s share, then the fifth and sixth men would end up being paid to eat their meals. The restaurant owner suggested that it would be fair to reduce each person’s bill by roughly the same percentage, and he proceeded to work out the amounts that each should pay.
The results? The fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $14, leaving the 10th man with a bill of $50 instead of $59. Outside the restaurant, the men began to compare their savings. “I only got one dollar out of the $20,” said the sixth man, pointing to the 10th man, “and he got $9!” “Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too! It’s not fair that he got nine times more than me!” “That’s true,” shouted the seventh man. “Why should he get back $9 when I only got $2? The rich get all the breaks!” “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine outraged men surrounded the 10th and brutally assaulted him. The next day, he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they faced a problem that they hadn’t faced before. They were $50 short.
The moral
There are a couple of lessons to be learned here. The first is an observation from my wife: If the 10 individuals had been women, they probably would have figured things out. But in all seriousness, I’m going to suggest that the approach taken by the restaurant owner in the story is exactly the right approach to divvying up tax cuts. It’s how our system should work. The people who pay the highest taxes should get the greatest relief from a tax cut, in absolute dollars.
The fact is, if you overtax the rich, they just might not show up for dinner next time. After all, there are plenty of good restaurants around the world."
This story is relevant today because both the Conservatives and the Liberals have proposed to cut taxes – in different ways. The Liberals have said that they would offer no tax cuts to the rich, but would instead increase the tax burden on the highest earners. The problem with this, of course, is that pushing any taxpayer’s marginal tax rate to 50 per cent or higher (which would be the case for many Canadians, particularly in provinces that also have taken steps to increase the marginal tax rate for the highest earners) will absolutely cause those folks to explore new ways to bring the tax burden down. And in the end, it may drive some to leave.
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.
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Hicks on Biz: Edmonton’s economy not too hot, not too cool
By Graham Hicks, Edmonton Sun, June 19th, 2015
This is extraordinary.
A year ago, the global price of oil plummeted – from $100 (US) a barrel to $50 to $60, where it seems to have come to rest.
Ours is an energy-based economy. Every other time oil and/or natural gas prices fell, in 1983, 1998 and 2009, Metropolitan Edmonton suffered. Unemployment rates jumped, jobs dried up, housing prices fell, folks left town. GRAB THIS STORY
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Canadian crude in high demand amid shortages
By Jeffrey Jones, The Globe & Mail, June 8th, 2015
Brisk demand along with supply disruptions due to Alberta’s wildfires have propelled Canadian heavy crude oil prices to their highest this year.
Recent prices for Western Canadian Select heavy crude, a blend of bitumen from the oil sands and conventional heavy oil, reflect an unusually narrow discount to North American benchmark oil. The weakened Canadian dollar has also boosted returns for Canadian producers, even as OPEC holds firm on output to keep world prices low in a bid for more market share. FOLLOW THIS ARTICLE
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Gunter: Oil and gas sectors given raw deal in Alberta throne speech
By Lorne Gunter, Edmonton Sun, June 15th, 2015
I guess if you like the government deciding who can and cannot make donations to political parties, you loved Monday’s throne speech.
Likewise, if you buy into class envy and angrily believe “the rich” should pay more taxes — and businesses large and small, too — you’re probably ecstatic.
Otherwise, Monday’s blueprint for the new NDP government, delivered by new Lieutenant-Governor Lois Mitchell, was, as Wildrose Leader Brian Jean said, “disappointingly thin.” READ MORE HERE
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