First of all, I want to make clear that I don't hate any of
my brothers-in-law. However, it has occurred to me that the
brother-in-law (or pick your least favorite relative) metaphor
provides a fitting way to think about the recent political change
and pending tax changes in Canada. All families have at least one
member that shows up late, drunk, or is otherwise obnoxious at
family gatherings; and if that person is your brother-in-law, you
simply can't hate him because it would break your sister or
spouse's heart (and also make you look like a jerk). You
don't have to warmly embrace him, but you have to figure out
how to get along with him, and above all you can't hate
Regardless of your political affiliation or philosophy on tax
policy, change is coming. While we don't have to welcome the
change with loving arms, we do have to figure out how to
productively work with it. We cannot, however, take up arms, become
entrenched in our positions, and curse the new reality. After all,
doing so would be unproductive and would break Mom's heart.
With the foregoing in mind, I don't love popular rhetoric
that suggests those deemed "rich" should pay more than
their "fair share" of tax. In fact, I hold this position
in low regard (though I don't hate it). While open dialogue on
the topic is meritorious, I would suggest that the position
represents a step down a slippery slope and can have unintended
Recently, there has been no shortage of people and media
advocating – via study after study – that the
"rich" (however you define "rich") have a moral
obligation to pay more than their "fair share" and there
is plenty of money for them to be able to do so. Nonsense. While
there are many arguments against such an advocation, let me remind
people that tax practitioners live the front lines of advising the
so-called "rich" (and also the "not-so-rich").
Such people are just like everyday folks, but many have risked
everything they have to start businesses. Most of those
entrepreneurs have created jobs. When those "rich"
entrepreneurs are asked to accept even more risk by having to pay
significant additional taxes – which reduces after-tax
capital available to continue to operate or expand their businesses
– there can be significant spillover effects such as
reluctance to work, loss of jobs or engagement in very aggressive
tax avoidance schemes. I trust that the people we have entrusted
our great country to will consider this when pushing forward with
promised tax rate increases.
I'm reminded of the movie "Christmas Vacation", and especially the
character Eddie (played by Randy Quaid) who is Clark Griswold's
(played by Chevy Chase) brother-in-law. Eddie shows up at the
Griswold house and parks his old RV outside the house, drains his
sewer into the street and causes overall chaos. However, in his
heart, Eddie means well, even if his actions are misguided. None of
the Griswold's truly dislike Eddie... how could they? He's
family. That's how I feel about the looming tax increases. I
certainly don't like the chaos that may result, but ultimately
we may need to live with them. And like an impending visit from
Eddie, the anxiety of the visit is likely much worse than the visit
Below are the tax rates that the "rich" will need to
pay if the newly elected Liberal government follows through with
its election promises:
As you can see, such rates are a significant increase from
recent years. In June, our firm wrote about the Alberta tax rate
increases and provided a
list of suggestions that private business owners should
consider. The list that we produced is still a great list, but
obviously we need more details of the proposals in order to fully
analyze the effect of the proposed rate increases. Prior to the end
of 2015, we would strongly urge private business owners to review
this list again and take necessary actions.
Once you're finished taking necessary actions to account for
the increased tax rates, make your family happy and give your
brother-in-law a hug.
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