Monday, April 4, 2011

Forward to Trudeauville

John Ibbitson wrote a piece yesterday titled “With New Platform, Liberals Chart Course Back to Trudeauville.” I don’t know that Michael Ignatieff is going “back” anywhere, but I am glad to see the Liberal Party’s renewed emphasis on education, child care, and the environment.

The Liberal plan calls for fairness in taxation. It’s hard to know how to structure a system of taxation in such a way that it is truly fair. However, it is not difficult to discern the feelings of those who are taxed. Wealthy individuals south of the 49th who pay less than five percent of their income in federal tax are most visible and vocal in their complaints that taxes are too high. They pay a small percentage of income in taxes, but to listen to them you would think they inhabited the most socialistic country in the world. “I’m in the 28% tax bracket,” she says, almost in tears. You can feel her pain, and when she says, “Taxes are too high!” you recall your own sense of loss when the government takes money you might have used for your daughter’s braces or new shingles on the roof. Seems like she’s right, you think: Taxes are too high.

We need to separate feelings from reality. I have been solidly in the 28% tax bracket for many years. But I have never paid more than 7% in federal income tax. I’m not cheating. I don’t even reduce the tax as much as I could. In the United States the tax code is brimming with exemptions and deductions and ways to calculate business and personal loss in such a way that taxes can be reduced, often to nothing. Skilled accountants can manipulate the complicated tax code to reduce tax all the way down to zero. The next time you hear someone from south of the 49th complain about taxes, realise that she is not complaining about high taxes. She wants to pay no tax whatsoever.

Perhaps the fact that wealthy and powerful people pay fewer taxes and at a lower percentage of income and wealth is a good thing after all. Shouldn’t innovation and resourcefulness be rewarded?

Science and society and the free market are limited by an unbreakable rule of economics. The 80/20 Rule has been found true for physical and chemical phenomena as well as for social interactions and product sales. In the realm I inhabit, achieving 80% drug purity requires perhaps 20% effort. Bringing that purity up to the FDA-required 99% requires an army of people to do the work, test purity and efficacy, and confirm purity through checks and audits. Probably about four times as much effort is given to achieve that last 20% of purity compared to the resources required to achieve the first 80% of purity. In industry, 20% of companies control 80% of sales. In the literary world, 20% of authors write 80% of the books anyone is ever going to read.

When I travel, my hotel room is prepared by a woman who earns less than 20% of my annual income. I am served breakfast, lunch, and dinner by waitresses and waiters who earn less than 20% of my salary. The janitors and maintenance people who prepare the boardroom where I will deliver my oral consultant’s report are payed less than 20% of my income. Throughout my work day, I am continually interacting with individuals whose industry is rewarded at less than 20% of my generous salary. Yet they are working long hours, just as I am. Does their hard work carry less value than mine?

The conservative nods. “Yes,” she says, “janitors and housekeepers and waiters are providing non-creative services. You provide a creative service to corporations and this is reflected in your $160 per hour salary.”

Pierre Trudeau shakes his head. “No,” he says, “janitors and housekeepers and waiters are performing work you could not complete on your short schedule. They are the ones who allow you to arrive on time, well-rested and well-fed, to deliver your report. Their time is just as valuable as yours.”

Society cannot easily regulate my salary or the janitor’s hourly rate. But society can oblige me to pay a fair share of taxes. Probably the janitor and the housekeeper should be paying no tax whatever. Their physical labour is sufficient tax. However, someone like me who is coddled and primped and served all day long should pay a significant portion of income in taxes. My income should support the daycare workers who care for the housekeeper’s children, should pay the salary of teachers who educate the janitor’s daughters and sons. I ought to pay a share of costs to build and maintain the roads that brought me safely and quickly to the company who requires my expertise. I should be paying in taxes a higher percentage of my income than someone earning only $50 per hour, and that person should be paying a higher percentage than someone earning $25 per hour. People earning less than $15 per hour should never even receive a tax form.

There was a time when this philosophy was called progressive taxation. Now it’s called “soaking the rich.” But it is the only fair system of taxation. Those who benefit most should pay the most to support the system that allows them to rise to prominence, power, and wealth.

It all comes down to our attitudes about the value of human life. When I am about to check out of my hotel room I first make sure I haven’t left too big a mess. I make sure I haven’t forgotten anything in a drawer or on the nightstand. And then I reach into my pocket and pull out a portrait of John A. MacDonald or Alexander Hamilton, depending on the country I’m in at the time, and place the bill on the pillow. My hotel room set me back $100; is a 10% tip for the housekeeper too much? I don’t think so. And as for attitude: I have yet to assess any gratuity I give as a business expense so that my tax burden can be reduced. The ten dollars I leave the housekeeper or the twenty dollars I leave for the waiter are not tokens of my wealth, to be reimbursed by the government. They are tokens of my gratitude, freely given, because I esteem the good work performed on my behalf, and consider it worthy of my support and recognition. Society is for all of us, and not just for those who believe themselves more worthy. We’re all worthy. Every one of us.

Mr. Ignatieff’s plan is not going back anywhere. It’s taking us to the kind of future we ought to have had long ago. It’s progressive. It’s a good idea. As Trudeau would have said, it is a step in the direction of a Just Society. There could be no better road to the future.

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