Ted Talks: The Cost of a Complicated Tax System
In his latest column, Provencher MP Ted Falk promotes a program in which able volunteers help people with “a modest income and a simple tax situation” file their tax returns. Volunteer initiatives are a wonderful thing, but let’s look at why this one is even necessary.
Complicated Tax System
We all need to file our taxes each year to ensure that the government has taken the correct amount off of our paycheques over the past year. This is a good thing, because it means that the government is accountable and can’t take more than the current rates allow. It’s also our chance to claim all of our tax deductions. Deductions are there to encourage people to spend their own money on things that the government would otherwise have to provide, and most of us have quite a few deductible expenses – things like rent, charitable donations, and tuition costs. Adding up all of these deductibles means that most people with “a modest income” will get most of the taxes they paid over the past year back in a tax return. But adding up all of the deductibles according to the rules of the tax system is so complicated that most of us are willing to pay an expert to make sure it’s done right.
Ted also talks about the Conservative “Family Tax Credits and Benefits Plan.” This introduces more tax deductible expenses, and while that means that many of us are able to get more of our taxes back, it also makes filing taxes just a little bit more complicated. Conservative governments are well known for providing “tax relief”, but if you need to hire an expert to make sure you get that relief, is it really a fair system?
The Tax Industry and the Cost of Taxes
There are currently 190,000 members of the Chartered Professional Accountants of Canada, and many accountants deal mostly with tax returns (H&R Block boasts that they alone have over 10,000 accountants, and they only deal with tax returns). There are also many online and software options, some free and some not. My family paid $200 for an accountant to file our taxes this year. Every year I suggest filing for free using some software option, but I don’t feel confident enough in my knowledge of the tax system to think that I could possibly do as good of a job as an accountant, and my wife agrees: she calls that $200 our annual marriage-saver. Taxes are stressful, and we’re able to pay for the peace of mind that comes with having a professional look after our taxes. But not everyone has $200 to spare, and the cost is actually much bigger than that.
Accountants are smart people, yet many of them spend most of their time helping us deal with an unnecessarily complicated system. Their time could be much better spent in ways that contribute to the economy, rather than helping the rest of us make sure the government isn’t taking too much of our money. Accounting is a very valuable service, but it doesn’t actually produce anything; it largely belongs in the same category as police, ambulance attendants, and disaster relief workers, the people we pay to help us escape from terrible things. The thing of it is, we invented taxes, and we have total control over how they work. They don’t need to be terrible things, and we don’t need to divert almost 200,000 Canadians away from more profitable work that would benefit our whole economy.
We also shouldn’t have to spend money to make sure we can keep our money. I’m pleased to see that the government notices that not everyone can afford an accountant, and that they support a volunteer program to help, but they’re also going to spend a million dollars ($1,000,000.00!) to support that program.
So, the government is spending tax money to help people pay less taxes because their own system is so complicated that people can’t handle it themselves and can’t afford to hire an expert do it for them. It doesn’t get much more convoluted or inefficient than that, but it doesn’t have to be this way.
Simplifying the Tax System
The Conservative approach to taxes is to simply cut the tax rate for corporations (a simple move), while giving individuals and families many small tax deductions full of conditions that make it hard even for Senators to understand.
The Green Party’s approach to taxes is to tax things that are bad: things that hurt our health and environment, things that cost us all money in the long run. We recognize that while most of us don’t understand the complicated income tax system, we all understand the cigarette tax: smokers raise healthcare costs, so we make cigarettes more expensive to recoup those costs. We want to review the entire tax system, phasing out the complicated income tax system and replacing it (over time) with taxes that target harmful things like pollution that drives healthcare costs, market speculation that destabilizes our economy, and other things. Taxes that are designed so that we can control the amount we pay based on the type of things, and the volume of things, that we consume.
So while I’m pleased that the government is trying to help people get their tax returns, and that they’re trying to make income tax less of a burden for families, I think they’re using hundreds of tiny bandaids to hold together a broken system, and it’s getting to a point where it’s hurting more than it helps. Let’s fix it instead.