Tax system explained

[twenty6twenty]

THE CANADIAN TAX SYSTEM EXPLAINED

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...

If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do…

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,” but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"
The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.


For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible


---Author Unknown---

[I Think]

But beer is a weak purchasing example.
We are talking about bridges, schools, libraries, policing, and health care to name a few.
We are not talking about men, we are talking about children, women, men and need to account for people who are aged and otherwise unable to do for themselves at some level.

How do you propose to change the system to keep it fair for everyone.
A flat tax is not going to balance the books for the children or aged and infirm.
Getting rid of subsidies and tax breaks for the mega corporations might help.
Making our armed forces back into a peace keeping roll, might help.

[Jx3]

But beer is a weak purchasing example.
We are talking about bridges, schools, libraries, policing, and health care to name a few.
We are not talking about men, we are talking about children, women, men and need to account for people who are aged and otherwise unable to do for themselves at some level.

You obviously missed the line at the bottom of the post:

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

[mexi cali]

That was great. Thanks.

[alfred2]

thank you that was great, what a way to explain the taxes, easy to understand.

[I Think]

No lack of understanding there, it is easy to understand, it is simply wrong headed.
I think the term, for that kind of over simplified explanation, is Nirvana Logic.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

.

Nowhere does it say no correction needed.

[marooned]

I guess that the hardest part is that the wealthiest are given various tax vessels to make it appear as though they only earn as much as the 6th or 7th man in the example, so they actually don't end up paying the balance of the bill even when they sit and drink.

Don't get me wrong - I like progressive taxation model, but I would simply prefer there were fewer ways to make it appear you earned less than you did.

[Gilchy]

I guess that the hardest part is that the wealthiest are given various tax vessels to make it appear as though they only earn as much as the 6th or 7th man in the example, so they actually don't end up paying the balance of the bill even when they sit and drink.

Don't get me wrong - I like progressive taxation model, but I would simply prefer there were fewer ways to make it appear you earned less than you did.

Name some of these magic ways to reduce taxable income this drastically.

[I Think]

Working for your own corporation,
charging for your home office
writing off all travel and communication expenses,
writing off clothing.
writing off baby sitter
writing off entertainment expenses
perform each transaction through a tax haven corporation and leave the profits in the tax haven corp.
Using a lawyer to make all your investments, that way they are privileged and CRA cannot do anything about them.
write off xmas gifts to the kids of your business associates (that could be every one you know).
Your spouses ball gown/tuxedo
Collecting tax free R&D grants.
To name just a few.

[Gilchy]

Working for your own corporation, Corporate Tax paid, then dividends or personal tax paid
charging for your home office extremely limited by CRA
writing off all travel and communication expenses,extremely limited by CRA
writing off clothing. see how that goes in an audit
writing off baby sitter childcare deduction available to everyone
writing off entertainment expenses extremely limited by CRA
perform each transaction through a tax haven corporation and leave the profits in the tax haven corp. exceedingly complicated, and for the most part, tax has to be paid to get to said tax haven. If done illegally, charged with tax evasion
Using a lawyer to make all your investments, that way they are privileged and CRA cannot do anything about them. Someone's name must be on the investments, if it is the lawyer's it would be taxable to that person, if it is the client's, they would pay tax, if it is a holding company, it would owe tax. Not sure how you think this magically disappears from CRA?
write off xmas gifts to the kids of your business associates (that could be every one you know). Have fun in your audit...
Your spouses ball gown/tuxedo Have fun in your audit... Also, yes rich people are burying taxable income by buying ball gowns lol.
Collecting tax free R&D grants. Must qualify for grant first
To name just a few.

None of those are magical ways to bury income.

[logicalview]

Working for your own corporation,
charging for your home office
writing off all travel and communication expenses,
writing off clothing.
writing off baby sitter
writing off entertainment expenses
perform each transaction through a tax haven corporation and leave the profits in the tax haven corp.
Using a lawyer to make all your investments, that way they are privileged and CRA cannot do anything about them.
write off xmas gifts to the kids of your business associates (that could be every one you know).
Your spouses ball gown/tuxedo
Collecting tax free R&D grants.
To name just a few.

sigh. Just so clued-out.

[I Think]

/\ not so clued out my friend, just older and wiser than thou.

[Tacklewasher]

/\ not so clued out my friend, just older and wiser than thou.

You have no clue as to current tax law if you really think anyone can legally write off some of the things you listed.

[twenty6twenty]

But beer is a weak purchasing example.
We are talking about bridges, schools, libraries, policing, and health care to name a few.
We are not talking about men, we are talking about children, women, men and need to account for people who are aged and otherwise unable to do for themselves at some level.

How do you propose to change the system to keep it fair for everyone.
A flat tax is not going to balance the books for the children or aged and infirm.
Getting rid of subsidies and tax breaks for the mega corporations might help.
Making our armed forces back into a peace keeping roll, might help.

I am only proposing that the people who pay far less tax than I, stop whinging about how hard they have it.
Obviously a flat taxing system would never work.
Clearly mega corps should pay the highest tax and NOT be subsidized.
Does the prime Minister NEED to live in a 12000sqft home ? there is some money for the kids right there?
Or NEED to fly around in private jets?
It's the politicians who need to start paying their share back, by getting paid less to do the lousy job they do.

[The Green Barbarian]

Making our armed forces back into a peace keeping roll, might help.

Peace-keeping role eh? Just where do you want to put them right now in the world? Detroit? St. Louis?