1) It is more complicated than necessary
2) It penalizes people for being innovative, for being more productive and for working harder.
I'm not talking about abolishing income taxes here but my biggest gripe is with the fact that our income tax system penalizes people who are trying to improve their family's well being and the general well being of our country. Let us use an example:
Imagine Bill. He owns his own company and he works hard to find new ways to serve his customers through better products and services. Lets pretend that Bill, because he works hard, makes a personal income of $100,000 per year. In BC, under our tax system, ignoring personal deductions, he pays $28,187 in income taxes, leaving him with $71,813 to feed, house, and cloth his family. This seems alright since Bill is a proud Canadian and doesn't mind paying some tax to help run his country and his average tax rate seems reasonable at 28.1%.This situation is actually all too common in Canada because successful and innovative people like Bill make economic choices everyday based on the net benefit to them, their company, and their family. Our tax system unfairly taxes the people who would likely create new jobs, invest in equipment and provide innovative new services given the right incentives. I'll talk more about our tax system again soon.
Bill is considering implementing a new service in his company and he would earn an extra $100,000 per year if he implemented this new service. His customers would be very well served and this would be a tremendous innovation for his industry. The drawback is that Bill would have to invest a little, risk losing his idea, work longer hours and be away from his family in order to implement this innovation. Bill does some figuring and looks at what he should do since his family could really use the money to pay for braces, education, a family vehicle and a family vacation. Bill figures that if he implemented his new service and worked the extra hours he would earn $100,000 extra per year, bringing his gross income up to $200,000. He also figures that he would go from paying a reasonable $28,187 in income taxes to paying an excessive $71,339 in income taxes and he would go from a net income of $71,813 to a net income of $128,661 - an increase of only $56,848 for all that investment, risk and effort - leaving him with an average tax rate of 35.7%.
Unfortunately, for his customers, Bill decides that the investment, risk, and extra work is not worth $56,848 per year and makes the choice to postpone the implementation of this service until it makes more sense.
Find out your own personal tax rates here.
What do you think? Gong?