Wednesday, April 25, 2012
How much revenue will new Ontario tax on rich raise?
In order to pass their budget in the province of Ontario the minority Liberal government made a deal to impose a 2 per cent surtax on those earning more than 500,000 a year in return for support from the New Democratic Party. The Liberals say the increased revenues will go to reduce the 15 billion dollar provincial deficit. However, there is considerable debate about how much the new tax will actually generate.
Kevin Milligan an economics prof. at the U. of B.C. said: "We're still going to raise revenue from this new tax. But it just might not be as much as the Liberals or NDP hope," This is hardly surprising since politicians are apt to be too optimistic when calculating such revenues. However, the rich are also well endowed with tax avoidance experts.
Not only may the rich find loopholes to negate the increase but they may be able to move income out of Ontario and thus frustrate the intended effect of the new tax. Even so some increase in revenue is better than none and perhaps we should count in the increased payments for tax experts who may then spend more!
Other jurisdictions such as the U.S. are attempting to introduce more taxes on the rich. In the U.S. Obama is plumping for the Buffet rule that would see a 30 per cent tax on the very rich. So far the Republicans have managed to frustrate attempts to pass such a tax.
However, Obama's proposal is timid compared to that of Francois Hollande the front runner in the race for the French presidency. He has suggests there be a 75 per cent tax on millionaires. '
The UK government had a top tax rate of 50 per cent but lowered it claiming that it did not increase revenue. Perhaps the revenue refers to donations to the political campaigns of the ruling parties as well as to the government. The rate has gone down to 45 per cent. For much more see this CBC article.