Tag Archives: taxes

Ready to Start Paying Back $300 Billion Or So?

Our Federal deficit will be between $280 and $300 billion this year! The deficit is just what we’re short in spending versus income. No, it’s not like a credit card. That’s a cute political shot that’s just not close to being true but sounds nice and simple. But think of it as you spending more than your income. If it was $500 a month that’s a problem – but that can be solved. Then, overnight, it turns to being short $15,000 a month! When it’s 30x you’re no longer going to find some savings or being able to count on a cost of living raise. You’re starting to wonder if your 14-year old can hold a full-time job or whether you could live in your car…

And this isn’t an abstract problem that’s happening to a neighbour or friend. This is happening to you and me – we’re not just cosigners of this shortfall (and the debt that’ll hit a trillion dollars by the end of the years.) There’s only one group that owes it: You and me.

As a result, the government (this one or the next one) will need some huge extra income. Cutting a bit here and there will help but won’t get one-one hundredth of the money.

It’s a pretty safe bet that the GST will go up. That’s a big pot of money, but won’t make much of a dent. Tax increases? Maybe – but forget the political like that “we can just tax the rich.” It’s bullcrap. There are only 270,000 Canadians earning over a quarter million a year and their marginal tax rate is already over 50%.

Could it be that they’ll start taxing the sale of your home? Your principal residence sale profits aren’t taxed. But it’s a good bet the government will look at it and maybe float that as a “trial idea” within the next few years. Whether it may come to pass or not, start keeping all your receipts for home improvements. If you made $300,000 selling your home it’ll be a big help to have $60,000 in receipts to deduct from that profit before it’s taxed. If it doesn’t come to pass, you can throw the envelope out – but you can’t recreate the receipts a few years from now.

If you have any other ideas of where the government can find a huge untapped pot of funds, I’m sure the finance minister would love to hear from you. Every level of government has their hands so deeply in our pockets already, there just aren’t many places left…

I doubt there are many people who question the wisdom or necessity of the Federal Government help because of the Corona virus. However, a rainy day fund of savings when the economy was humming along would have been great. But just breaking even hasn’t been a priority for years. The next five years will be a huge rude awakening for taxpayers that didn’t care much over the past decade…

This Is Your 10-Months Notice

With the extension of the Canada Emergency Benefits of $2,000 a month, vast numbers of people (that aren’t back to work) are now able to bridge their income for 24 weeks and a total of $12,000.

This is your 10-months notice that you WILL be paying tax on this money. You do on your earnings, on any EI you collected and on these benefits.

If your total earnings this year will be roughly the same, just take last years’ tax return and divide your total income line by the total tax you owed and/or paid. That’ll give you your tax rate. No matter what, it’ll be 20 to 30%. Since there isn’t tax deducted from your Emergency Benefits, you’ll need to be ready. At 20% that will have you owing at least $2,400 in taxes. With 10 months notice, that’s setting aside $120 every two weeks. If you choose to ignore that oncoming train and wait until January, you’ll need to save $600 a month since you’ll only have four months left before it’s due.

Your choice: $120 now or $600 later. But then, “later” don’t complain that you didn’t see this coming!

Governments Need Money And You’re Their Victim

The big story last week was that the city of Detroit filed for bankruptcy. They have one massive financial mess and a whole lot more problems on top of that. The biggest challenge is the over $9 billion of IOUs for retirement plans and retirees medical coverage.

When the economy isn’t growing, government revenues aren’t growing, either. Unfortunately, governments spend way more a year than the rate of inflation and population growth. Politicians also make all kinds of promises to get elected and to tell us exactly what we want to hear: You CAN have it all and your taxes won’t go up. It’s nonsense but it gets them elected. Plus, they won’t be the same people around when the mess hits the wall. It’s evident in every jurisdiction from federal to provincial to cities. It probably isn’t any different than we tell ourselves or our families: We can keep up our lifestyle and won’t have to change a thing, do a budget, or admit we can’t afford something. We should have it all – even if it’s on credit cards.

But for us and for governments, there’s a day when we hit the financial wall and then it’s only radical adjustments that’ll work. For cities, which are the hardest hit, it’s a constant search for revenues. When houses don’t go up in value, the property taxes they collect also go down – or they should.

In the US, millions of homeowners massively overpaid their property taxes because cities were really really slow in adjusting the market values downwards. After all, the last thing any jurisdiction wants to do is to lower what you owe them.

When I drove from New York to Washington, DC last month and back, I paid 17 tolls and over $51. A couple of cities in New Hampshire are actually suing some good Samaritans for plugging expired meters. Yup, wouldn’t want anyone to prevent them from writing a lot of expired meter tickets.

In Calgary, the city overcharged homeowners $51 million last year. Instead of a refund, they’re now debating what to do with the money. I have a $65 overpayment here from a client. What do you think will happen if I don’t refund it?

To renew the registration of my company here in Alberta is one click at a registry office and done. That used to be $20. This year it’s $150, which is an insane rip-off. But every company that wants to stay in business has to pay it.

Photo radar and red light cameras are a huge money maker. Sorry, the story that photo radar is critical in reducing accidents isn’t totally true. Just check the stats Highway Transport Safety Board. In Florida, some counties have now admitted that they’re reducing the time of orange lights after denying it for years. Why? Shorter Orange generates more red light tickets! Longer Orange reduces them a lot. With over $150 million in fines, the State REALLY wants the income.

And last week I drove through a town next to Phoenix called Paradise Valley. I would guess almost every second intersection has a red light camera. That’s in a town of not a lot of traffic.

Governments need money – and there’s only one person they can get it from and that’s you. We vote for these people and I’m looking forward to the day when the promises of politicians for more of this and that gets greeted with laughter and a collective ‘no thanks.’ One day we’ll have to teach the politicians what we want. But maybe first we have to run our own financial life in that way.