Tax cut best spent on cauliflower

It's January and the "middle class" tax breaks are taking effect. Did you feel it? A family with a combined income of $100,000 could be raking in an extra $13 per month! 

That's money that could go towards the kids' education. Or a couple heads of cauliflower. 

The average salary of a Canadian is around $50,000, so most people can expect a paltry $7 cut on their monthly paycheques. If you're one of those uppity upper middle class folks and rake in $90,000 per year, you can expect up to $57 per month.  

When I told one of my upper middle class friends he could be saving $50 per month, he said with a humph, "That's it?" (Yes, he's quite uppity.) 

While it's certainly nice to take home a little more each month, I would suggest it's not worth $4 billion. That's what the C.D. Howe Institute projected it would cost the federal and provincial governments to institute the tax break while at the same introducing a higher tax rate for those making over $200,000. 

The middle class tax cut/upper class tax increase was supposed to be revenue neutral, if you recall. As it turns out, the new government has already admitted it will take in far less than promised in the election campaign. But as with so many election promises, we fail to get too caught up in the details.

Many economists at the time indicated that while a higher tax rate on the rich sounds good in theory, it doesn't usually work out. While it's next to impossible for your average worker to prevent the government from clawing back its taxes, the wealthy have options. By taking advantage of tax loopholes and offshore tax havens, billionaires can somehow achieve lower rates of taxation than janitors. Unless you're a janitor who just won millions of dollars in the lottery (which I've heard happens), you're likely paying a higher portion of your income to taxes than Bill Gates. 

 The issue was recently highlighted in a report by Oxfam, where it was reported that $7.6 trillion of U.S. wealth is in offshore tax havens. They estimate $190 billion would be available to government if that wealth was taxed.  

Even more alarming, the report indicates the richest 62 people in the world now own as much wealth as half the world's population of 3.5 billion people. This statistic is difficult to wrap one's head around. Sixty-two people are worth almost $1.76 trillion. Over the last five years, those 62 individuals have increased their wealth by 44%, while the poorest 3.5 billion have had their wealth decline by 41%. 

There are many reasons for this divergence, and unfortunately, it's not a problem that can be easily remedied. As our newly formed government has shown, you can't just increase tax rates to bridge the gap. 

All that being said, we're still fortunate in Canada, where a "wealthy" person is considered someone who makes $200,000 annually. There's a reasonable level of equity in our country, much thanks to our strong social programs and progressive tax system. 

And while I criticize our new government's middle class tax cut, I applaud the enriched Canada Child Benefit, which will actually give the most to those who need it most. Low-income families stand to benefit as much as $300 more per month. 

There will be no, "Humph, that's it?" when these low-income families receive their cheques in July.  

For many families it will provide the means to feed the kids and pay the rent, rather than have to choose between the two.