As I’m preparing to file my tax return, I can’t help but notice a certain number that jumps out from the first page. Marginal tax rate: 31%. Yes, I live in Canada, a socialist (if not communist) country by most Republicans’ standards, where we’ve had legalized gay marriage for years, public healthcare for decades–and the thought of declaring bankruptcy due to a medical procedure is simply unfathomable. In America, the top marginal tax rate is 35 per cent, and that’s only if you make more than $388,351. Nobody pays a 31 per cent marginal rate in the States, although a single person making more than $178,651 pays just slightly more than me at 33 per cent.
That is, of course, if you don’t have a decent financial adviser. As he admits on his own freakin’ website, Republican presidential hopeful Mitt Romney paid just 13.9 per cent tax on income of 21.6 million dollars, consisting largely of investments, in 2010. You know who has an effective tax rate of 15 per cent in Canada? People earning less than 42-thousand dollars a year. To be fair, my effective tax rate on last year’s earnings was 22 per cent, but that still dwarfs Romney’s rate–and let’s just say he made a bit more money than I did. President Obama, on the other hand, paid 26.3 per cent of his income in taxes. And he’s still a millionaire, by the way.
The scary thing is that if Romney lived in Canada, he’d pay even less tax, according to this Financial Post column. Okay, so we’re talking a rate of 14.2 per cent, which is just 1.2 percentage points less than the 15.4 he paid on last year’s earnings–but that’s still saying something. In the Post‘s words, “for a top income earner, Canadian dividends are taxed a top federal rate of only 17.72% (2011) while capital gains for a high income earner would be taxed at half the top marginal tax rate or 14.5% (i.e. 50% X 29%).” Basically, if most of your money comes from investments, you won’t be paying much tax on either side of the border.
It’s one thing if your money is earned by following the stock market and picking bonds and equities (though I still don’t feel sorry for you), and quite another when big-shot CEOs are paid largely in stock options as a way of earning less tax on their income. Okay, so it’s primarily a measure to tie their salary to the performance of the company, but the super-low tax rate is definitely an added bonus. What I don’t get is why we charge the same tax rate on dividends and capital gains to the part-time day-trader as we do to multimillionaires. In my books, it makes more sense to have a sliding scale of taxation for investment income, since we are talking about earnings here, not some sales tax like the HST. Of course, with a large number of sitting House and Senate Republicans having signed a pledge to never raise taxes–and with the Republican-minded Conservatives holding a comfortable majority until 2015 up here, it’s safe to say that we won’t see any investment tax reform any time soon.
One thing that most media stories don’t mention, though I’m sure it’s there in his 200-page tax return somewhere, is what kind of tax refund, if any, Romney will receive. Personally, I plan on using my 300+ dollar refund to get a tattoo of His Mittness on my left ass cheek to match the Chad Kroeger tattoo on the right…
OK, so I don’t have the singer of Nickelback on my buttocks, and I don’t plan on putting Romney down there, either. Incidentally, I’m using my tax return to take a trip to the States. Perhaps I shall invest in a coop while I’m at it. After all, I’d pay even less capital gains tax, being that I’m Canadian. ;)