Once again, tongues are wagging about defined benefit pension plans, particularly the impact of the upcoming budget on public sector retirement packages. An aging workforce and longer life expectancy have made it more expensive to provide them. What to do? Some recommend scaling back the entitlement while others advocate increasing the employer contribution.
Yet an obvious part of the solution is the one that everyone forgets: lower business taxes. Virtually every defined benefit plan in the country owns shares in the country's largest and most profitable enterprises. If these businesses make good after-tax money, they can pay better dividends to the pension funds that own their shares.
Take the Canada Post Pension Plan (CPC Pension). During the recent debate over the Canada Post strike, members of the New Democratic Party simultaneously demanded that the existing pension fund for mail workers be preserved and that corporate taxes should rise to pay for more government spending.
These concurrent demands are painfully ironic. The top five holdings in the CPC Pension are Toronto Dominion Bank, Royal Bank of Canada, Bank of Nova Scotia, Suncor, and Canadian Natural Resources. Banks and oil companies -- the twin villains in every left-wing storyline -- pay dividends to the pension fund of these unionized workers. These dividends come from after-tax profit. If the business tax rate rises, the after-tax profit remaining for the pension funds drops.
At the time of the strike, the Canada Post Fund had $202 million invested in Toronto Dominion Bank. When TD profits, it can reinvest the money in growth or pay dividends to the shareholders (either way, the pension fund gets a better return on its investment).
However, TD can only pay out these benefits on after-tax earnings. If taxes go up, dividends and capital gains necessarily go down and shareholders (including the postal workers) lose out. It is really that simple.
Anyone in Canada with a pension plan has a good reason to celebrate the New Year. On January 1, 2012, the final installment phase of the Harper government's business tax cuts took effect, dropping the rate to 15 per cent from 22 per cent only a few years ago.
By contrast the 2011 NDP election platform proposes to increase the corporate rate from 15 per cent to 19.5 per cent (a one-third hike) to raise $9 billion for new federal spending. The Liberals proposed similar business tax increases. That would drastically reduce after-tax earnings left to pension funds who own shares in these very same companies. In that sense, a corporate tax hike is a tax increase on pensions.
By contrast, when Prime Minister Harper reduced business tax rates by one-third, people saving for retirement benefited. These beneficiaries also included Canadians without company pension plans. Almost seven million Canadians have opened Tax Free Savings Accounts (TSFA) and many more have Registered Retirement Savings Plans (RRSP).
These investment tools are often used for mutual funds or stocks. On top of that, 17 million Canadians are invested in the Canada Pension Plan (CPP), which owns over $18 billion in domestic equities. These people are directly or indirectly shareholders, as well. All of these retirement investments enjoy dividends and capital gains from after-tax profits. Tax these profits and you are ultimately taxing the retirement funds of ordinary middle class people.
We should celebrate the fact that workers are invested in capital markets. It is good for everyone involved. People grow their retirement savings while their money provides investment capital to companies that create jobs and build wealth.
But the benefit is not just economic. It is also societal. Politicians often like to divide people by socio-economic class: workers versus capitalists. The two are increasingly one and the same, due to direct or indirect share ownership by workers.
The old utopian socialist dream was for workers to become owners of the "means of production" through the process of forced collectivisation. In an ironic twist of fate, it was the capitalistic stock market -- and not the state -- that transformed workers into business owners.
For them to retire in peace and comfort, we need a strong profitable business sector with low taxes.
Canada Pension Plan Post-Retirement Benefit
Canada urged to end 'pension apartheid' | Retire ... - Financial Post
What a guy he must have majored in stupidomics.
they will thank you ---not by hiring, but by cutting wages 50%
know of any cases like that?????
text book ideology versus empirical evidence----
get real mr polievre, get real
Yes, a company's main priority is to achieve higher productivity and profits. However without high-skilled labour, they will never reach the desired quality/quantity of their services/products.
As well, there is a very competitive labour market, with many highly skilled invidivuals looking for employment. In tough times such as this, they will not find jobs because companies that wish to hire them are strapped for cash and are drowning in government taxes and redtape.
So what can a government do to resolve this conundrum? It is through cutting red tape, making it easier for businesses to thrive and grow and it is through cutting down corporate taxes, to give businesses the extra edge so that they will operate in our countries and not in a competitor country with better taxes and better regulations.
Banks produce nothing. They skim the cream from the productive economy. They make their money by charging interest on money they lend out that they created out of thin air through the magic of fractional reserve lending. Yes they should be taxed, and it should be a progressive tax to discourage the sort of fraud the US and British banks have engaged in while worshiping at the alter of greater profit.
We want to lower personal taxes = Canadas revenues shrink.
We want to privatize profitable public institutions = Canadas revenues shrink.
We want to free trade the entire freakin' planet = Canadas revenues shrink.
So how are we ever supposed to pay off our debt ? Or afford the 50B+ in new military hardware ?
Or is the plan to sign over our assets to everyone under the sun so nothing can be repossessed when we declare bankruptcy ?
If you want to know why these neo-clowns always want to slash taxes, revenues, tariffs etc etc etc, research “starving the beast” (do it). As hard is it might be to believe, they’re bankrupting us on purpose.
A great way to privatize, for example, healthcare without having to take any flack over it; make it so that we simply can’t afford it in any way, shape or form. When things get bad enough everyone will be begging our government to abandon all public spending and privatize everything under the sun to avoid complete bankruptcy.
With the 53 Billion dollar deficit, Harper and his gang created a crisis so that they could manage it. Of course, to the Harper dictatorship, managing that crisis means making cuts to all the things that don't square with their neo-con philosophy. Paying off the debt is the last thing in their minds.
It is high time that corporations were made to pay more taxes and to keep the pension plans of their employees topped up. Keep on with taxing the average Canadian who has a job will eventually cause massive reductions in societal benefits, all so that corporatios can be more profitable and continue to suck up public money
The necessary taxes must come from the economy where the money is produced and collected as created before it can be siphoned off. Too much of the profit created by the efforts of thousands of workers is sent out of the country, electronically, as soon as made, to foriegn owners. Additionally, why should taxpayers be expected to subsidize corporations to invest in Canada? To create jobs? Nonsense-jobs will be created because it makes sense to invest in a solid society with an educated population and the chance of making a profit is very good.
Let the individual save for themselves. Whether they be business owners or employees, we all have individual savings options for ourselves (RRSPs) and for the education of our children (RESPs).
If we entrust our money to the government (CCPs) or through corporate versions of retirement funds, then we will always have the uncertainty of losing all of it. Look at Nortel, those employees worked 10-20 years for a company believing they will retire with enough in their pensions. When the company went under, their pensions were the first to be used up to pay for the company's debts.
It is high time that we take care of ourselves through hard work and personal savings. We have to avoid the temptation to acquire debt we cannot repay back and to live within our means.
Lower crime rate. Climate change. Happier nurses. Faster horses. More expressive GM vegetables. Lower crime rate. Shorter line ups everywhere. Healthy children. Factory daycare. Rose smelling poop. Lower crime rate. Privitized oxygen. Dayglo oilwells. Prefried potatoes. Young conservatives wearing bellbottoms ironically. Everybody gets laid! Lower crime rate through increased incarceration.
People will negotiate with the knowledge that what they promise another tomorrow can be rescinded.
Typical Tory short-sighted corporate brown-nosing. Granted, they'd get more support if they zeroed out their OWN defined benefit pensions. But we know they won't.
Do you achieve efficiency for the public sector services by wasting more tax dollars? No, you have to cut off the fat, make them WORK for their salaries and make them show some accountability for how they use up their 8 hour work days.
30% FOR THE POOR SENIOR ---15% FOR THE CORPORATE FRIENDS
and this dude is arguing for even lower corporate largesse
IF YOU'RE A NEWS OUTLET, YOU'RE DOING THEIR WORK FOR THEM.
Corporations are already setting on massive amounts of money and doing no investing. Lower taxes and all will be right in the world is the Conserative mantra. Not working so well to date.