Saturday, 5 April 2014

Not one of these taxes existed 60 years ago?

A warning: this post may be even more tedious than my usual offerings. I'm going to go through a line-by-line debunking of a frequently forwarded email that has arrive in my inbox just a few too many times. It consists of an amateurish poem about how terrible taxes are, which is followed by a lengthy list of taxes and the observation that:

"Not one of these taxes existed 60 years ago, & our nation was one of the most prosperous in the world. We had absolutely no national debt, had a large middle class, and Mom stayed home to raise the kids."

The crappy poem, I'll ignore, but this is a factual claim which is simply false, and it's a bad thing to formulate one's opinions on policy or anything else based on falsehoods. So I feel compelled to address this nonsense in some detail. And I'm just angry enough to go through the list item by item. Here's the compete list from the email:

Accounts Receivable Tax
Airline surcharge Tax
Airline Fuel Tax
Airport Maintenance Tax
Building Permit Tax
Cigarette Tax
Corporate Income Tax
Death Tax
Dog License Tax
Driving Permit Tax
Environmental Tax (Fee)
Excise Taxes
Federal Income Tax
Federal Unemployment (UI)
Fishing License Tax
Food License Tax
Gasoline Tax (too much per litre)
Gross Receipts Tax
Health Tax
Hunting License Tax
Hydro Tax
Inheritance Tax
Interest Tax
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Mortgage Tax
Passport Tax (fee)
Personal Income Tax
Property Tax
Poverty Tax
Prescription Drug Tax
Provincial Income and Sales Tax
Real Estate Tax
Recreational Vehicle Tax
Retail Sales Tax
Service Charge Tax
School Tax
Telephone Federal Tax
Telephone Federal, Provincial and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Water Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
I'll make a couple of general observations first.
  1. Almost all of the taxes that actually do exist today also existed 60 years ago. I am aware that this forwarded email has been circulating for a long time, and may well have started out as a fax or even snail mail chain, so perhaps it was written in the 1970s, when income tax was less than 60 years old in Canada? Somehow I doubt it was carefully researched, though. 
  2. Many of the things that are called taxes in this list are not taxes at all, but user fees for a particular service: if you don't want the service, you don't pay the fee. These fees may even be payable to the government, but complaining about them as separate taxes is bizarre, since they have to be paid for somehow, and if the government provided them for free they'd just have to raise the actual taxes everyone else paid.
  3. Some of the taxes that actually do exist are just different names for other taxes. It's like listing your pets as including "a poodle, a dog, a mammal, a puppy, a bitch, a canine, oh and can't forget Fifi", when all you have is just the one animal.
So here they are:

Accounts Receivable Tax: "Accounts receivable" is an accounting term used to describe money you're owed for work you've already done and invoiced the customer for. Basically, they're considered part of your income, and taxed as such based on the assumption that people usually pay their bills, which in fact they do. (If you don't get paid, you can usually write off the bad debt as a deduction later.) So this is not a distinct, separate tax: it's simply a part of income tax, which is already listed elsewhere.

Airline surcharge Tax: There are a whole lot of surcharges that airlines often add to your fare. Note: it is the airline who adds this surcharge, not the government, so calling this a tax is kind of a stretch. To be fair, airlines claim they are adding these surcharges to cover extra costs they have to pay, in particular the fees to the organization that operates the airport with its security and air traffic controllers and baggage carousels. Not a tax. 

Airline Fuel Tax:  This one actually exists in some jurisdictions, and probably didn't exist in the 1950's, so score one for the email. 

Airport Maintenance Tax: Uh, no, not usually. There might be the occasional municipality that imposes a specific tax to maintain an airport that they think is really important, but this is not a tax you or I are likely to encounter, except as an airline surcharge, which again, is a legitimate fee to impose on the airlines who, y'know, use airports to carry on their profit-making business.

Building Permit Tax: Not a tax. Building costs money all over the place, and one of those costs is ensuring it complies with safety codes and zoning requirements. If you're spending on materials and labour and land to build something, it's not unreasonable to expect you'll be able to afford the fees for processing those permits. The alternative is making taxpayers subsidize your building through actual taxes. 

Cigarette Tax: Yeah, this one exists, and was probably not around as a distinct tax 60 years ago. However, if you are wise, you will never have occasion to pay it. Score for the email so far: 2 actual taxes that didn't exist 60 years ago.

Corporate Income Tax: Of course this exists. OF COURSE it does! I actually don't know if it existed 60 years ago, but it would be pretty amazing if they hadn't. A corporation is a legal fiction, an artificial person that exists only by virtue of the laws of the state granting it such status. If we're going to pretend that such an artificial person can exist and own property and enter into contracts and so on, then why on earth would we not also have it pay income tax on its, y'know, income? Now, corporations are charged income tax at different rates from individuals, so technically this may be treated as a distinct tax and not the same as personal income tax, but I mean, come on!  I guarantee you have never had to pay this tax, because corporations cannot read blogs. 

Death Tax: No such thing. Seriously, there's no such thing, not in Canada today, anyway. People pay tax on their income, and when they die, and their estates wrap up, there are various implications for taxes about various non-liquid assets that have been accumulated over the person's life, but it all comes down to special rules about applying income tax. Also, heriot existed more than 60 years ago.

Dog License Tax: This is a fee. There are, presumably, legitimate health and safety reasons for requiring dog owners to register their pets. Or maybe not. I don't know, and I haven't thought about this particular policy question at length, but in any event, if you are required to obtain a license for something it is entirely optional to own, it's a FEE, not a TAX! 

Driving Permit Tax: Fee. Not tax. Unless you want to pay for my road test through your taxes, do not complain about this as a "tax". Sheesh. 

Environmental Tax (Fee): I don't even know what this is. There are LOTS of proposed models to deal with environmental issues, and many fees and charges in place that yes, didn't exist 60 years ago. But this is listed here as a fee, so I'm wondering if the author was thinking of that item that shows up along with sales tax on the receipt when you buy a bottle of soda (deposit on the bottle) or some item with environmentally hazardous components. Again, though, this is a fee, not a tax, and a perfectly sensible arrangement.

Excise Taxes: This one makes me laugh. Didn't exist 60 years ago? Excise taxes are an ancient invention. And cigarette taxes by the way, are a kind of excise tax, so the email has already got credit for this one.

Federal Income Tax: Introduced in Canada in 1917. Canada was actually late to the game; the U.S. and the U.K. both had income taxes before then. Modern income tax as a permanent, standard method of government revenue came about around the First World War, but prior to that had been used on and off to pay for various wars. But even if modern progressive income tax is a relatively new thing, it replaces older forms of wealth tax and head tax that were much more unfair. So saying that in the good old days we didn't have income tax is sort of like pining for the good old days when we didn't have to suffer the pain of getting Novocaine injections at the dentist. 

Federal Unemployment (UI): Here's a clue as to the age of this email, or at least its author: UI was renamed to EI (Employment Insurance) back in 1996. At the time, it was already almost 60 years old, having been introduced (abortively) in 1935 and then actually implemented in 1940. Whether it's actually a tax is debatable, since it's treated as an insurance premium. In any event, it definitely existed 60 years ago.

Fishing License Tax: Fee, not a tax. Also, almost certainly existed 60 years ago.

Food License Tax: Fee, not a tax. You don't wanna run a restaurant or business that serves food, you don't need to buy this. Also, has been around for a long time.

Gasoline Tax (too much per litre): This is an excise tax, and again, not necessarily a bad thing. The use of gasoline imposes lots of externalities on others and on society as a whole. I don't know if there was an excise tax on gasoline 60 years ago, so let's just give this one credit as a hit. Current score 3.

Gross Receipts Tax: This exists in some states. Don't know if it exists in Canada. It's actually a sort of midway point between a crudely calculated corporate income tax and a hidden sales tax. It almost certainly is not a distinct tax you'd have to pay IN ADDITION to everything else here, and I would be very surprised if it didn't exist as far back as the Roman Empire, but benefit of the doubt: 4.

Health Tax: Okay, I'll give you this one. Even though these are technically premiums for a mandatory health insurance system administered by the province, I don't mind if you call them a tax, and it's true they didn't exist 60 years ago. Tommy Douglas introduced the idea in Saskatchewan in the 1960s, and it's become one of the things we Canadians are most fiercely proud of. Score is 5 and shame on you for complaining about this.

Hunting License Tax: Fee. Not a tax. And also, centuries old.

Hydro Tax: The only references I can find to a Hydro Tax (as opposed to the Hydro Tax Credit, which is the very opposite of a tax) is to this sort of thing or this sort of thing. Governments have always applied excise taxes to specific goods from time to time for various reasons, and hydropower has been around forever. Even hydroelectricity has been around as long as we've had electricity, which is well over a century now, so I should be very, very surprised if it never occurred to a government to tax power generation before 60 years ago.

Inheritance Tax: What I can't figure is why the person who made this list would include both a "death tax" and an "inheritance tax", which as I said does not exist in Canada. And didn't mention "estate tax", which does exist in some places but not Canada.

Interest Tax: I know of no special tax on interest. I know that there's a space on my tax return form to fill in how much interest I've earned from bank accounts and such, so interest is taxed, but it's taxed as a part of income generally. There ARE various kinds of interest tax credits, but again, that's the very opposite of a tax.

Liquor Tax: Again, an excise tax. Also, very very much older than 60 years.

Luxury Taxes: It is likely the author of the forwarded email simply made a list of every phrase he or she could think of that included the word "tax". You might recognize the phrase from one of the Chance cards (or was it Community Chest? I can't remember) in the classic board game Monopoly which, I note, has existed for more than 60 years. Incidentally, sumptuary laws have been around for thousands of years.

Marriage License Tax: Hey, I'll grant that maybe the state shouldn't be in the business of licensing who can and can't marry, but (1) this is a fee and not a tax, and (2) having to pay the government or the lord some benefit for the privilege of getting married has a long and storied history.

Medicare Tax: Oh, as distinct from Health tax? Sorry, no, that's double-dipping. On the plus side, you don't get double-shamed for complaining about public health care.

Mortgage Tax: Okay, this really confuses me. I wouldn't put it past the author to claim that a mortgage is a tax because gosh darn it it's one of those things you keep on having to pay every month for no obvious benefit (other than, say, title to your house), but maybe it means a tax on mortgages, which probably didn't exist 60 years ago because they don't exist today. Banks might have to pay some tax on mortgages, because that's how banks make their income and banks pay taxes on income (I would hope). There are also lots of little surcharges and things on mortgages, including insurance premiums, but those aren't taxes.

Passport Tax (fee): Yeah, fee, not tax. And also I would be very surprised to learn that applying for a passport was free 60 years ago.

Personal Income Tax: If we pay the previously cited Federal Income Tax to the Federal government, to whom do we remit Personal Income Tax?

Property Tax: Just because you personally did not pay property tax 60 years ago does not mean it did not exist. 

Poverty Tax: This is another one of those phrases the author picked up somewhere and thought was a real tax. There's a "Poor Tax" in Monopoly, along with the luxury tax, and there are taxes that disproportionately affect the poor (sales taxes, for example) that some advocates might occasionally describe as poverty taxes, but that's rhetoric, not a specific tax.

Prescription Drug Tax: In some places these exist, but not so much in Canada. Benefit of the doubt, pretend it didn't exist 60 years ago, score is 6.

Provincial Income and Sales Tax: Um, these are actually two separate taxes, handled very differently from each other. In Alberta, there is no provincial sales tax, but other provinces have them. I'm not sure when they were introduced, but they're hardly a new thing. And provincial income taxes date back to the 1930s, or even earlier for BC. I'm actually surprised (not very) that the author did not mention the GST, Canada's national sales tax which is actually new enough that I remember when it was introduced. But the taxes that are actually mentioned here did, in fact, exist 60 years ago.

Real Estate Tax: How is this different from Property tax? There's lots of taxes involved in real estate generally, but they generally fall into the categories of property taxes, income taxes or sales taxes.

Recreational Vehicle Tax: It's not quite fair to say there was no RV tax 60 years ago when there were no RVs 60 years ago. That is, there might have been some, but they don't introduce a special distinct tax on something until it has actually been around for a while. I'm willing to bet there was no cell phone tax 60 years ago, either.

Retail Sales Tax: Oh, here's the mention of GST! Sort of. Nobody in Canada calls it Retail Sales Tax, which leads me to believe someone cut and paste the list of taxes from some earlier American forward, but never mind that. The GST is in fact a tax that didn't exist 60 years ago. It was introduce to replace the old Manufacturer's Sales Tax, which had been around since 1920. So a national sales tax did exist 60 years ago. I don't think we can score this one a hit. Maybe if the email had specifically referred to the GST, but no.

Service Charge Tax: By definition, a service charge is not a tax. Some taxes may be disguised and misnamed as "service charges" but if there's a service charge on your bank statement, it's your bank taking your money, not the government, which is kind of an important distinction when it comes to deciding if something is a tax or not.

School Tax: Where I live, at least, schools are paid for through municipal property taxes and provincial revenues. There is no specific "school tax".

Telephone Federal Tax: It's telling that the only references I can find to this on Google are to copies of the email I'm responding to here. I don't think it exists. And 60 years ago, many of Canada's telephone companies were actually government entities (Edmonton Telephone and AGT existed within my memory), so if we want to characterize the various telephone-related charges as "taxes", then they either existed 60 years ago if they exist today.

Telephone Federal, Provincial and Local Surcharge Taxes: See above.

Telephone Minimum Usage Surcharge Tax: See above

Vehicle License Registration Tax:  Not a tax. 

Vehicle Sales Tax: Last time we bought a new car, we paid GST on it. If "vehicle sales tax" counts as a separate tax that didn't exist 60 years ago, then so does "book sales tax" and "running shoe sales tax" and "red paint sales tax" and "blue paint sales tax". No, sorry. 60 years ago, the car would have been subject to the MST. 

Water Tax: Look at your water bill. It charges you for how much water you use, and you pay that money to the utility company of the municipality, not to the gummint. That's not a tax, unless  you consider buying bread at the grocery store to be a separate "bread tax".

Watercraft Registration Tax: Hint: If the word "registration" occurs in your putative tax, it's probably a fee and not a tax. And actually, these fees have existed for hundreds of years.

Well Permit Tax: Same goes for the word "permit" or "license". It's a fee, not a tax.

Workers Compensation Tax: This is actually more along the lines of an insurance premium than a tax, but again, it existed 60 years ago. 

Summary: Out of 48 taxes listed and alleged not to have existed 60 years ago, 30 are either different names for the same tax, fees for specific services, otherwise do not exist at all. I count only 18 that can actually be considered distinct taxes that exist today.  Of these, all but 6 existed 60 years ago. 

I warned it would be tedious.

1 comment:

  1. I love how this becomes less explanatory and more snarky as you scroll down. :-)

    I laughed out loud at "Score is 5 and shame on you for complaining about this."