Donald Trump’s 2005 tax return shows him paying a 25% income tax rate. Some say he is not paying his fair share. But what percentage is fair? In 1941, Roosevelt raised the top marginal US income tax rate to 100%. Is that enough for being a fair share? And what if you decline all Government benefits? Shouldn’t your fair share then be zero? We think the real reason governments insist everyone pay their so-called fair share is for paying the national debt.
Governments constantly admonish everyone pay their fair share of income tax. For example, Canada’s Minister of National Revenue said on March 5th, 2017 :
Most middle-class Canadians pay their fair share of taxes, but some wealthy individuals participate in complex tax schemes to avoid paying their fair share.
This is because no-one can agree what a fair share is. The term, like “underground economy”, also evokes emotion instead of logic. Why, others are using benefits without paying their fair share! It makes a great news sound bite. In addition, emotional responses means no thinking is required. Governments do not want you thinking.
In 1941, Roosevelt proposed a 99.5% tax rate on all income over $100,000. When an advisor questioned this, Roosevelt replied, “why not”?
After this proposal failed, Roosevelt issued an executive order to tax all income over $25,000 at 100%. Shortly thereafter, Congress rescinded his executive order (See Footnote 1). The top marginal tax rate went back to 94%.
During WWII, Great Britain’s top income tax rate was 99.25%. It was 97.5% during the 1960’s and 1970’s. That is why in 1971 the banker Lowenstein advised the Rolling Stones leave England. (Lowenstein famously described the Rolling Stones as “degenerate, long-haired and, worst of all, unprofitable layabouts”.) They exiled themselves to France to cut their album, Exile on Main Street (hence the title.)
Today Rolling Stones Inc. pays a 1.6% income tax rate through an offshore tax structure. Tax savings are also why they always rehearse in Canada and not in the US. Is paying only 1.6% a fair share? The British Government seems to think so. In 2003 they knighted Mick Jagger.
Lowenstein described the Rolling Stones as “degenerate, long-haired and, worst of all, unprofitable layabouts”.
There is little information about Canada’s tax rate history. However, www.legalbeagle.com says:
Prior to 1917, the Canadian government did not charge income tax. This was part of a plan to encourage immigration to Canada, as the UK and the US were charging income tax during this time period.
In 1948 the top marginal tax rate was 84%. It has seen gone down to around 55%. Judging from the Minister of National Revenue’s quote above, it seems she would not be nominating Sir Mick Jagger for an Order of Canada anytime soon.
Canadian income taxes are payable to the Receiver General, who receives “public money” on behalf of Canada. All benefits listed on CRA’s T1 Income and Benefit Returns are paid from “public money”, or Canada’s Consolidated Revenue Fund (“CRF”). The CRF also pays Canada’s national debt.
Canada’s CRF makes payments, including interest, for the national debt. Why Canada does this is a mystery. After all, Section 18 of the Bank of Canada Act says the Bank of Canada may lend money to the Government. Interest on $500 billion is a lot of money. Canada can save billions of dollars annually by simply changing this “may” in the Bank of Canada Act to “shall”. Doing this means no more interest payments to foreign bankers. This is why the Committee for Monetary and Economic Reform (“COMER”) launched this lawsuit against the Government of Canada.
There is no legal definition to what is a fair share. Governments use fair share because it provokes emotional responses rather than logical ones. Logic dictates that if you are not using any Government programs, then your fair share should be zero. It seems the real reason is getting everyone paying for Canada’s national debt, including interest, to foreign bankers. For more, see Apu’s Theory at www.CanadaIncomeTaxIsLegal.is