tag:blogger.com,1999:blog-7141615629701321642.post1920732520821435677..comments2024-01-07T08:41:13.864-05:00Comments on C A I T I - O N L I N E: Ned Goodman comments on Flaherty's deficit (fiscal and intellectual)Brent Fullardhttp://www.blogger.com/profile/08515599756822506137noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-7141615629701321642.post-89628528021675809382008-07-26T13:00:00.000-04:002008-07-26T13:00:00.000-04:00Present Value Of Taxes Ignored So, Dim Jim Flahert...Present Value Of Taxes Ignored<BR/> <BR/>So, Dim Jim Flaherty is the Canadian Finance Minister, supposedly responsible for the entire country's federal finances, but doesn't even understand basic finance concepts.<BR/> <BR/>Now, a first year finance student can tell you that a "Sum" to be received in the future is still worth something now, by calculating the "Present" value, discounted by an appropriate "Interest" rate.<BR/> <BR/> <BR/>The simple formula for this calculation can be presented as follows:<BR/> <BR/>P = S(1 + i)^-n<BR/> <BR/>Where:<BR/> <BR/>P = Present Value<BR/>S = Future Sum<BR/>i = Periodic Interest Rate<BR/>n = Number Of Periods<BR/>(Note: The symbol ^ is used here to denote exponent.)<BR/> <BR/> <BR/>For the purposes of this "real world" example, we shall use the following reasonable parameters:<BR/> <BR/>1) A federal personal tax rate of 22% (the 2007 marginal rate for "middle income" earners of between approximately $37,000 and $74,000).<BR/>2) A provincial personal tax rate of 10% (the approximate 2007 marginal rate for "middle income" earners of between approximately $35,000 and $71,000).<BR/>3) Therefore, a combined personal tax rate of 32%.<BR/>4) A federal corporate tax rate of 15% (the announced rate by Dim Jim).<BR/>5) A provincial corporate tax rate of 10% (an approximate average and the desired rate by Dim Jim).<BR/>6) Therefore, a maximum combined corporate tax rate of 25%.<BR/>7) An annual discount or interest rate of 3.56% (the July 24, 2008 Government of Canada 7 year benchmark bond yield as published by the Bank Of Canada).<BR/>8) 7 years for the number of periods that trust distributions may likely be considered to accumulate within a senior's RRSP before conversion to a RRIF and annual taxable withdrawals begin (as a senior not considering an annuity would/must convert the RRSP to a RRIF before he/she turns 72 years of age [72-65=7]).<BR/> <BR/> <BR/>So, a $100 distribution taxable in 7 years has a present value of approximately $78, with a concomitant present value of personal taxes of approximately $25, being virtually identical to the maximum corporate taxes that would be exigible (which empirical evidence has shown to be actually much less).<BR/> <BR/> <BR/>Calculation:<BR/> <BR/>Present Value Of Distribution = $100(1 + 0.0356)^-7 = $78<BR/>Present Value Of Personal Taxes = $78 x 32% = $25<BR/>Maximum Corporate Taxes = $100 x 25% = $25<BR/> <BR/> <BR/>Now, as we all know, combined personal tax rates can be a fair bit higher than 32% and effective combined corporate tax rates can be a fair bit lower than 25%, thus skewing the calculation and making Dim Jim's incompetence and hypocrisy even more apparent, but heh, you be the judge.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7141615629701321642.post-40291695672253555622008-07-26T12:24:00.000-04:002008-07-26T12:24:00.000-04:00Ned Goodman for Finance Minister!!!!...or - Gov of...Ned Goodman for Finance Minister!!!!<BR/><BR/><BR/>...or - Gov of Bank of CanadaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7141615629701321642.post-27709850439222660932008-07-26T10:29:00.000-04:002008-07-26T10:29:00.000-04:00"We probably loaned them the money so that they co..."We probably loaned them the money so that they could steal our resources and not be taxed. Great plan there wee Jim, the FinMin."<BR/><BR/>by truth in trusts<BR/>-----------------------------------<BR/><BR/>Ya, aren't we Canadians are so generous and polite that way?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7141615629701321642.post-71845334693797157542008-07-26T10:26:00.000-04:002008-07-26T10:26:00.000-04:00"The government had other options if they were con..."The government had other options if they were concerned about the leakage issue [with pensions and foreigners] other than destroying the sector," said Ned. "They could have restricted income-trust ownership to RRSPs and individuals only; lowered the RIF to 65 years of age from 69 to speed up taxation of distributions and limited income trusts to a certain market capitalization size to stop everyone from converting."<BR/>-----------------------------------<BR/><BR/>Simple, sensible and reasonable options that could have been taken to limit the immediate "nuclear blast" and future "nuclear fallout", proffered by a sound-minded businessman.<BR/><BR/>Instead, the CON Reichstag drops "Fat Man" on the Canadian citizenry, resulting in the genocide of seniors and income trusts.<BR/><BR/>REAL LIES.<BR/><BR/>REAL DEVASTATION.<BR/><BR/>REAL WANKERS.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7141615629701321642.post-15466095178564657012008-07-26T10:20:00.000-04:002008-07-26T10:20:00.000-04:00"So [Brazilian mining conglomerate] CVRD buys Inco..."So [Brazilian mining conglomerate] CVRD buys Inco and borrows money to do it so it can shelter its income from all taxes and goes home with the most prolific mine in the world," he said. "But Inco's not allowed to deduct interest on its foreign expansions."<BR/>So let's get this straight. <BR/>A foreign company can come in and buy a Canadian company using borrowed money, suck all of our resources out of the ground, then write off the interest against the income and pay no taxes in Canada?<BR/>We probably loaned them the money so that they could steal our resources and not be taxed. Great plan there wee Jim, the FinMin.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7141615629701321642.post-78197050763662587262008-07-26T08:46:00.000-04:002008-07-26T08:46:00.000-04:00Ned Goodman for Finance Minister!!!!Would it not b...Ned Goodman for Finance Minister!!!!<BR/><BR/>Would it not be nice to have someone in that portfolio who actually knows what is going on in the world of Finance.<BR/><BR/>Run Jim Run , there goes another ambulance.<BR/><BR/>Dr Mike Popovich.Dr Mikehttps://www.blogger.com/profile/16915911929286615081noreply@blogger.com