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"In fact, if we do not act now, there is a serious risk that over the coming decade, when the younger generation of voters begins to outnumber the older generation, a populist politician could corral the anger of the young," 

Save capitalism, tax boomers, new report suggests

Thu Nov 12, 2020 - The National Post

COVID-19 could be the catalyst that forces embittered millennials to overthrow the capitalist order — but policymakers could intervene before that happens, a new report by Deutsche Bank proposes.

Out of the pandemic emerged younger workers who were disproportionately affected by the economic crash because they are more likely to be employed in industries such as retail or hospitality, where working from home was not a possibility. As well, job prospects have dwindled for the newer graduates and they have little in savings.

The authors of the report, strategists Jim Reid and Luke Templeman, predict “sudden and seismic shifts in the established capitalist order” if young workers continue to experience economic inequality.

“In fact, if we do not act now, there is a serious risk that over the coming decade, when the younger generation of voters begins to outnumber the older generation, a populist politician could corral the anger of the young,” the report reads.

In order to address this, Reid and Templeman suggest that rather than taxing all baby boomers, policymakers should look at where baby boomers made their wealth and tax them accordingly.

“We should avoid a simple age-related tax. A blunt instrument makes no sense.”

Baby boomers have been able to grow their wealth with ultra-low interest rates; urbanization that’s inflated property prices; investing in companies that exploit the environment; access to cheaper education decades ago; and their mere population size outpacing younger generations, which allows them to win democratic elections.

To help close the wealth divide, the report suggests several tax policies:

• The first would be a tax on primary residence. It could be done through a capital gains tax, which could be focused on houses exceeding a certain value, to acknowledge the leverage boomers were able to take advantage of decades ago.

• Another area policymakers could focus on is additional taxes on financial assets such as stocks and bonds. This could be key because baby boomers are benefitting from low interest rates as they begin to sell the assets heading into retirement.

• Reid and Templeman also recommend a “super tax” on stocks to make up for gains that companies made by exploiting the environment. Governments could then in turn reinvest the funds in stemming climate change.
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The suggested taxes on capital gains is to avoid higher taxing on income, the two write, as it’s an “invasion on hard work” and there is a risk that work would be disincentivized.

The report also urges policymakers to address disparities in landownership and education.

Cities have to instigate a mass shakeup of existing rules that leave a low supply of homes for a growing population. When it comes to education, higher costs for higher education are outpacing graduate salaries.

If policymakers choose to avoid the wealth gap between baby boomers and the younger generations, it could spell disaster, the report says.

“If we do not enact substantial change now, then a generation of young people will soon take power,” Reid and Templeman write. “When they do, all indications are that they will enact policies that not only forcibly redistribute in blunt ways, but also upend the very foundations of capitalism.”

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41 minutes ago, Airband said:

policymakers could intervene....

You bet they will, capital gains on primary residences has been a liberal/NDP dream for years. They call it taxing the rich.

When deicer talks about the 1%, he forgets that globally, he (me, you, I and us) are the 0.5% global elite. Watch for the UN sponsored global reset coming early next year. Progressives will be delighted until they get the bill and find out who the rich actually are.

If Rome serves as an example, the time is right and all of it will be coming sooner rather than later with Covid providing the perfect backdrop of necessity to inspire a government starving for revenue. It won't be enough though, population growth is required and JT needs this done quickly, and the beauty of it is, that no one will question the downstream costs except racists and students of history. Like France and Germany, by the time the obvious is a palpable tumour, it will be too late for surgical intervention. 

Edited by Wolfhunter
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39 minutes ago, Wolfhunter said:

 

If Rome serves as an example, the time is right and all of it will be coming sooner rather than later with Covid providing the perfect backdrop of necessity to inspire a government starving for revenue 

Thanks goodness we are not eating off lead plates.   😀

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8 hours ago, Wolfhunter said:

You bet they will, capital gains on primary residences has been a liberal/NDP dream for years.

Why not, income is income. What makes it unique and deserving of exemptive treatment relative to other types of capital gains? 

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4 hours ago, Airband said:

Why not, income is income. What makes it unique and deserving of exemptive treatment relative to other types of capital gains? 

A valid point, but a tough sell for any government. I didn't suggest they should or shouldn't, only that they desperately want to and have for years.

I think the only reason it hasn't happened yet is the fear of backlash from an entire demographic of home owners. It's not like clawing back military pensions... we are too few in number and far too small a demographic for anyone to care. The issue is sometimes trotted out around Remembrance Day but garners little attention. They will simply name a road "The Highway of Heroes" if called on it and most of the people will be happy.... claw back CPP or OAS though and you would hear the difference.    

As the single largest investment in most people's lives, and one of very few assets treated with such preferential tax rules, it would hurt any government taking it away. Since it mostly effects a large voting demographic (Boomers) in this case, it would likely hurt them badly. 

On a similar note, woe to any government who cancels the ability to income split pension income and woe to the party who reduces the Canada Child Benefit. Axing the TFSA program would injure them too but many people see that as a rich mans problem instead of the saving vehicle for everyone that it is. They may be better off starting there.... all with the standard IMO caveat of course.

Most interesting thing of all, at least to me, would be listening to the backlash from the very people who have long been shouting "tax the rich." That tune, in and of itself, is (almost) sufficient for me to root for the concept... it might be fun to watch.

 

Edited by Wolfhunter
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On 11/12/2020 at 11:45 AM, Airband said:

Out of the pandemic emerged younger workers who were disproportionately affected by the economic crash because they are more likely to be employed in industries such as retail or hospitality, where working from home was not a possibility.

The same for oil workers, construction workers, truck drivers, etc

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21 hours ago, Airband said:

Why not, income is income. What makes it unique and deserving of exemptive treatment relative to other types of capital gains? 

If you're going to tax the "gains" it's only fair to allow the "costs" to be tax-deductible.  Lawyers fees, property tax, interest costs, maintenance costs.  Talk about a can-o-worms!  I think this is the way it works in the US.  Well, at least it will be a boon to the noble profession of Accountancy.

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2 hours ago, seeker said:

If you're going to tax the "gains" it's only fair to allow the "costs" to be tax-deductible.

It would be no different than the deductible costs associated with the sale of a cottage or other vacation property not eligible for the Principal Residence Exemption. It's a well-trodden path with established rules and guidelines.

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I'll put this under the reality thread simply because it reflects the faulty, alternate reality of liberal thinking. Since they can't seem to identify gangs as the problem, much less ethnic gangs, there is simply no solution on the horizon other than those that fail to work.

When people under lifetime firearm bans for multiple previous weapons offences are shooting up the city with over capacity magazines, it's a clue that regulations are not the solution. Or it should be....why isn't it?

If the first step in solving a problem is correctly identifying the cause and source of it, then brace yourself, we are in for lots more of this. 

Trudeau promises to get tough on hunters after boy, 12, killed in gang shooting

https://torontosun.com/opinion/columnists/lilley-trudeau-promises-to-get-tough-on-hunters-after-boy-12-killed-in-gang-shooting

Edited by Wolfhunter
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On 11/12/2020 at 10:43 PM, Airband said:

Why not, income is income. What makes it unique and deserving of exemptive treatment relative to other types of capital gains? 

One of the reasons I believe is because equity in a lot peoples homes is their only form of security for retirement or for that reallyyy bad rainy day when it comes. Historically it has been the ONLY safe haven left untouchable from prying governments hands. If Ottawa would stop spending needlessly in areas that bring no return for the Canadian tax payer, we wouldn't be in this problem in the first place. How many billions of $$$$$ has our train wreck Trudope spent on other countries to basically promote his own " woke" image on the world stage? 
 

That money could have been spent on this present crisis here at home. If poorer countries need help that's what the UN is supposed to be for.

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4 hours ago, Jaydee said:

One of the reasons I believe is because equity in a lot peoples homes is their only form of security for retirement or for that reallyyy bad rainy day when it comes.

Understood, but I believe some protections could be achieved through a phased-in reduction of the Principal Residence Exemption (PRE). Such a phased-in approach would also serve to minimize the sort of turbulence and disruption seen with the sudden imposition of changes to Income Trust provisions. In any event, with the waning influence of the boomers as a voting block, the PRE will become an increasingly large yet less risky target. 

MillenialGraph.jpg

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6 minutes ago, Airband said:

In any event, with the waning influence of the boomers as a voting block, the PRE will become an increasingly large yet less risky target. 

MillenialGraph.jpg

Is that really the best way of looking at it; boomers and non-boomers?  As those non-boomers become home owners they will naturally fall into the boomer group as far as this issue goes anyway.

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2 hours ago, seeker said:

Is that really the best way of looking at it; boomers and non-boomers?

Not sure, but coupled with a continued downward trend in ownership it might suggest a lesser level of resistance overall to any proposed change. To be clear, I'm not arguing for any as it would be in my own best interest not. I'm just trying to understand what the justification is for a carve-out of a single asset class for total tax exemption.

 

homeownership.jpg

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If they were to start taxing the sale of primary residences they would have to have a "valuation day" after the tax was imposed, otherwise you could go back decades (if you lived in the same place) deducting hundreds of thousands of dollars. After the valuation day, house prices would probably go down, as people wouldn't see it as an investment tool, so you would be claiming capital losses.

 

Hey, if the government can loose money selling drugs, they could do it with housing as well.

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1 hour ago, mo32a said:

If they were to start taxing the sale of primary residences they would have to have a "valuation day" after the tax was imposed, otherwise you could go back decades (if you lived in the same place) deducting hundreds of thousands of dollars.

What deductions would you see being included in the hundreds of thousands of dollars? Items such as maintenance, repairs  insurance, property taxes and other current expenses cannot be used in the calculation of the Adjusted Cost Base which establishes the base cost from which any capital gain/loss is determined. As mentioned earlier I do believe a phased-in approach over a number of years and/or via taxable thresholds would be necessary to minimize the impact on both individuals and the housing market.

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1 hour ago, Airband said:

What deductions would you see being included in the hundreds of thousands of dollars? Items such as maintenance, repairs  insurance, property taxes and other current expenses cannot be used in the calculation of the Adjusted Cost Base which establishes the base cost from which any capital gain/loss is determined. As mentioned earlier I do believe a phased-in approach over a number of years and/or via taxable thresholds would be necessary to minimize the impact on both individuals and the housing market.

Classic, what if, how come and why not. 😀

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39 minutes ago, Airband said:

As mentioned earlier I do believe a phased-in approach over a number of years and/or via taxable thresholds would be necessary to minimize the impact on both individuals and the housing market.

Regardless of those efforts though, I wonder if it wouldn't be the most universally hated tax in Canadian history, eclipsing even the GST.

Home ownership represents the single biggest investment many people undertake in their lifetime. A huge demographic have built the security of their final years around the equity in their home. Even the notion of property taxes based on market value is problematic in terms of optics.

The widow who lived at the same address for 70 years has (perhaps) seen her $14,000 home rise in value to 2.3 million and can't afford the taxes anymore. You and I might say "take the money and run," or we might suggest that an incremental approach (wait til they die off) would improve the optics, but I wonder if there isn't a lot more widows flying line astern on the same flight plan with an eye toward their own future.

The voting block most effected is still pretty substantial and it would certainly include new entries to the market who would resent the rule changes with a vengeance.

In short, and IMO, it would be a courageous (or desperate) gambit for any government to undertake and I think they would get a spanking no matter how incremental the implementation.

What do you think about the notion of eliminating income splitting?

Personally, I would say woe to any government that even suggests it and wonder if TFSA accounts would be a safer leap into the deep end?

  

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Since the topic of this thread is "reality," lets take a moment and reflect:

Does this make sense?

Prime Minister Justin Trudeau’s response to Toronto’s out-of-control gun violence, which last week claimed the life of an innocent 12-year-old boy, was to blame Ontario Premier Doug Ford for not allowing Toronto council to ban handguns.

Would dinosaurs have been well served by banning meteors and do meteors care about dinosaur regulations? Why don't the police simply ban crime? Why doesn't the fire department ban fires? EMTs could save countless lives simply by banning car accidents.

If we instituted a ban on drowning, pools would be perfectly safe for toddlers, life guards would a thing of the past and we'd save a fortune on signs. 

Shark attacks should be banned too. I have a thing about Black Mamba's (horrid, frightening beasts).... they should be banned from biting people.

The real question is why JT isn't banning Covid 19...

 

 

Edited by Wolfhunter
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3 hours ago, Wolfhunter said:

In short, and IMO, it would be a courageous (or desperate) gambit for any government to undertake and I think they would get a spanking no matter how incremental the implementation.

Agreed, it's a  'bridge too far' vs 'desperate times call for desperate measures' sort of call.
 

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What do you think about the notion of eliminating income splitting?

Personally, I would say woe to any government that even suggests it and wonder if TFSA accounts would be a safer leap into the deep end?

To be honest income splitting has never struck me as a major source of tax leakage and my initial response would be to look at rejigging inheritance and estate taxes before going after it or TFSA's.
One way or the other the government's going find a way to get at the pile of wealth the boomers are sitting on.

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Rather than contemplating new taxes, I suggest we force governments to live within its (our) means for a change and start REDUCING or even ELIMINATING some taxes all together.

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