Path: utzoo!dciem!nrcaer!heraclitus!rayt From: rayt@heraclitus.UUCP (R.) Newsgroups: can.general Subject: Re: Flat-Rate Tax Message-ID: <6936@heraclitus.UUCP> Date: 28 Aug 89 00:47:10 GMT References: <1989Aug24.152032.15356@gpu.utcs.utoronto.ca> Reply-To: rayt@cognos.UUCP (R.) Distribution: can Organization: Cognos Inc., Ottawa, Canada Lines: 82 In article <1989Aug24.152032.etc.> Gerald Olchowy writes: >A flat-tax rate system is (IMHO) the only fair tax system. One >might have a large personal exemption to give immediate assistance >to the low end of the income spectrum, but that should be the >the only exemption. In addition, one could have different >rates for individuals and for businesses. (Ideally, business >income should be untaxed. You can tax business income by >taxing the dividend and capital gains incomes of individuals. >[...] >In response to article 1618 from >that entrepreneurs would not like such a system, IMHO that is >absolutely wrong. True entrepreneurs would welcome a flat tax >rate system with open arms. Then market forces determine what >investments are made and are profitable, [...] You may be right; it seems to me, however, that under the current system where tax incentives are given for the investor, an elimination of that system would ultimately net less from an investment. It would, clearly, depend upon the relationship between what is presently paid and what would be paid. The question, though, is whether it is in the government's interest to make it less profitable for investment under the guise of enhancing fairness. The entrepreneur can, for example, just take his money elsewhere if more favourable conditions evince themselves - that they would be forced to move out of Canada is a choice many are undoubtedly considering anyway. >As for the comment that some investments are more risky than >others, that's the way its supposed to be. The oil industry >was mentioned. Let's take this as an example. If nobody goes >looking for oil, the price of oil is sure to rise. >[...] >As the price of oil rises, >the potential profit than becomes proportional to the potential >risk, and if you are a competent oil driller, with a flat rate >tax system, you will be able to realize that potential profit >and provide society with the oil it requires. One can be a very skilled oil driller and still miss the oil - simply because it isn't where you are seeking it; while much progress has been made in gathering heuristics for natural resource location (prospecting), it is by no means as simple as just drilling for it. Equally, like any sort of future-oriented business, its pointless to wait until an unsatisfiable demand is current before seeking remedies: it takes time to find/design the resources plus time to extract/implement them once located, and finally a significant time to achieve regular production levels. One also must account for unexpected technological barriers arising (e.g. if new technology or process is involved). Crisis management is probably the worst from the consumer point of view - initial shortage with exorbitantly high prices (if you can get it), followed by a glut; something like the fiasco of the 1970's. Governments are interested in avoiding such eratic market fluctuations since it puts their autonomy at risk - equally, it is a sign of mismanagement, that is, incompetence. Ideally, one wants to be ready with a product at the point where the demand is ready to absorb it (low competition with no warehousing costs); this implies R & D with significant foresight AND significant funds. The further R & D in one country lags behind another, the more it loses its global market share and the balance of payments becomes skewed. If a government gave no incentives for research/exploration, it would be carried on where such incentives do exist (Japan comes to mind). >If you are investing in something risky that society does not >desire, you aren't being a very astute entrepreneur, and the >government should not reward you for your incompetence or for >taking an ill-advised risk. My own view is that society really only wants `more for less' and is more than willing to leave the specifics up to those capable of designing something to fill this vague demand. There is also the very curious fact that much desire is GENERATED rather than found. Lastly, taking `ill-advised' risks generally means investing more than one is likely to recoup profitably; under a tax scheme which broadens this domain, one is likely to find oneself in a second-rate nation of subsidiary plants and resource management. R. -- Ray Tigg | Cognos Incorporated | P.O. Box 9707 (613) 738-1338 x5013 | 3755 Riverside Dr. UUCP: rayt@cognos.uucp | Ottawa, Ontario CANADA K1G 3Z4