New Internationalist

Ask… Peter Portfolio

Issue 220

new internationalist
issue 220 - June 1991

Ask... Peter Portfolio
With this issue the New Internationalist
introduces a new column, Ask Peter Portfolio.
Internationally known as the poor man's rich man,
Mr. Portfolio welcomes your questions on taxes.

Dear Peter
Could you settle a bet? Is there such a thing as too much money?

Mickey in Montreal

Dear Mickey
That, as we in the tax-avoidance business like to say, is the $64-million-dollar question. In the Portfolio world of tax theory you are getting too much money if you are being robbed of your incentive to work. If, for example, you were a single mother with three children, you would be getting too much money if city welfare gave you so much of the taxpayers' money that you were able to adequately feed and house your children. That's because you would lose your incentive to go out and get a minimum-wage job waiting tables while your children spent the day trying to take care of one another. So for a single mother anything more than $20,000 a year is probably too much money.

However, if you are the director of a savings-and-loan institution there is no such thing as too much money. Imagine for a moment that you are making $500,000 a year as you steer your corporation towards economic disaster. What would your reaction be to tax measures that would leave you with less disposable income than in the previous year?

You might well lose complete confidence in the economy and the Government, abandon your family and strike out on the open road with nothing but a flannel shirt and a harmonica. A simple rule of thumb really. The tax collector should never give too much money to the poor or take too much from the rich.

Dear Mr Portfolio
Shame! You must be aware that the tax-avoidance schemes that you advocate lead directly to cuts in public spending on social welfare. At a time when a record number of people are being forced to use food banks, how in all conscience can you advocate further reductions in taxes?

Earnestly in Nipigon

Dear Earnestly
I'm really hurt. Peter Portfolio feels for those who eat at food banks. Don't get me wrong, I am not one of those old-fashioned reactionaries who are forever shouting that there is no such thing as free lunch. Nor am I above sharing a little tax information that I use to help take the sting out of dining out. When I visit a fashionable restaurant I generally take a client along, or at least someone I hope to do business with. Then I can deduct 80 per cent of the cost from my income.

Now I realize that many poor people are not in business for themselves but I think the knowledge that once they pull themselves up by their bootstraps they can get the taxpayer to pay for their meals is a powerful incentive for the poor to buckle down (which is of course the first step in pulling one's self up by one's bootstraps) and get entrepreneuring.

Dear Peter
They are at it again. You know who I mean, all those socialists and loony leftists, saying that we should make the rich pay our so-called 'fair share' in taxes. It is the sort of thing that makes me just want to give up.

These people have no sense of the tremendous pressures that the wealthier members of society are forced to bear. Presiding over the collapse of an economic system is depressing enough as it is; to be charged confiscatory tax rates for this privilege would be enough to make many of us simply pack it in.

(Name withheld at the request of accountant)
New York City

Dear Nameless In New York
I could not agree more. We often hear about the Cycle of Poverty - a neverending system that people are born into but cannot escape. But rarely do we hear about its darker cousin, the Cycle of Wealth. Here too the sins of the father are visited upon the sons.

Take Kenneth Thomson, for instance. His father was a narrow-minded radio-station owner in Northern Ontario who assembled a chain of second-rate newspapers. Ken could not help be influenced by his father's acquisitive habits. He has bought a series of major newspapers throughout the world and transformed them into second-rate publications. On top of this he has bought the Hudson's Bay Company and Simpson's department-store chain and dabbled in oil exploration. Many of these operations are so poorly run and have so little commitment to service it is clear that Thomson is desperately trying to break the wealth cycle, but he was born with so much that he can't, in one lifetime, lose it all.

But, dear nameless in New York, I am afraid that nothing can be done to help you or Ken Thomson and his heirs. During the 1950s and 1960s liberals tried to help the poor break out of their cycle of poverty by throwing money at their problems - money taken from the rich through what they termed the 'progressive' tax system (as we all know, progressive is simply a code-name for Communistic). It was a failure - the rich stayed rich and the poor stayed poor.

In this case the best advice is to simply resign yourself to your fate.

Dear Mr Portfolio
Why is it that my employer was able to write off the cost of purchasing new equipment in two years, even though now, five years after the machine was completely written off, it is still working as good as new. I, on the other hand, have just been laid off due to technological change.

Puzzled in Manchester

Dear Puzzled
Some things are just too difficult to explain.

Dear Peter
Why should I give to charity? I already pay a fortune in taxes. Shouldn't the Government be using some of that money to support worthy organizations?

Tight-Fisted in Dunedin

Dear Tight-Fisted
You clearly don't understand the benefits of charitable giving. If we were to simply count on governments to support benevolent organizations there would be no way for wealthy people to insure that their favourite worthy organizations, such as art galleries and private schools, got what they needed. I like to think of tax-deductible charitable donations as my way of redirecting government spending. For example a mildly left-wing government (not that we are much afflicted with them these days) might not see the need to help pay for the new football grounds at my son's university. They might prefer to spend money on hot lunches for inner-city children or some such other nonsense. But when I make a donation to the building that I want to see built and that my son will benefit from: I am in effect forcing the Government to make a donation to the building fund that is equal to the amount that I get as a tax deduction for being so generous. Charitable donations - your way of spending the Government's money.

Doug Smith is a Winnipeg journalist whose accountant claims that he is forbidden by federal regulation to give a sucker a break.

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