Quote of the Day: “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.” Milton Friedman
It’s hard to know where to start on Robert Williams’ article on the Front Page today. He tells us that Kitchener Centres’ MP Mike Morrice has a tax plan that “would save hundreds of millions” if implemented. Basically, he wants to tax REITs at the same 38% rate that other corporations are taxed at. Well, two things to note right away: 1 – Mike Morrice is a socialist and therefore has absolutely no idea about general economics and how things work; and 2 – Robert Williams and his friends at TheRecord are completely enamored with Morrice and wouldn’t dare say anything critical or actually apply any critical thinking to any of Morrice’s so-called ideas. So, let’s just begin with the obvious: corporations don’t pay taxes, they just simply pass taxes (as a cost of doing business) along to consumers. Corporations and other large and small businesses see taxes as an input cost and this is factored in to their final prices structure. So, if all REITs are now taxed, they will raise rents (of whatever goods and services they sell) in unison – and therefore, rents will increase. This isn’t some wild economic theory, this is just plain economic fact. However, with any price increase, there will obviously be a decrease in demand and this drop in demand is dependent on the demand elasticity of the product being sold. This also means that there will be less profit to be distributed to shareholders as noted in the article by Williams. This then means that less tax will be paid by shareholders. How much? We don’t know. Since the personal tax rate of high earners is far about 38%, this might actually mean the less tax money will flow to the government. Of course, Morrice doesn’t mention this obvious fact and of course, Williams is too stupid or too compliant to ask about it.