7 News Archive
Taxes: a rotten deal for working people

By Howard Huggett
Seven News, April 23, 1977

Around the end of April many working people will send in their income tax return and heave a sigh of relief to think that it’s all over for another year. They will be wrong, because only the arithmetic assignment will be over. On the next pay-day they have an appointment with the tax collector. Someone else will do the calculations, but they still have to pay.

There is an old Chinese proverb which says: He who gives quickly gives twice. Workers certainly give quickly. There isn’t even time for them to handle the taxed portion of their wage or salary before it is turned over to the government. It’s nice to get a refund next year, and very many working people do, but it can’t be denied that this money is an interest-free loan amounting to hundreds of millions.

Tax form lacks sense

It is difficult to see the sense in much of the tax form. For instance, there is the 3% deduction allowed from the gross income for tax purposes. The amount of this deduction is called “employment expense” on the form, which presumably takes in the costs of going to and from work, lunches that have to be bought, special clothing, etc. How can these costs be expressed as a percentage of income, since car tickets, gasoline and food are sold at the same price to everyone? And why 3%? Anyone who can get to work and back in Toronto on two tickets or tokens a day is spending $3.30 a week or $165.00 a year on the basis of a five-day week with a two-week holiday per year. As for driving to work, the T.T.C. estimated a year ago that a ten mile round trip per day costs $2.00, counting insurance, depreciation, etc. That comes to about $500.00 per year on the same basis as given above. Since the maximum deduction allowed is $150.00, so that amount does not even cover the cost of the cheapest transportation, let alone lunches, clothing, etc.

Compare this method with that used to determine the cost of running a business. The tax return for a company allows for the listing of every expense and the deduction of the total from gross receipts. Even a self-employed workman is allowed to deduct actual travelling costs and some other expenses from his gross income.

Then there are the exceptions. For a child under 16 the tax-payer is allowed $390.00, a very low estimate for the cost of keeping a child for one year. If it is meant to cover the actual expense it should at least be increased as the cost of living goes up. It isn’t, because in 1970 that exemption was $300.00. It has increased only 30% in six years of severe inflation.

Charitable donations

Another token deduction is the $100.00 for medical expenses and charitable donations. This is unfair to most people, whether worker or boss. There are many people who give little or nothing to charity, and they may spend very little on medical expenses, particularly if they are covered by health insurance. For them the $100.00 deduction is an undeserved allowance. On the other hand some people are obliged to pay heavy medical costs. From the actual amount of their bills they must deduct 3% of their net income (that mysterious 3% again). A worker with a net income of only $5,000.00 who had medical expenses of $300.00 not covered by insurance would have to deduct $150.00 and get credit for only half of his bills.

The general pattern that emerges here shows that a business is allowed deductions based on the actual situation, whereas for working people allowances are not realistic, but more in the nature of a gesture or a token. Every now and then a few more crumbs are thrown out to keep working people from becoming too unhappy.

Published in Seven News, Volume 7, Number 21, April 23, 1977.

Related topics:
Income tax
Tax Fairness