Non-Tax Based Revenues

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So the Ontario Provincial government has backed off removing the tax exemption for meals under 4 bucks. For those who may not know, in Ontario, a meal at a restaurant that costs less than 4.00 is not subject to provincial sales tax (it is subject to the GST though).

Naturally, there’s been a lot of condemnation towards to the idea of taxing small meals – and rightly so. A glass of milk and a sandwich for lunch being taxed is repulsive to me.

I was just listening to the news on the radio, where it was reported that represenatives of the Government in Ontario are saying that they are going to look at ways of increasing “non-tax based revenues.”

I’m not sure what scares me more. Higher taxes or “non-tax based revenues.”

The problem with “non-tax based revenues” is that those who float these ideas seem to fail to understand that all money (at least REAL money and worth – not stuff that is simply printed when more is wanted in circulation) is generated by trade. There simply is NO OTHER way to generate revenue except by trading a service, selling product, and generating value for someone. When you get interest on your money in a bank account, you’re trading something – the bank pays you to use your money to increase their lending abilities. and in return you get a reasonably ‘safe’ place to stick your money and get something back.

You can’t increase value or revenues unless you provide a service or product that someone wants. And Governments simply should not be involved in this kind of trade whatsoever.

This is why ‘non-tax based revenues’ scare me. There are a few ways Governments can come up with non-tax based revenues. Let’s look at some of them:

1. Investment:

A government could invest money by sticking it in savings accounts or other investment vehicles, but of course this means that the money is not available for spending. And that is pretty much contrary to what any government does. Governments are addicted to spending so much, that in fact there is nothing to put into investment vehicles.

However, Governments do talk about investing. But what they really mean by this, is “We’re going to give some specially selected entities some cash that we’ve taken from other entities and we’re going to come up with a politically nice sounding reason for giving this cash to that entity.”

Often dressed up as “Job Creation” programs or other such nice sounding terms, these investment programs end up being a long term drain rather than any kind of great investment.

I recently asked my MP if he could provide me with information on long term benefits of these such programs, where money is given out as a grant or loan – I want to know how much of this money is actually repaid. I personally don’t know of ANY business that was started with a Government grant or loan that is still in business after ten years, paid back all the money it received, and never requires any further Government funding. Most of the businesses I come across were started with non-government funding and/or sweat equity.

So, Government investing ought to be a scary thing for tax payers to consider.

2. Fines:

Governments do take in a lot of non-tax revenue through monetary fines such as highway traffic act violations. But really, this becomes a hidden tax and has nothing to do with real law and order philosophy. The philosophy of law and order should be such that an enforcement officer is very upset at having to charge a person or entity with an offence. The philosophy of law enforcment is to prevent crime – not to simply “catch and fine.”

When you start looking at ways to increase revenues through monetary fines, you have a government that is corrupt. Naturally, there are varying degrees of corruption – but that doesn’t make a small degree of corruption “o.k.”

I’m using a wide definition of corruption here, obviously. But this is important for any small amount of corruption will only lead to bigger corruption and the removal of liberties and freedoms from individuals.

To use montary fines as a system of revenue generation is completely and utterly against the entire philosophy of law enforcement in the Western world. Unfortunately, this is being ignored and our original philosophy of prevention oriented rather than apprehension oriented isn’t even thought about much in any serious way.

There are in fact many many legitimate reasons why someone would break the law. In fact, we provide legislation exemptions in many cases including allowing police, fire and ambulance officials to proceed through red lights at traffic intersections.

But it is quite conceivable that an ordinary citizen could also feel an obligation to do the same thing. Health emergencies are the first and most obvious that come to mind. It would be an utter disgrace to be told that one should wait for an ambulance when one can drive their relative or friend to a hospital much quicker than waiting for an ambulance. Wouldn’t you agree?

And often, the law is just plain stupid and deserves to be disobeyed by intelligent people. But we’re talking about the use of fines as revenue generators – and this method of increasing revenues. The bottom line is that to use fines as a method to increase revenues simply is against all principles of law enforcement and does nothing but corrupt our entire law enforcement system.

3. Products and Service.

The only real way of increasing revenues in any society is through the honorable system of commerce and trade. In fact, all tax revenue comes about because of commerce and trade. Without commerce and trade, there is nothing to tax. Got that, Carol Goar?

No amount of economic theory, creative thinking, or weird ideas is going to change this basic and most important concept. The ability to trade freely is the ONLY way to incease value and revenues, no matter what sort of entity you are, with one exception: Government. Governments should not and cannot truly increase revenues using this method.

Here’s why: If a Government is generating revenues through the sale of products or services, it is taking away opportunities from other businesses. As well, it is taxing the very businesses it is competing against. The business or entity being taxed has no choice but to pay the taxes at the risk of physical force and punishment should it choose to not pay tax.

And by competing against the business, it is effectively reducing it’s tax base in the long term. Maybe even the short term as well. By reducing the revenues of the business, that business is now less able to hire others, increase it’s business, and likely will decrease it’s potential revenues. At this point, the socialist government has created a new problem. By attempting to increase revenues through commerce, and competing against other business, it now must “look after” those who have been hurt by it’s practice through welfare. So instead of having net revenues, it’s at an even bigger loss.

It’s pretty simple really. And in fact, Governments in Canada do engage in this type of revenue generation and it has hurt individuals.

Canada Post engages in commerce other than it’s mandate which is to deliver mail. Instead of decreasing it’s size as it’s service is less and less required, Canada Post has decided to get into the business of website hosting, greeting card sales, and other retail/service products that are already provided by private business.

This poses another problem as some businesses get a special advantage in dealing with Canada Post that other businesses do not get. In the short term, this may look good for Canada Post, but what’s missing from the balance sheet is all the individuals they’ve hurt and who will end up paying less tax, because of this Crown Corporation’s business practices.

The LCBO is another example in Ontario. The control of liquor and wine is another matter – but if you’ve been into an LCBO store recently, you’ll have the opportunity to purchase wine glasses, cork screws, gift baskets, and other non-liquor items. In doing so, the LCBO is directly competing against other business.

I admit that I don’t have the figures in front of me – but I would bet that in the long term, this has a negative effect on our economy. And the more the Government gets into any “non-tax based revenues,” the greater the long term negative effect will be.

Not to mention the many thousands of individuals that this policy will directly harm immediately.

If a Government has revenue problems, the answer is simple: Reduce spending. If the Government is thinking about or even implements revenue generating systems, then it has gone far beyond what it should be doing for the common good. Any service or product that generates revenue should involve the market, providing consumers with choice.

The common good requires a robust, healthy, market system in the long term. Non-tax based revenues will do nothing but harm the most people over the long haul. It’s actually frightening to know that our Government is even considering non-tax based revenues.

2 thoughts on “Non-Tax Based Revenues”

  1. I quote from above: “You can’t increase value or revenues unless you provide a service or product that someone wants. And Governments simply should not be involved in this kind of trade whatsoever.” I tend to agree with this statement, (especially the second part), however there are some who would not. Those who do not might suggest Canada Post and the LCBO are assets because they generate profit which is returned to the public purse for various programs and debt reduction. Maybe these profits are better off in the hands of government. Well…let’s just see about that. Canada Post recorded $6 billion in revenues and a net income of $253 million last year. Of that, $63 million will be returned to the federal treasury. What about the other $190 million?? In Canada Posts latest annual report to parliament, $900 million in expenses is listed under the category “other”. Apparently there are no explanations as to where these bucks are going or have gone. Have a look at this article: I was astounded by some of the figures and Canada Post’s lack of accountablility.

  2. Thanks for your comment, Rob. The fact that often, there is a dividend generated and ‘returned’ to the public purse is a bit of a red herring, really. When these crown corporations are selling products and services that the private sector can do, then it means that they are directly competing against private business… private business which is forced to pay taxes. That dividend represents lost sales that did not go to hard working individuals who work for a business. It means that some business couldn’t hire more people, give some a pay raise, pay their own dividend on stocks and bonds that are held in RRSP accounts, etc. etc. Canada Post is an interesting subject all on it’s own. I don’t have it in front of me, but if you’re interested, I’ll look it up for you – last year’s (or pehaps it’s 2002) Financial Statement. Canada Post has had ongoing decreasing sales in mail delivery, and yet it is expanding and losing money in other areas. They even bought a new building in Ottawa! Their financial statement is very very interesting when you examine it, and look at where they got their profits, how much they are spending in other areas, and how much of this ‘other area’ business is competing directly with the private sector. I’ll take a peek for it, and post it here later. It’s interesting reading if you want to take some time wading through the numbers and different ‘divisions’ of Canada Post.

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