The Fanstastic Ms. Fox

Illustrating part of the recent statements of Warren Buffet:

Both the US and Canada consider investments to be a special kind of income. In Canada, if you make $200,000 a year in wages or salary, you pay about $62,404 to the Federal Government, and about $22,500 provincially, for a total of $84,904, leaving you with around $125,096

But if you own a corporation that makes $200,000 and pays all profits in dividends? It pays 16.5% of its profits to the CRA ($33,000), and then pays you $167,000, which is taxable at 50% ($83500), on which you owe only $15478 Federally and $5797 provincially. A total tax bill of around $54,275, leaving you with $145,725 or so.

At that income level, for owning rather than working, you get an extra $20,629 a year... to start.

Plus, if the corporation lost money last year, you can claim those losses against this year's profits, reducing the total tax bill. If it loses money *next* year, you can sometimes claims those losses against this year's taxes. If you have money in a Tax-Free Savings Account, that's not taxable.

Incorporated or not, you also have business-related expenses. Taking clients out to dinner to talk shop? Half of it counts as a business cost. Home internet? It's a business expense. Cell phone? As long as you have a land-line, it's a business expense.

All this is totally legal and not at all "sneaky" as far as the CRA is concerned. When we start talking sneaky-but-still-legal, there are a lot more options to save money.

Also, many (taxpayer-funded) subsidies are only available to corporations. Not sole-proprietorships or partnerships.

So maybe you'll start up your own corporation? Maybe not. Incorporation costs about $5,000. And the taxes are about $1,000 a year. More importantly, if you're a tiny (perhaps worker-owned) corporation, making below the $50k-per-year level, the numbers work out so you actually pay *more* tax for owning rather than working.

This, my friends, is how we maintain a class system.