Lifetime income tax
Encyclopedia
A lifetime income tax is an income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

 that would tax a person based on their cumulative lifetime income, rather than their yearly income as is currently done throughout the world. A lifetime income tax is currently just a proposal that has been made by some economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

s and politician
Politician
A politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...

s.

The main advocate of the idea is Roger Martin
Roger Martin
Roger Martin is Dean of the Rotman School of Management at the University of Toronto and an author of several business books. Martin has originated several important business concepts in use today, including integrative thinking...

, Dean of the University of Toronto
University of Toronto
The University of Toronto is a public research university in Toronto, Ontario, Canada, situated on the grounds that surround Queen's Park. It was founded by royal charter in 1827 as King's College, the first institution of higher learning in Upper Canada...

's Rotman School of Management
Rotman School of Management
The Joseph L. Rotman School of Management commonly known as Rotman School of Management is the University of Toronto's business school, located in St. George Street in Downtown Toronto. The school, named after Joseph L...

. Former Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....

 health minister and Conservative Party of Canada
Conservative Party of Canada
The Conservative Party of Canada , is a political party in Canada which was formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in 2003. It is positioned on the right of the Canadian political spectrum...

 leadership candidate Tony Clement
Tony Clement
Tony Peter Clement, PC, MP is a Canadian federal politician, President of the Treasury Board, Minister for the Federal Economic Initiative for Northern Ontario and member of the Conservative Party of Canada....

 has come out in favour of reforming Canada's tax code to embrace this notion.

Clement's plan makes a good example of such a system. Those who have earned less than $250,000 over their lifetime wouldn't have to pay taxes. Those who have made between $250,000 and $500,000 over their lifetime would be taxed at a 14% rate. Earners of a cumulative $501,000 to $750,000 would be taxed at a 24% rate, and those who had made $1 million over time would be taxed at 27%.

This system would have several advantages:
  • It would help the young, the portion of the population most likely to make new purchases and those that are struggling with high interest rates, student loans, and young families
  • It would put more of a tax burden on the middle aged and elderly who are more likely to save rather than spend and who have a generally higher standard of living.
  • It could help cure Canada's "brain drain
    Brain drain
    Human capital flight, more commonly referred to as "brain drain", is the large-scale emigration of a large group of individuals with technical skills or knowledge. The reasons usually include two aspects which respectively come from countries and individuals...

    " of educated professionals emigrating to the United States
    United States
    The United States of America is a federal constitutional republic comprising fifty states and a federal district...

    .
  • It would protect people against fluctuations from year to year.
  • It would especially benefit those who have moved from a low income to a high income


The system would also have some disadvantages.
  • It would tax old people more heavily than any other group, and many old people are not well off.
  • It would reduce savings and thus decrease the amount of investment capital available in the society.
  • It would make someone having a poor year even worse off as he or she would be paying taxes based on a number of earlier successful years
  • It would hurt those who were once rich and are no longer wealthy


The system would maintain tax bracket
Tax bracket
Tax brackets are the divisions at which tax rates change in a progressive tax system . Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.-Example:Imagine that there are three tax brackets: 10%, 20%, and 30%...

s that other alternative taxation schemes would do away with.

The implementation of the policy would also be difficult. Martin believes that before computers such a tax could not have been managed, but that it is today possible. The transition between systems would be difficult, taking many years. The politics of implementing such a system would also be difficult. Young people in much of the west are the least likely section of the population to vote, while old people are the most likely, so that any system that transfers money from the old to the young has a major hurdle to overcome.

Other proposed income tax systems

  • flat tax
    Flat tax
    A flat tax is a tax system with a constant marginal tax rate. Typically the term flat tax is applied in the context of an individual or corporate income that will be taxed at one marginal rate...

  • negative income tax
    Negative income tax
    In economics, a negative income tax is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government. Such a system has been discussed by economists but never fully implemented...

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK