This presentation discuss how trickle down economics. There is allot of misunderstanding on how income flows from Government treasury to social programs. The presentation will discuss pressure facing the middle class including economic growth.

1. Why does Trickle Down
Economics work
By: Paul Young, CPA, CGA

2. Agenda
• What is Trickle Down Economics?
• What is the Tax code/Rules
• Explanation of Corporate Taxation

3. Summary
• This presentation discuss how trickle down economics. There is
allot of misunderstanding on how income flows from Government
treasury to social programs.
• The presentation will discuss pressure facing the middle class
including economic growth.

4. What is trickle down economics
• Trickle-down economics, or “trickle-down theory,” argues for income
and capital gains tax breaks or other financial benefits to large
businesses, investors and entrepreneurs in order to stimulate economic
growth. The argument hinges on two assumptions: all members of society
benefit from growth; and growth is most likely to come from those with
the resources and skills to increase productive output.

5. What is the tax code
• The tax code
• Provides deductions for expenses a part of earning income
• Provides rules for taxation, i.e. tax rates, capital gains, dividend tax credits,
etc.
• Each country has their own tax body that sets the rules for taxation
• Some countries have flat tax rates, but high consumption taxation (Europe/Asia)
• Some countries have progressive tax rates that tax the top 1% at about 50%+ of their
income
• Corporation report income based on GAAP (Generally Acceptable Accounting
Practices). There are issues how both income and expenses are reported when it
comes to accounting and taxable income. The differences are known as both timing
and permanent differences.
• Timing differences is how items are treating different for accounting than taxation, e.g.
Warranties, Depreciation/Amortization
• Permanent differences are items that are not allowed for taxation, but are acceptable for
accounting, e.g. only 50% of meals and entertainment is deductible (Canada)

6. Corporate Taxation/Planning
• Corporation earned income around the world depending on how
they are organized
• How does income move around the world?
• Companies are looking at ways to expand their global present. Companies will
deploy FDI as part of looking for returns on investment that will benefit their
shareholders (http://www.investopedia.com/terms/f/fdi.asp)
• Companies may moved R&D/Innovation to low cost producing countries
• Companies may control the borrowing as such may lend money to foreign
entities via intercompany loans/interest income
• Companies can re-patriate cash via the following methods
• Intercompany dividends
• Intercompany interest
• Transfer pricing (shared services)

7. Personal Taxation
• Countries tax income, not wealth
• Countries have different tax systems
• Payroll taxation (Social Security)
• Personal Income Taxation
• The wealthiest people in the world has created wealth through investment in business,
stocks and bonds and real estate
• Income earn from investment is tax based on residency status.
• Some income is tax different, i.e. interest vs- dividends or the sales of
shares/companies/personal use property/listed property/real property
• Top 1% can pay over 50+ of their income to taxation -
https://www.youtube.com/watch?v=hWarBMfshaA

8. Top Income Earner/Canada
• Here’s what it takes to be among Canada’s top earners:
• Top 1 per cent: income of at least $222,000. A total of 264,030 tax-filers
earned that amount or more in 2013,
• Top 5 per cent: income of at least $115,700,
• Top 10 per cent: income of at least $89,200.

9. Top Income Earner/Canada
• Combined Provincial/Territories range 47% to 55%
• NB has highest combine Personal Income Tax in Canada
• The small group is a big source of federal revenue, contributing more than
20 per cent of all income tax collected. Canada’s rich may be getting a
little richer, but their income growth of 1.2 per cent between 2012 and
2013 was in line with the growth of all other tax filers.
• http://www.cbc.ca/news/canada/new-brunswick/higher-taxes-on-rich-
may-miss-revenue-targets-experts-say-1.3031842 or
https://www.youtube.com/watch?v=pICUvNi95AY

10. Redistribution of Income:
Facts:
• Top 1% account for 20%
of the Federal Income
Tax
• Corporate Tax account
for 1/3 of the transfer
payments
• Equalization benefits
come from the have not
promises via royalties as
well as other revenue
sources

11. GDP / Wealth Flow
Factors in play that impact wealth
distribution
• Companies invest into projects as part of
return on investment for their shareholders
• Pensions Funds like CPP investment in
companies for their return on investment
• Wealth distribution is done through transfers
to provinces to support healthcare.
• Provincial government collect tax dollars to
fund education and healthcare
GDP Growth:
• 2/3 of the economic
growth is driven by
retail Sales
• Exports are about ¼
of GDP. Canada
needs exports
• Canada needs FDI in
order to develop its
resources,
manufactured
goods, build
transportation
systems

12. Other information/Comments:• NDP and Liberal Comments - http://www.torontosun.com/2015/08/15/trudeau-and-mulcair-selling-a-fantasy-to-the-middle-class or
http://www.cbc.ca/news/politics/trudeau-speech-chamber-commerce-1.3513939
• I hear the same comments that Harper has killed the middle class when it is has been bad provincial policies led by various provincial
government that felt social policy at all costs is the solution to run their various budgets. Here are facts/videos on the middle class -
https://www.youtube.com/watch?v=xqLDHQ-iJU8 (is this a lie? or https://www.youtube.com/watch?v=yOl37VcG89c (is this a lie? -
http://globalnews.ca/.../tax-cuts-since-2005-net.../ (is this a lie?) or http://www.slideshare.net/paulyoungcga/taxation-policies (are my
slides 8-11 wrong).
• BTW: Hiking the corporation tax to 18-22% range will add 2-8% more to cost of your iPhone, iPad, Clothes, transit passes, food, beer, wine,
etc. http://www.slideshare.net/paulyoungcga/corporation-taxation-canada-44675640.
• How about childcare: http://www.iedm.org/fr/2821-quebecs-failed-child-care-model
• Canada is one of the most admired countries in the world: http://www.ctvnews.ca/canada/canada-ranked-as-most-admired-country-in-the-
world-report-1.2470040
• Canada also has done well compared to its peers across the world - http://www.bmonesbittburns.com/economics/forecast/int/intmodel.pdf
• http://www.theglobeandmail.com/report-on-business/top-business-stories/canadians-scale-the-income-ladder-with-the-best-of-
them/article25533315/?click=sf_globefb
• Remind me again why we should change to either Mulcair or Trudeau government as the facts do not align with their policies!
http://www.torontosun.com/2015/08/15/trudeau-and-mulcair-selling-a-fantasy-to-the-middle-class
• FYI – Canada is still one of the best countries in the world - http://news.nationalpost.com/news/canada/canada-named-the-country-with-
the-best-reputation-by-global-survey-again or https://ca.news.yahoo.com/blogs/dailybrew/canada-tops-the-world-as-most-reputable-
country-021908756.html
• FYI – Taxing the richest - http://www.cbc.ca/news/canada/new-brunswick/higher-taxes-on-rich-may-miss-revenue-targets-experts-say-
1.3031842 or https://www.youtube.com/watch?v=pICUvNi95AY
• Hydro rates - http://laws-lois.justice.gc.ca/eng/const/page-4.html

13. Summary
• Top 1% pay over 50% of the income to taxation
• Top 1% earned their wealth through investment in stocks, bonds and real estate
• Top 1% have good accountants and lawyers as such no how to work within the tax laws to
moved income around as part of managing their taxes
• Top 1% may take their investment elsewhere as part of managing their wealth -
http://www.statcan.gc.ca/daily-quotidien/161017/dq161017a-eng.htm
• Pensions fund by companies as part of managing their returns
• Bad policies hurt the low to middle class worst than the 1%
• Carbon Taxation will force up household spending by $1,200 to $1,500
• Hikes to CPP will impact hiring (Companies may not be able to afford the hikes)
• Hydro rates impact both business investment as well as household spending
• Money flows from companies through the following ways
• Dividends payout
• Capital Investment (debt, working capital or stock issuance)
• Share buyback

14. Are there issues with trickle down?
• Some countries like the United States have done an adequate job in terms re-allocation
of taxation to support social programs
• You cannot tax people to prosperity
• Government needs to have balance approach to tax policies and program spending.
Program spending needs to be driven via value for money. If services can be better done
by the private sector then they should be outsourced
• Education has to be aligned to jobs opening as well as future jobs
• There is no such thing as free ride. Someone else is paying for your free ride -
https://www.youtube.com/watch?v=PAGqKhSw5Lg
• Some countries are better than others when it comes to support social programs –
Canada and Scandinavia - http://www.slideshare.net/paulyoungcga/scandinavia-vs-
canada-comparison-of-social-and-economic-policies
• Canada #1 - Report: American Middle Class No Longer The World's Richest - America's
Newsroom - https://www.youtube.com/watch?v=yOl37VcG89c