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. It is not one government policies, but many that support economic growth.

1. Why does Trickle
Down Economics
work – December
2017
By: Paul Young, CPA, CGA
Date: December 27, 2017

2. Paul Young - Bio
• CPA, CGA
• Financial Solutions
• SME – Business Process Changes
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Supply Chain Management
• Academia – Advance Accounting, Public
Finance and Advanced Management
Systems
Contact information:
Paul_Young_CGA@Hotmail.com

3. Agenda
• What is Trickle Down Economics?
• What is the Tax code/Rules
• Explanation of Corporate Taxation
• Explanation of Wealth Transfer
• Middle Class
• Tax Cuts

4. 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.
• It is not one government policies, but many that support economic
growth.

5. 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.

6. 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)

7. 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/fd
i.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)

8. 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

9. 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.

10. 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

11. 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

12. 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

13. Blog – Wealth
Distribution
• Canada has series of programs that moved income from the federal
government which are called the federal transfers -
https://www.fin.gc.ca/access/fedprov-eng.asp. The new transfer
agreement ties federal transfers to GDP -
http://evidencenetwork.ca/archives/26746
•
• The new Premier John Horgan who does not support Kinder Morgan is
asking the federal government more CST money for daycare -
https://www.theglobeandmail.com/news/british-columbia/bc-ndp-
looks-to-federal-government-to-help-fund-childcare-
plan/article37012357/. Kinder Morgan delays are costing $73B of new
exports of oil over the next 20 years or about 3.6B/annual in export
revenue for oil companies.
•
• I am all for a good debate on changing transfer policies, but not when it
is strictly about give me more money. The debate should be about how
do we grow the economy. It is not by dropping carbon completely out of
the economy. https://www.slideshare.net/paulyoungcga/carbon-free-
economy-canada-november-2017
•
• Source - https://www.slideshare.net/paulyoungcga/wealth-distribution-
canada-november-2017

14. Canada Middle Class

15. Blog – Tax Cuts
Here is more information on Harper:
 Harper did not just focus on tax cuts including corporate tax, but also set up innovation funds and sign trade
deals to expand exports. https://www.slideshare.net/paulyoungcga/wealth-distribution-canada-corporate-
tax-july-2017. Trudeau was elected and said he will focus on clean technology, right?
https://www.liberal.ca/wp-content/uploads/2015/08/A-new-plan-for-Canadas-environment-and-
economy.pdf The problem is clean technology companies are not making money, right?
http://www.bnn.ca/awash-in-red-ink-canadian-clean-tech-struggling-despite-ottawa-s-green-goals-1.729679
 Harper created many innovation funds, sign trade agreements, expanded ports like Montreal, Prince Rupert,
etc. Harper was all about getting goods to market. More could have been done, but pipelines as well as lack
of priorities by governments including Ontario on natural resource development set Harper back -
https://www.slideshare.net/paulyoungcga/merchandise-trade-canada-july-2017
 I see nothing in proving your point that tax cuts do not work. All I see is opinion. So, I suggest provide a
source or shut up. If you realised a couple things about world it is very global now. Canada needs to be
competitive when it comes to attracting foreign capital. If you look at Harper’s policies then you will see he
did not focus on one area, but many areas like innovation, trade, FIPA, capping the growth in payroll taxes,
etc. http://ottawacitizen.com/storyline/head-of-canadas-largest-manufacturing-association-says-tories-have-
supported-the-sector or https://www.slideshare.net/paulyoungcga/manufacturing-sector-canada-june-2017
 Do you own RRSP? You have CPP deducted, right? Where does pension money go? It goes to profitable
companies, right? http://www.cbc.ca/news/business/cpp-pension-earnings-1.4243308
 You treat corporation with other distaste, but I bet you shop at grocery store, drive a car, own a cell phone,
rent/own a house, right? You would not have these luxuries without corporations.
 I see you are also talking about the bailout, right? Harper was forced into bail out.
http://www.autonews.com/article/20160907/OEM01/160909877/co-directors-tell-why-they-made-auto-
bailout-documentary
 I have explained many times about deficit and debt, but you will never read the links.
https://www.slideshare.net/paulyoungcga/federal-government-debt-canada-august-2017 or
https://www.slideshare.net/paulyoungcga/canada-cpc-and-liberals-surplus-debate
Let’s see I defend my position with facts and figures and you expressed opinion. I have even gone the extra mile to
show the flow of taxation which seems to be missing from your point, why? I have novel idea if you are going to
debate me then I suggest you provide backup to your opinion.

16. Tax Cuts / PBO
Source - https://globalnews.ca/news/1356467/tax-cuts-since-2005-net-canadians-30b-pbo/

17. LPC / Tax Cut
• Liberals eliminated tax
credits
• Liberals plan hikes to CPP
• Liberals are forcing carbon
pricing
• Liberals eliminated income
splitting
Source - https://globalnews.ca/news/3769136/taxes-middle-class-liberals/
The paper focuses on couples with children
under the age of 18 and single parents. It finds
that more than 80 per cent of families with
incomes between just over $77,000 and
$108,000, which the authors define as the
middle class, are paying more in tax as a
result of the federal income tax changes, with
households paying $840 more on average.
Lower-middle-class families, those with
household incomes between, roughly, $52,000
and $77,000 are paying $382 more on
average, with nearly 70 per cent paying more.
Global News – September 26, 2017

18. 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

19. Are there issues with trickle down?
• Some countries like the United States have done a poor 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

20. Bottomline
• 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