If every individual in Canada and the U.S.A. including corporations was going to pay their fair share of taxes to support government, what percentage of income would need to be taxed, in a tax regime that has no write-offs or loopholes and equally taxes every individual and entity, and build in a 5% goods and services tax for local governments.
ChatGPT said:
To answer your question, we need to make several assumptions, as calculating a precise tax rate requires detailed data on government spending, income levels, and the total taxable base. However, I can give you a rough estimate of what such a system might look like.
Step 1: Calculate Total Government Revenue
Let's start by estimating the total revenue that governments (federal, provincial/state, and local) need to raise to fund their operations.
Total Government Revenue for Canada and the U.S.:
- Canada:
- In 2022, Canada's federal government revenue was about CAD 400 billion.
- Provincial governments also generate significant revenue (roughly CAD 300 billion combined).
- Local governments add more, but their revenues are smaller (around CAD 100 billion).
- Total government revenue: Approx. CAD 800 billion.
- United States:
- The U.S. federal government collected around USD 4.9 trillion in 2022.
- State and local governments collected about USD 2.1 trillion.
- Total government revenue: Approx. USD 7 trillion.
Step 2: Estimate Total Taxable Base
Now we need to estimate the total taxable income and assets in both countries. This will include both individuals and businesses.
- Canada:
- In 2021, the total taxable income for all individuals was approximately CAD 1.6 trillion.
- Total corporate income in Canada is harder to measure, but we can estimate it to be roughly CAD 200 billion.
- Total taxable base for Canada: Approx. CAD 1.8 trillion.
- United States:
- Total personal income in the U.S. was about USD 23 trillion in 2022.
- Corporate profits in the U.S. were around USD 2.6 trillion in 2022.
- Total taxable base for the U.S.: Approx. USD 25.6 trillion.
Step 3: Calculate the Tax Rate
Now we need to calculate the tax rate that would be needed to generate the required revenue.
- Canada:
- Total revenue needed: CAD 800 billion.
- Total taxable base: CAD 1.8 trillion.
- Required tax rate: Tax Rate=Required Revenue Taxable Base=800?billion1.8?trillion=44.4%\text{Tax Rate} = \frac{\text{Required Revenue}}{\text{Taxable Base}} = \frac{800 \, \text{billion}}{1.8 \, \text{trillion}} = 44.4\%Tax Rate=Taxable Base Required Revenue?=1.8trillion800billion?=44.4%
- So, a flat 44.4% tax on both personal and corporate income would be needed to cover the entire cost of government without write-offs or loopholes.
- United States:
- Total revenue needed: USD 7 trillion.
- Total taxable base: USD 25.6 trillion.
- Required tax rate: Tax Rate=Required Revenue Taxable Base=7?trillion25.6?trillion=27.3%\text{Tax Rate} = \frac{\text{Required Revenue}}{\text{Taxable Base}} = \frac{7 \, \text{trillion}}{25.6 \, \text{trillion}} = 27.3\%Tax Rate=Taxable Base Required Revenue?=25.6trillion7trillion?=27.3%
- So, a flat 27.3% tax on both personal and corporate income would be needed.
Step 4: Include the 5% Goods and Services Tax (GST)You also mentioned a 5% Goods and Services Tax (GST). This tax is typically levied on consumption, which means it would generate additional revenue for local governments.
Let's assume the total taxable consumption (GDP) is similar to the total income, with the GDP for each country being roughly proportional to the total income.
- Canada:
- Canada's GDP was around CAD 2.4 trillion in 2022.
- A 5% GST would generate about CAD 120 billion.
- The total government revenue after including GST would be: 800?billion+120?billion=920?billion800 \, \text{billion} + 120 \, \text{billion} = 920 \, \text{billion}800billion+120billion=920billion
- With the GST included, the total required tax rate on income would be adjusted: New Tax Rate=920?billion1.8?trillion=51.1%\text{New Tax Rate} = \frac{920 \, \text{billion}}{1.8 \, \text{trillion}} = 51.1\%New Tax Rate=1.8trillion920billion?=51.1%
- So, with the GST, 51.1% total taxation on income (corporate and individual) would be needed.
- United States:
- The U.S. GDP was about USD 26.7 trillion in 2022.
- A 5% GST would generate about USD 1.34 trillion.
- The total government revenue after including GST would be: 7?trillion+1.34?trillion=8.34?trillion7 \, \text{trillion} + 1.34 \, \text{trillion} = 8.34 \, \text{trillion}7trillion+1.34trillion=8.34trillion
- The new required tax rate on income would be: New Tax Rate=8.34?trillion25.6?trillion=32.6%\text{New Tax Rate} = \frac{8.34 \, \text{trillion}}{25.6 \, \text{trillion}} = 32.6\%New Tax Rate=25.6trillion8.34trillion?=32.6%
- So, with the GST, 32.6% total taxation on income (corporate and individual) would be needed.
Conclusion:- Canada: If the entire revenue needed to support government operations were to be raised through a flat tax on income (corporate and individual), the required tax rate would be 44.4%. With the inclusion of a 5% GST, this would rise to 51.1%.
- United States: The required tax rate on income would be 27.3% to cover government expenses. With the addition of a 5% GST, this would increase to 32.6%.
These rates assume a complete and equal tax burden with no exemptions, deductions, or loopholes. |
