Episode Transcript
[00:00:00] Speaker A: Foreign welcome to wealth on Main street where conversations about growing your wealth are fun and entertaining. Wealth isn't just about money. It's the skills and the knowledge that we develop to pass on to future generations. Tune in each week to, to grow your mindset and your net worth at the same time.
2025 taxes in Canada. It's a, it's a crazy space. We've had a wild nine years of tax changes and tax updates and we're going to have a great conversation with a tax specialist. We're joined by Kim Moody, who is a founder of Moody's Private Client Law as well as Moody's Tax. He's a well written, well known individual. In fact, if you have the chance, make sure you get on his LinkedIn and, and look at all the amazing articles that he puts out. They're fantastic and they're well written and they're also entertaining to boot. So Kim, I had the pleasure of getting to know you a little bit through Strategic Coach and very excited to have you with us on the program today.
[00:01:13] Speaker B: Thanks Richard. I appreciate being here.
[00:01:16] Speaker C: One of the things, Kim, that I was, we were just chatting a little bit before the recording of the show is, you know, a, we're, we're really excited to have you join us today. And as Richard shared, if you do not know Kim Moody, you have an opportunity. So we'll include links where you can follow him, you can get connected with him. And my first question is, you know, given that Justin is just about out, what do you envision the tax landscape looking like for Canadians over the next five or five plus years? What is coming up in your thinking or in your circles? What do you envision that looking like for the average Canadian and what can they realistically expect in the way of change?
[00:01:59] Speaker B: Well, thanks Jason. Appreciate the kind introduction as well. And I'll first comment on your just in, just out because I have to say, just, you know, putting on my commentator hat more than anything.
I, I think that so called resignation was one of the most pathetic we've seen in history in Canadian history. And I, I, you know, I minored in Canadian history and political science in my undergrad degree and from confederation forward, right. So 1867 forward. And so I know a good chunk, you know, of the history of Canadian prime ministers and their challenges and you know, their positives and what have you as I wrote in my Financial Post piece and, or did I? Yeah, no, I did.
In my view it's going to be a hard, hard time for historians to resurrect and make anything positive economically, socially, anything good that came out of this fellow's tenure.
I don't think the history books are going to be kind in the short term and I hope the long term, because the economic vandalism and damage that this guy has caused is, is unbelievable. So that, that and, you know, the, the long goodbye, you know, he's down right now in the United States. You know, he attended the, the funeral of President Jimmy Carter and, and he, and he got on the cocktail circuit, you know, with the CNN and CNBC or msnbc. I mean, like, come on, like, enough is enough already. And so I'll just leave it at that. In terms of my.
[00:03:45] Speaker A: I think he'll be down there scouting out new ski resorts that he can go around snowboarding unnoticed.
[00:03:52] Speaker B: Yeah, you know, go ahead.
[00:03:55] Speaker C: Yeah, I was going to say that it's real, real authentic leadership that this country needs right now. And you know, the, the, the postmodern theatrics, the, the moment that that news came out, I had communicated with our community as well that, you know, this is, this is a time for change where we need actual, real leadership and, and not an individual who's playing dress.
[00:04:22] Speaker B: Up totally, you know, and frankly. But let's say his last name was Smith, would he have got elected?
No. There's no credit, there's no credibility. So I think whenever you rely on the last name or, you know, just some sort of legacy issue in order to become leader of such an important position, I think that's pathetic. And I've never admired this fellow's leadership. I don't admire him as a person. I don't admire his economic policies and ideology. There's not much I admire about this person now. He's a human being and deserves respect. So do I like what that lady did at the ski resort when she went up to him and said, get the f out of B.C. no, I think that's colossalist. I can understand the sentiment.
Doesn't make it right. But having said that, the sooner Canada sees the backside of this fellow, the better. So to answer your question, in terms of what can we expect for tax in the next five years? Well, you know, I can tell you what I hope and what I hope is that, you know, assuming that, you know, that peer gets elected, you know, the Conservative Party, they're going to inherit a real mess. I mean, they already know that.
I think they're gonna, it's gonna take some time for them to realize how really bad it is, because I suspect it's really, really bad.
But on tax, you know, so, so just to clarify that I, I think it's going to take a while for them to get to the tax file. No, notwithstanding that, he's committed to putting a tax reform tax force together within 60 days of getting elected and he's still saying he's going to do that. And he announced that last June and that if he gets elected he's going to do that. And so I'm very, very hopeful that, you know, within 60 days of getting elected that he does convened attacks reform task force. That, that's a hard mouthful to say.
I challenge you to say it fast. But in any event I have to come up with an acronym triple T or something. But and I, you know, one of the things that Pierre has announced, you know, as priorities will be, you know, a tax reduction. He wants to incentivize making things, as he calls it, and bringing back capital to Canada. And I think I'm missing, oh, simplicity. He wants things to be simple.
I think all those are great.
I'm on record, Jason, many, many times over the years saying that I'd love to see a Folsom tax reform commission. The last time we had that was in 1962-1966. It took four years to study it and recommend.
And then those recommendations that were released in 1966 were controversial at the time. But ultimately a good chunk of those recommendations, not all of them and some are modified, but were put into major tax reform that got implemented January 1st of 72 by Trudeau Sr. And so that's the last time that we've had major, major tax return. I'd like to see a major tax reform version two, but I, I just don't see it and I don't think, you know, I don't want to put words in here's mouth but I think he realizes politically that you're not going to have an open ended commission like that. It's going to be short term and it's going to have some pillars, you know, that I've already talked about and the recommendations will come out. I'm going to guess I have no idea. But some short term timeframe where the commission will make recommendations. Let's say that's six months. And do I think that's doable? Yeah, I think it is because some things are rather obvious. We need to bring down personal tax rates. You know, our personal tax rates are way too high. Will they ever be as low as the United States? Probably not because we're smaller and we don't have the same Leverage.
But can we bring down a lot of the tax rates on the back of, you know, tax or, sorry, spending reduction? I think so. I think we can make some good progress there, I would agree. And also just increased economic performance.
We can make that work. What that number is, I don't know because I'm not an economist, but I certainly want to see what it looks like. So I think personal tax rate reductions is high on the priority list and I would expect if Pierre follows through that we're going to see something like that. Fingers crossed. I have no inside knowledge on that, but fingers crossed. And then I tend to think that we're going to have to see corporate reform in some form or fashion because the United States is.
They went through major tax reform in 2017. 18 in DJT version 1 and DJT version 2 is wanting to do some more. And so I think we're going to need to see real response this time. Not like we saw during Bill Morneau's tenor, which was just pathetic.
And then. So I, I suspect we'll see some sort of corporate reform and I suspect at the end of the day that we're going to see a lot of elimination in an attempt to simplify the existing Income Tax act, because it is bloody complicated. Yeah.
[00:09:41] Speaker A: You need so many professionals around you just to be able to figure out what to do to have an idea at the end of the year, you know, what can you expect to have left over to reinvest in your business? I mean, it's really is a complex nightmare. And, you know, Jason's fond of saying that capital will go to where it is best treated. And absolutely, if those reforms don't come in, we're going to see that. You know, as I think Peter said recently that the continued, you know, as a Ross Perot quote about the continued sucking sound.
[00:10:08] Speaker B: Yeah. Of.
[00:10:09] Speaker A: Of capital, the country.
[00:10:11] Speaker B: Listen, I think he said that within the last week here, if I'm not mistaken. But yeah. And frankly, on that point, Richard, you know, in my client base, our firm's client base, we're seeing. We. We're seeing so many successful people leaving Canada. You know, and I've rang this alarm bell for years because it's, you know, they need our help. But is it the kind of help that we want to give? No, we're, we're, you know, I'll speak for myself. I don't want to speak for my colleagues, but I'm a very, very proud Canadian, you know, I'm very proud of this country. And to see those successful People leaving on the back of my advice is disappointing. It's intellectually stimulating and challenging and rewarding. But it's, it's so bad for our country. It's. And the number of people that we've seen. I'll give you a little test here, Richard and Jason. So in the first 23 years of my career I had about a dozen departure tax files, as we call them in our industry, you know, people that leave Canada. So whenever you leave Canada, become a non resident, you're deemed to have disposed of all of your assets of fair market value. So in the first 23 years of my career, roughly I had about a dozen of them and mostly grandma and grandpa wanting to live in the States or you know, somewhere exotic, you know, better weather, better health care or being close to family, something, you know, it was never tax driven.
Fast forward to when little prince became, you know, prime minister and you know, all of a sudden the first thing he did was increase personal tax rates for the so called wealthy. And then they went after private businesses in, you know, 2017 and then the out of control spending with COVID and constant leaks of hey, are we going to have a wealth tax? You know, just all these things during COVID that they were testing a wealth tax and oh, you know, the modern monetary theory of economics looks like it works until it doesn't, you know, with inflation. And so you know, the continued pile on and you know, attacks on real estate, you know, the so called flipping tax, the prohibition of deductions on short term rentals, which is one of the most ridiculous policies I've ever seen in my entire career. You know, all those things that are. So you want to take a guess at how many files I've had on departure tax in the last, I'll say.
[00:12:33] Speaker C: About five years, 10x.
[00:12:35] Speaker A: I'm going to say that it's been 100.
[00:12:37] Speaker B: So 120, you say? Jason, how many?
[00:12:39] Speaker A: I'll say 150.
[00:12:41] Speaker B: 150. You guys want to revise your quotes before I tell you?
[00:12:45] Speaker A: Okay, I'll double it to 300.
[00:12:47] Speaker C: Okay, I'll go 20x.
[00:12:49] Speaker B: 20X. So 20 times a dozen? Yeah, yeah. You stole off 600. Over 600, 500.
You know, and we're a small firm, we're about 80 people.
You know, we're not big four. We're not, you know, big law where we have hundreds and hundreds of people now we're pretty niche, you know, we, we advise the, you know, the high net worth, ultra high net worth private families across Canada.
But to have 600 files now. Not to be, you know, to be honest though, not all those 600 have closed. I would say probably a little more than half of them have closed. But the wealth attached to those, you know, to those ones that have closed is I. High billions. Right. And when you think about that leaving Canada, you know, the sucking sound, as Ross Perot said. And you guys talked about how many, you know, how many average Canadians, if you want to call it that, or immigrants to Canada does it take to replace even one successful Canadian leaving?
A lot.
[00:13:55] Speaker A: Well, how many jobs over the, over the following two decades just got eliminated because that capital is not available to fund projects, investment and jobs?
[00:14:08] Speaker B: Yeah. And let's just call it the other 300. The other half that didn't close. Again, the wealth around those are massive. Are they still keen? Well, yeah, they are.
They're wanting to see what happens though. I can tell you that if the Liberals or the NDP get elected this next election, I would guess probably at least 20% of those 300 will go.
@ least.
[00:14:32] Speaker C: I have no doubt. People are at their wit's end and they're, they're looking for real leadership, sense of relief. We often ask clients of ours, you feel like you're not taxed enough, regardless of what your political leanings are. The fact of the matter is, is that we're, we have experienced probably, well, at least in my lifetime, from the moment I was conceptual enough to understand taxation. This onerous taxation is just absolutely ridiculous. It's, it's a, as our late mentor, R. Nelson Nash would often say, it's a parasite host relationship.
And so if you drain the host, both parties die. And this has just been, and, and Kim, you were talking about it earlier when, you know, small, medium sized businesses were villainized as, you know, tax cheats and people that needed to be disciplined in some way, shape or form. And totally disregarding the fact that that's the complete backbone of the Canadian economy and the government is constantly hovering over your assets with a giant knife and fork just waiting to devour them. And so Canadians want relief. They want practical leadership. They want sound, logical solutions, not amateur night at the arena. And it's, it's not that that individual was a bad human being or a bad person. He was just purely incompetent. And you can't have a country as resourceful as ours repelling the amount of capital and investment that we've repelled in his tenure and some of which will never come back just because once you lose that trust, it's Gone. And these companies are going to operate in environments where their capital is well received and highly respected so they can get people.
[00:16:25] Speaker B: It's not even just companies, it's individuals with monstrous portfolios. Right, that, that contributes a lot. But you know, I, I just to comment on that, Jason, I, I think you're bang on. And in terms of the parasite host relationship, I mean, I agree with that. I always tell clients that CRA is your, you know, the taxman is your partner in your life. And, and I think generally people, and I'll speak for myself, I think, you know, taxation in any form is the price you pay for a stable society.
You know, infrastructure, minimal health care, you know, minimal education, you know, taking care of the vulnerable, you know, etc. I have no problem with tax. I get accused by, by some lefties that think that I'm on the zero tax train. I'm not. I'm much more reasonable and centrist than that. I happen to be a lot more vocal though, than the average person because I think when you assess the value you're getting for your dollars, the value that Canadians have had has been atrocious. Do we have a great healthcare system across all provinces? No, it's atrocious and it's getting worse.
Do we have a good education system? No.
My youngest son graduated grade 12 about three years ago now. When he was in grade 10, he came home with the privilege wheel. I had no idea what a privilege wheel was. But when you go around the wheel and you look at, are you white, are you Christian, are you, you know, blah, blah, do you have, do you live in a home? Do you know, apparently he was towards the center and very privileged and therefore he had to acknowledge his privilege. You know, that motivated me to start a think tank called the Aristotle foundation, you know, to push back and like that. I hope I'm allowed to say that. And the Aristotle foundation, you know, led by our Mark Milkey is an amazing thing, but that's, I'm digressing here, but my point being is that we don't get good value for dollars on infrastructure and on what's being provided. You know, the CRA has not.
[00:18:42] Speaker A: I mean, the billion dollars that they spent on a pipeline they couldn't build is not a good value exchange.
[00:18:47] Speaker B: Yeah, I agree. And then, you know, the, the amount of CRA auditors that they've hired to do what to, to redistribute wealth, to redistribute income, you know, it's almost doubled in the headcount.
[00:18:59] Speaker A: It's craziness you talk about them being a partner. Well, they're the only partner in a, in a structure that can change the percentage of ownership that they have on an annual basis and not have to, not have to do any paperwork for it. They can just demand a new level of ownership in the business. And you don't know what it's going to be until it's too late.
[00:19:17] Speaker B: Yeah, well, to be fair, it's not the cra, it's the Department of Finance led by the government that can do that. But yes, I understand your point.
[00:19:25] Speaker C: It's, you know, Kim, I, I was just impressed because I was sharing with Richard how excited I was for this episode. And in, in preparation for it, I was thinking through some of the things that, because we're omnipresent on social media, so we're all over Facebook, we're all over Instagram, we're all over YouTube and so on. And what we hear and what we read is very, very emotionally sensitized. And when people are in a position where maybe they feel like their perspective is not being validated, then that can quickly lead to, you know, insults and, and just things that have no substance or any value in, you know, creating any positive change. And people are drawing these comparisons around what did I have here? You know, economic growth between, you know, Trudeau's tenure and Harper's tenure, tenure with very short term memory loss of what the Harper government was dealing with in 2007, 2008, the financial crisis and how we, you know, navigated through that and the, the income growth.
I, I just don't understand that. Like, it doesn't. You can have income growth, but if you have corresponding skyrocketing cost of living, then how is that an advantage to, to the, the average Canadian? Yeah, you've got income growth, but everything that you're spending your net income on has skyrocketed in price.
[00:20:58] Speaker B: Yeah.
[00:20:59] Speaker C: And yet look at the economy. Look at the unsustainable elevated housing pricing and what that's causing in the way of people not being able to achieve that dream of homeownership. And so when you're dealing in poverty reduction, come on. Like, the list goes on and on. Daycare, parental care, all those costs being reduced. Go and talk to a family that has to put children into daycare and ask them how they feel about the dramatic reductions in daycare costs. You'll likely get a snow shovel to the face because people are like, why don't you take a break from La La Land and come visit us in reality sometime And I think that that's, that's a message that this, this government simply heard but ignored, frankly.
[00:21:45] Speaker B: Yeah. And I'll take it one step further.
You know, there's a reason why prudent governments who are fiscally conservative, you know, and historically liberal parties have been fiscally conservative as well. This version of liberal party is ridiculous. But there's a reason why, for example, they're fiscally conservative. Because it's common sense that if you pump the economy with too much money and you have, you know, as economists and even I think Piers picked up on this. When you have so much money chasing so few goods, what does that do? Well, it drives up inflation. Right. And is the, you know, do wealthy, wealthy people care about inflation? No, because they benefit from it. Their portfolio makes them wealthier. Right. But do the poor or the middle income people, if you want to call it that, do they care? Yeah. You know, and even some higher income earners care. You know, you guys, I'm sure, make a decent living, but, you know, like I do. But when you go to the grocery store, I mean, you know, I was thinking about the other day, I went and got a couple packages of, you know, chicken breasts and, you know, one package of steak and I can't remember what else. Some vegetables. You know, it was 130 bucks for. And I looked at it and it would barely fit the screen that I'm looking into right now. You know, the items. And I think to myself, I can afford this. I don't want to afford paying 40 bucks for a small little pack of steak.
But who can afford that the average income earner and the average income earner makes?
It's not a lot of money in Canada. I can't remember what the statistic is off the top of my head. I want to say it's somewhere around $40,000. It's a low number. Right. So if you take somebody who's, who's making 40,000 or even, let's be generous and say 50,000, can they afford that package of chicken breast and steak? No, they can't. And so that, to me is where the rubber hits the road with the dissatisfaction. Right. When you guys are on social media and you see all this dissatisfaction, what I see is the average person who really struggles to put groceries on the table and to, you know, to make their mortgage payments. Especially after renewal. Right. You know, after renewal, it's jump like crazy. And so it's. That to me is just so heinous because inflation is a tax on the poor and it's And I, I will forever go to my grave blaming the liberal government for their out of control spending. Even during COVID on the front end of COVID I could get around that because nobody knew what we're dealing with. But after the first few months and you continue with shoveling out this money out the door, out the door, out the door with no accountability, I'll forever go to my grave and not forgive them for that kind of piss poor management of our economy that ultimately increased inflation and ultimately harm the average worker and their families. That to me is quasi unforgivable.
[00:25:08] Speaker C: I agree wholeheartedly. And the individual and the average family, they've somehow over the course of time been conditioned to villainize the grocery store. Using your example and villainizing the company and saying, look, the only, the only.
[00:25:29] Speaker A: Telling them to do that.
[00:25:30] Speaker C: The only reason why these grocery prices have skyrocketed is because the grocery store owner woke up one morning and said, rather than do this all the time and just permanently increase prices, I just woke up Monday and decided to increase prices. Like people, people just. And again, you know, if you really understand what's going on, you'll know exactly what to do. And people just plainly and simply do not really understand what's going on. It's not the grocery store, it's not the company. If that were the case and they were truly greedy, prices would have always been elevated. And, and it, that's just not the case.
[00:26:10] Speaker A: And so makes me think of our mentor, Nelson Nash. He talked about driving down the interstate following a semi truck and he's following it for an hour. And on the back it says last year this truck paid $25,000 in taxes. You know, you get to pondering when you're on a long drive and he says, wait a second, that truck didn't pay those taxes. I paid those taxes. The consumer pays for everything. And so, you know, everything to gets delivered somewhere has to have the price of what got it there included, which includes all the fuel and all the truck. Like everything's included. And you know, you talk about inflation, we're having a tax conversation. And the tax that we've settled on is the most important that we're talking about is inflation because it's a hidden tax on the back of every consumer. And, and no individual consumer has any control over that tax. Great tax is created through manipulation at government levels. So the only time you have a liquor control is when you get to exercise a vote. And depending on where you live in the country, if it's a high population Low population, you don't have an awful lot of say in the result of what happens, at least in Canada.
[00:27:12] Speaker B: Yeah, well, you guys have hit on a topic that is one of my favorites, which is financial literacy.
You know, the, I've written a couple posts, you know, financial post pieces on this topic.
They don't tend to get a lot of traction because a lot of people just aren't interested in, in learning more, which is very sad. But I, I personally think the only way that our country and any western democracy or any country for that matter, improves their lot in life is when their citizens are financially literate on average.
[00:27:46] Speaker C: Right.
[00:27:47] Speaker B: And because when you're financially learning, you're going to make better informed choices, you know, this whole thing of, of oh, the boogeyman over here is going to really impact you. You know, pick your boogeyman of the day. And the left is famous for, you know, abortion or climate change or you know, the out of control housing, you know, all the boogeyman stuff. No, no, no, really, at the end of the day, this is about how is our economy managed.
And frankly, the less managed the better as long as government spending is in control and that we have good economic and tax policies to make the garden fertile.
Now how are people going to understand that? Well, by taking an active interest in trying to understand even basic economics. Go take a course my youngest son right now is taking. He just enrolled in SAIT because he wants to be an entrepreneur. Yeah, that's a good old man. I love entrepreneurs. But he said, hey dad, if I want to be an entrepreneur, what's going to set myself up? I said, well you better take some basic business courses. And that includes accounting and finance and economics.
And to his credit he, you know, one of the few times he listened to good old dad and he signed up and he's taken a course, you know, he's taken his diploma at Satan. I'm really excited for him. Just, you know, it's only been a week that he's been in these courses, but some of the questions he's asking me and see the twinkle in his eye, you know, that makes me excited. Notwithstanding, he's my son. But I like to see that from every Canadian because it is so important and your financial future depends on understanding basic stuff. So financial literacy in my view is the way out of this mess.
[00:29:38] Speaker C: I love that and couldn't agree more because people again, you know, they, they can get really emotionally sensitized and if you're communicating the truth to someone and you know that it's the truth, not just your truth.
Quite often that can lead to, you know, emotionally sensitized disagreement. And, but if you're having a discussion with somebody on a basis of understanding the truth, then it becomes much easier to tackle the challenges that we're dealing with versus the government.
You know, relying upon Canadians to, to not think. And again, credit to, it's come up a few times in our discussion, but credit to our late mentor, our Nelson Nash, who is one of the most brilliant individuals that we've been blessed to learn from and one of the most well read. And he often said that everything begins with the way that we think. And the fact of the matter is most people would rather die than think.
[00:30:36] Speaker B: That's true.
[00:30:39] Speaker A: Well, and we, you know, there's a, there's so many components. You know, we, we talk to people frequently and we ask them some basic questions. You know, what direction in your lifetime have you seen taxes go? We're not saying necessarily income tax or sales tax, like any individual tax, but just tax in general. What direction have you seen it goes? And everyone responds with, it's gone up. I'm like, okay, well, and if you're a young individual, maybe they haven't seen that yet. Like, okay, well, ask your parents, ask your grandparents, what would they tell you? And they're going to respond with, okay, well, well, relative to what's been spent by the government and what they're taking, in what direction do you think they need to go? Like, in order to, in order to pay for things? There's only one way to, you have to generate some kind of revenue stream. Well, the, the economic machine, the, the thing that funds everything, everything. Every government program is built upon a tax bill. It's the only source of revenue that they really have, unless they're selling government buildings, you know, so, so the average.
[00:31:37] Speaker B: The average person doesn't understand that.
[00:31:39] Speaker C: Right, right, right.
[00:31:40] Speaker B: And so, you know, I do a lot of guest lecturing at, at law schools and, you know, accounting schools.
I don't, I don't teach full time simply because it's too consuming and it doesn't pay enough.
But I love to give back in terms of trying to educate youngsters in particular. And so one of the things, especially at law schools, what I'll do is they'll invite me to speak on any tax matter that I like. So usually what I'll start off with is I'll say, all right, and if you know anything about law students, some of them, not all of them, they want to save the world. Right, Right. Yeah. And so it's interesting. So, so I'll start off my lecture by. By saying, how many of you think that we should tax the rich more?
You know, a good chunk of the hands go up. Oh, okay, good. What's your name? You know, I'll pick on somebody, and usually the person's a good sport. And then I say, okay, well, let's start off with some statistics. Do you know how much the top 0.01% of Canadians earn? And so then I'll tell him. And he says, he guesses a number. It's usually really low.
And so then I tell him. Or sorry, it's usually really high is what I meant to say. But the number is when I give them the statistic, it's like, oh, it's only that. Oh, okay. Do you know how much percent they pay as Canada's taxation load in total? So then I give that. So I go through the machinations, right? 0.1 and then top 0.1% and then the top 1% and then the top 5%.
I'll test you guys, see if my memory is okay here. Do you know what the top 5% roughly earns in Canada? Individual, median. Not median. Sorry, average.
[00:33:33] Speaker A: Top 5%. Average individual, I would say, is around maybe 200, 225,000.
[00:33:38] Speaker C: I'd say 350,000 plus.
[00:33:41] Speaker B: Yeah, it's a lot less than that. I'm going from memory here, but I won't be far off. About $130,000. Wow.
But so that means the top 5% earn anywhere from like, average is $130,000. Right. So there's a lot of higher income earners above that. Yeah. Do you know how much they pay in. In tax as Canada's tax load?
[00:34:05] Speaker A: 97% of the entire tax load.
[00:34:07] Speaker B: Yeah, that's a little high.
[00:34:09] Speaker C: I'd say somewhere between 54 and 60.
[00:34:12] Speaker B: Yeah, off the top of my head. And I should probably just double check while I'm still on here, because I might screw this number up with the top 10%, but it's somewhere around 50%, which, when you think about that. And then I talk about the statistics, I've already told you guys about how many people have left Canada and what it takes for even one billionaire. Let's say you have a person that are as $1 billion, and let's say they earn 5%, so they're earning $50 million a year. And let's say they pay on average 50% tax. So they're paying $25 million in tax. How many average Canadians does it take to just replace that $25 million?
[00:34:51] Speaker C: A lot.
[00:34:52] Speaker A: A lot number.
[00:34:54] Speaker B: So I go through that kind of conversation, and then I talk about what the tax is used for, blah, blah, blah. And then at the closing of my lecture, I'll say, all right, how many hands are still up about taxing the rich more? And it's interesting that, yeah, there's the odd one that still has it.
And those are. I remember this last time I lectured about six months ago, and this guy came up to me and he says, yeah, my hand was still up. But I gotta tell you, Kim, it's mainly ideologically driven. I can't argue with your stats.
[00:35:27] Speaker C: So let's bring this down to Tom, to the you and me level, where if. If you and I came, if we owned a business together and we got together and said, look, we are receiving an incalculable number of customer complaints that our pricing keeps going up.
So how, Kim, can you and I continue to raise pricing versus sitting down and saying, do we truly understand what the customers we have and the customers we want to attract truly value? And how can we deliver that to them in a way that has us thinking smartly, acting quickly, doing things faster, better, and cheaper so that we can deliver it to them at the best, reasonable, fair price?
But all the discussions that happen are always around, how can we tax the rich more versus sitting down and saying, how can we spend what we're collecting in a more fiscally responsible way? How can we rub two nickels together till the beavers fart? Why don't we start there?
[00:36:39] Speaker B: Yeah.
[00:36:40] Speaker C: Versus shifting the discussion to. Because, you know what? Again, remember, most people would rather die than think so when you're dealing with the Minister of finance, that whole, you know, team, and they're sitting around having discussions, you've really got to put some deep thought behind how you can actually reduce spending and deliver services to Canadians in a very responsible way fiscally.
But it's much easier to sit around the boardroom table and say, all right, let's get this group fired up. Those rich people. Those rich people, their tax cheats. How do we dip into their pockets and get more money because we need more money, let alone having a discussion about how to spend more money effectively. It just leads to this compounding factor of ridiculous stupidity. And it's amateur night at the arena.
[00:37:38] Speaker B: Yeah, I call it the politicization of the tax system. And I wrote a piece on this a few months back, and there's no, you know, politics and tax will forever be inextricably. Linked. Right.
You know, as I wrote in my post piece, it's like wine and cheese. They're, they go together very, very nicely.
But should there be a purposeful attempt to try to limit the amount of blatant politics that's in our tax system? And I think the answer is yes, you're not going to eliminate it to zero. But can you eliminate some stuff that does nothing for the country? In other words, it doesn't improve productivity and put money in the pockets of Canadians. It adds complexity to the statute. It adds complexity to the administration. And I could riddle off a whole bunch of these things that have gone on in Canada in the last 25, 30 years, but the proliferation of these kinds of political interference in our tax system for, for no benefit over the last nine years under this Liberal government has been atrocious. Let me give you one example you guys familiar with, and I've written a lot about this, so I apologize to your listeners and to you if you've heard me speak on this, but you familiar with the short term rental prohibition on expense deductions that they introduced? Well, yeah.
[00:39:08] Speaker A: Talk about killing hundreds of thousands of investors. Opportunities where they purchase property specifically based on that dynamic, and now they need to sell it, but they might be selling it based on these miscellaneous, unproven, unaccepted capital gains rules.
[00:39:26] Speaker B: So let me, let me give you an example here. And I've written about this a lot and spoken on it because I want to draw attention to how silly this is. So, so of course, you know, these Airbnb owners are evil. Right. Because they're sucking up property that could otherwise be converted into rental properties. Right.
You know, the Liberal Party came out with a piece on this even a couple weeks ago in their X account, which. It just drives me crazy to even look at that stuff because it's, number one, it's false. Yeah. And number two, it's misleading and it's disingenuous and it's all politics. Because Airbnb owners are not evil. They're just simply people trying to eke out a living and make some money. Oh, what's geez? That's evil. Right.
[00:40:09] Speaker A: Often because they keep losing all their money to taxes.
[00:40:12] Speaker B: Yeah. So I'm going to pick on you, Richard, since you interrupted me. Okay, so you're a criminal drug dealer. I've used this example a lot.
[00:40:22] Speaker A: Hey, I didn't know that you've been reading my emails.
[00:40:25] Speaker B: Yes, I have. I've got your phones tapped as well. Because you're out there selling cocaine. Right? And you've got quite the little dealer network. And so you've got burner cell phones, and, you know, you've got.
You know, you're. Let's just say you made $10,000 in the last year, and you come to me and you say, hey, Kim, yeah, I know I'm not supposed to be selling cocaine, but I want to make sure that I pay tax on this stuff, because if I don't, I'm a tax evader, and that's criminal again. So. And of course, that's how they got Capone was on, you know, tax evasion. So I want to make sure that I at least file my tax return. Now, in real life, of course, most criminals don't, but in real life, have I had some criminals come to me and say, hey, yeah, I want to pay tax. And the short answer is, yes, I have. It's unusual and it's rare, but it has happened. So, Richard, you come to me and you say, I don't want to. I don't want to be a criminal twice. I'm okay with being a criminal once.
And so you've got $8,000 of expenses against the $10,000, because burner cell phones and your cost of your snow and et cetera. So you've got $2,000 net income. Are you able to.
When I file your tax return, I'm going to report the $10,000. Am I able to deduct the $8,000?
No.
[00:41:46] Speaker A: Tracking mechanism. It's illegal activity, so you won't be able to. You wouldn't be able to in that scenario.
[00:41:51] Speaker B: The answer is, of course I can. There is nothing. Or actually, sorry, of course you can't, because you're the dealer here, so. And I am, as a tax, you know, filing your tax return. There is nothing in the income tax statute that prohibits the deduction of your business expenses notwithstanding your income is illegal. The Income Tax act is. Is agnostic as to whether or not the source of your income is from illegal sources or not. It doesn't care. It's just taxable.
And so is there any specific provision in the act that prohibits the deduction of the $8,000? The answer is no. So I'm going to file your tax due, and you're going to pay tax on $2,000. Now, let's pick on Jason here. And he's an Airbnb owner, and, oh, my God, he is just an evil guy. He earns the same $10,000 legal, but he's operating in a jurisdiction that prohibits those deductions. Or try that again. That prohibits short term Airbnb. But Jason says, you know what? Screw it, I'm going to still advertise. I'm still going to do it, and if the jurisdiction wants to find me, bring it on. I'll just deduct it as an expense because usually the fines are not that high, and so who cares?
Well, now, because the federal government decided to go after these Airbnb owners because of course, they're quite evil, you know, sucking up the housing supply.
Again, total bullshit, if I haven't said that already.
So, Jason, you're an evil guy. Can you deduct you've got $8,000 of expenses as well? Same thing as Richard. Can you deduct that now?
[00:43:32] Speaker C: Probably not without a lot of problems.
[00:43:35] Speaker B: Well, the answer is no. Because of this new rule, you have to pay tax on the full $10,000, which makes zero sense. But here's the bigger issue. The bigger issue is think about the public policy here.
So Richard is a criminal.
Jason is not. Jason happens to be breaking some civil a lot of nimby, as I call it, not my backyard rules. I don't want these Airbnb owners and in my backyard, they're too noisy. I used to own a cottage property in a. In a British Columbia strata development, and they asked me to join the Strata board because I was one of the only accountants. So of course I got appointed as treasurer.
If you really want to have. Have fun, not really join a Strata board. It's the most ridiculous thing you've ever seen. At least in my experience it was. And it's all about NIMBY stuff. Oh, I don't want that. Oh, no, it's nothing about, you know, good policy or what's good for the overall neighborhood. It's about me, you know, and that's exactly the public policy that was done here for political win by the Liberal Party to satisfy a faction of their voter group that thinks that Airbnbs are causing tax or, sorry, causing housing supply. But by doing so, they put Richard on a better stead than you, Jason.
[00:45:10] Speaker C: Unintended consequence.
[00:45:13] Speaker A: So the takeaway is that anyone investing in Airbnb should sell them and find a drug dealer to partner with.
[00:45:20] Speaker B: I'm not saying that on record. I do not condone any criminal activity, but if you understand that simple, blatant example. Yeah, like, tell me under any reasonableness standard from a public policy perspective that that makes sense. And I don't care. I don't give a shit what answer you give me, Jason.
There will be no Feasible answer. That. That makes sense.
[00:45:49] Speaker C: I would agree.
[00:45:50] Speaker B: Yeah. Am I allowed to say shit, by the way? Sorry about that. Okay.
[00:45:54] Speaker C: No, no apology necessary.
[00:45:55] Speaker A: Yeah.
[00:45:55] Speaker C: This is a show where we speak.
[00:45:57] Speaker A: Our truth when, when we're talking about the tax system and the current administration in Canada. It's common language. I mean, let's just be clear about that.
[00:46:06] Speaker B: We just don't want to get you.
[00:46:07] Speaker A: Guys nine years of it piling up. So there's a lot to talk about.
[00:46:12] Speaker B: That one is, that particular one is just an, an easy illustration of how stupid our tax system has gotten by the addition of those provisions. And to me, you know, to go back to one of your earlier questions, Jason, what do I think people should expect in the next five years under, you know, for tax. I think a simplification, I think, you know, a more common sense approach to tax, a more prudent public policy perspective in tax and tied to all that, you know, a simpler administration. I'd love to see a system where we have, you know, people that don't need to pay tax preparers to file their tax returns.
You know, there's not many accountants that like to do tax returns, first of all, because it's so monotonous and boring.
And to see these low end tax preparers like H and R Block and what have you, probably shouldn't mention by name, but, you know, charge people 100 bucks, 200 bucks, 500 bucks to do simple tax returns, it just drives me crazy. It does our country no good.
And so we need to get to a much simpler way to file our tax returns and administer our system better.
[00:47:28] Speaker A: And it's interesting that you say that like it makes, you know, I've been curious with, you know, just seeing all the crazy changes that have happened in the last five years, let alone the last nine.
Each and every year, each budget presents new things that have to be learned about. And so it seems like it's creating a measure of chaos just in the tax preparer community because all this, okay, is, is it enforced? Is it not? Are we learning? How do we, you know, you have to, you have to go through a period of understanding to and even be able to think about advising a client. And there's so many new things to learn, plus all the rest of the tax code you got to know about, like it be like it's a very complex situation to stay on top of those things.
[00:48:08] Speaker B: I'm going to show you something. I just got to step away and grab something. But this is our Income Tax Act. When I first started off in tax.
About 30 years ago, it was about that thick.
Today it's volume one, volume two, and I challenge you to even read a few sections and make sense of it. Like it. To your point, Richard, the average person cannot read this, can make no sense of it. It's taken me an entire career to be able to interpret it correctly. And I can tell you with all honesty, do I, there's certain provisions in this act that to this day I still can't understand.
And there's a very, very small group of people that can make sense of those provisions because it's becoming more complex and more convoluted. When you get people like me who dedicate their career and life to the study of taxation that can't understand it anymore, the system breaks down and it's just not good. Right. It breaks down because if it breaks down for people like me who are in the position of giving advice and interpreting it, what does that do for the average person?
[00:49:33] Speaker C: Well, I, we spend a lot of time. I'm a member of klu, the, the Conference for Advanced Life Underwriting.
[00:49:38] Speaker B: And I'm an associate member, by the way.
[00:49:40] Speaker C: There you go. Congratulations. It's a wonderful organization to be a part of. And you know, a lot of great minds converge and, and work through interpretation of.
[00:49:51] Speaker B: Yeah.
[00:49:51] Speaker C: You know, proposed tax changes, tax changes that, that are in force and how they're to be interpreted and how people can, you know, maneuver legally through these tax changes. It's, it's just an ongoing, never ending. And. And then we end up coming back to some of the same measures year after year to say, you know what, we now have a different interpretation of this just based on how Revenue Canada has either. Or the courts, or the courts have, you know, ruled in one way or another or how Revenue Canada as pursued in one way or another. So I know firsthand what you're describing. And you know, when Kaylu converges once a year in Ottawa and does have occasion throughout those few days together to spend time with members of Parliament, they don't understand it either. And so it's.
[00:50:45] Speaker B: You know what, Jason? I've lectured at the Ottawa conferences for years and I've never seen you in the audience.
I'm just kidding.
[00:50:56] Speaker C: I'll have to. I'll have to. Next time you're on the stage, I'll have to be.
[00:51:00] Speaker B: Hey, Kim. Exactly.
[00:51:02] Speaker A: I'm over here.
[00:51:04] Speaker C: I don't have any cocaine.
[00:51:06] Speaker B: So I'm thinking, come with me. I'm calling bullshit that you attend these conferences.
Well, I'm just kidding.
[00:51:16] Speaker A: Yeah.
[00:51:17] Speaker C: No, it's the last time, the last time I attended was just prior to Covid.
[00:51:23] Speaker B: Yeah, I attended. I actually, to be honest, I put my associate membership on hold recently. Really? Yeah. And I'll probably renew it here at some point, but just because I've got more memberships than you can shake a stick out. But the.
But I think I lectured not this last spring, but the spring before on the. On a variety of topics. So. But in any event, a great conference by the way, so.
[00:51:51] Speaker C: Oh, 100. And a lot of great webinar content too. There's great sessions that are coming up here in February that apply directly to what Richard and I do around corporate owned life insurance and the clients that we deal with and how they navigate through that, especially clients that have family office structures and yeah, they're rather complex in how they're put together, you know, corporately with multiple companies and trust considerations and so it's nice to be able to attend that from a distance and have to get on an airplane and travel and all those things that you're acutely familiar with. But a great, a great organization can't say enough positive things about K because they played an instrumental role in all of that nonsense that was introduced when we were looking at penalizing small business owners and tax taxing them into oblivion. And the K LU membership played a big role in. They did advocating, you know, for this. The small business owner.
[00:52:58] Speaker B: Yeah. Kevin Work, Glenn Stevens and a bunch of others were just totally instrumental in that. Yeah. I've got a lot of time for, for the tax people at cable, so. So I agree. But could go, I could wax on and on about them.
[00:53:10] Speaker A: Yeah. You know, I think that kind of brings up something interesting, Jason, thinking about, you know, going Back to like 1982, there was some tax reform stuff that kind of happened around there and, and it was this period of time where they were trying to tax death benefits and they, you know, the news media was up in arms about the widow and orphans tax and the kitty tax and all these things they were calling it. And, and that, that led to some, some moderate changes where you know, said well we're not going to do that. But you know, we get asked questions like that every once in a while from people. Well, what's going to happen? You know, we, we help a lot of people with cash value life insurance and well, what's going to happen when the government comes after that? Like people always have those types of questions, you know, but the reality is it serves, it solves a social good in so many Ways because these private companies of insurance companies, that capital is solving a lot of problems, that if we didn't have that capital available, people would be looking with their hands out waiting for more money to show up magically from the government coffers to solve those problems instead.
[00:54:07] Speaker B: I tend to agree with you, Richard, that you know, the societal reason, the public policy reason for non taxation of insurance and the accumulation, it makes a lot of sense I think where the government and even people like me get a little bit, you know, their eyebrows furrow a little bit is when.
What did you just do here? What's this plan?
These triple back to backs and I'm just making that one up because that's an old one.
But all these very, very cute, aggressive, aggressive plans that even the insurance industry or Caelu in particular has put out warning pieces on that is when I think your industry gets under the microscope. But in terms of straying too far from the foundational aspects, you know, like accumulated funds in an insurance policy, there's nothing mischievous about that in my view. And, and so, and I think generally most governments have agreed with that. So I don't think you got too much to worry about that in my view at least my crystal ball says that.
But in terms of some of these very aggressive plans that still pop up in your industry. In my industry and other industries, yes. You got, you got, you got things to worry about there.
[00:55:23] Speaker C: Yeah. I think to add to that, Kim, is you know, provided that the, the death benefit of these contracts has merit and.
[00:55:32] Speaker B: Oh for sure, yeah.
[00:55:33] Speaker C: Anything that we do inside of our firm, which operates, you know, coast to coast in Canada and has now stretched over into operating in the United States, everything that we do is auditable. That's one of our, our key mantras. Anything that we do must be auditable. And that death benefit has to have merit. And the government's position, as at the last time it was discussed, is that provided the death benefit has merit, that's really the primary box to check off.
Otherwise you invite scrutiny. Understandably so. And the key point is that when you think about, you know, the government gives. Why does the government provide tax breaks for people to donate money to charity? Because the government doesn't have the capital to support those initiatives and, and to, to provide money there. So when you're dealing with an insurance contract and you're paying premium with after tax income, well, that death benefit is, it has merit. Well then the family's not going to rely upon social programs. As Richard mentioned, when there's money that's needed the most when the family's grieving the loss of a loved one and a tax free windfall shows up. And so I would imagine if the government tried to encroach upon that, the sheer weight of the life insurance industry lobby would be, I think it would be massive.
[00:57:00] Speaker B: There's no compelling public policy reason, at least in my view, you know, to, to even do that, because I don't think there's any mischief and frankly, it, it solves a big societal need. And I agree with your analogy on charitable donations, which is one of the reasons why I've been, you know, so pissed off about the alternative minimum tax amendments. You know, even with the amendment that they did to fix it, you know, they, if you've been following this story, you know, when they first proposed amendments to the alternate minimum tax, you know, their 50% of the charitable credit would be denied in terms of calculated amt. And then when you start running the numbers, it's like, holy cow. So the wealthy can't basically make any charitable donations anymore without triggering this tact. So they cleaned it up to 80%. So there's still a 20% leakage that if you make a charitable donation and you're a high income earner, you've got to worry about whether or not that trips into amt. In my view, that's top of the list, towards the top of the list in terms of things that need to go. And frankly the whole alternative minimum tax needs to go. As I've written about many times, even that makes, it makes no public policy sense. So anyhow, I could go on and on.
[00:58:18] Speaker C: Kim, this was a blast.
[00:58:21] Speaker B: Pleasure, guys.
[00:58:22] Speaker C: We're just scratching the surface. I could literally talk to you for days.
[00:58:28] Speaker B: I got to tell my wife you said that.
[00:58:33] Speaker C: Well, we just loved having you on as a guest and fact we, we'd be honored if you join us again. And this, this was a lot of fun.
[00:58:41] Speaker B: Anytime.
[00:58:42] Speaker A: Good to, to have you again. Once we're. Once we're looking on the other side of a political shift here in Canada to see what the winds of change have to bear. And one of the things we like to do, of course, Kim, and our show before we close is we always want to recognize although you showed up in this really fun blue suit jacket here with us today, it doesn't look like a cape. Exactly. Although it is more in alignment with a cape than what we normally see.
And when you show up and you advocate for the small business owner and for the Canadian population around tax silliness that takes place at the government level, you're actually showing up as a superhero. So our question for you is, who would you most like to be a hero to?
[00:59:20] Speaker B: Well, besides my family, which, of course, I always want to be a superhero to my family, my community, and also, you know, as a subset of my community, the small business owner. You know, I'll continue advocating and fighting for, you know, the small business owner to be applauded, and I wouldn't say rewarded, but recognized as the true leaders that they are and how important they are to the fabric of western society. Western democracies, you know, I'll keep fighting for them, and if I could be viewed to be a hero, even better. But I'm not looking for that. I just want people to recognize how important they are.
[01:00:05] Speaker C: Well, we're right there alongside you in that fight, Kim. And there. There you have it, folks. Kim Moody, incredible interview, and we'll definitely have him back again. And for anybody who's watching this episode on YouTube, you've just seen another video show up as recommended. Learning. Because we believe there's no such thing as having arrived in knowledge. There's always something new to learn. So continue your journey of learning. Gentlemen, this was incredible. Let's make the rest of our week outstanding. Thanks again, Kim. We appreciate you.
[01:00:34] Speaker B: Thanks, guys. Cheers.
