Bruce Campbell: Canadians are finally starting to rethink tax cuts

    1 of 1 2 of 1

      By Bruce Campbell

      Now that Canada is in the fiscal red, taxes appear to be coming back into fashion.

      A surprisingly broad swath of Canadians—and not your usual suspects—are musing aloud about the need to raise taxes to tackle the deficit and to pay for the things we care most about, such as public health care.

      Almost three out of five Canadian CEOs surveyed in March say higher taxes are needed to get the country back into the fiscal black.

      Recently John Manley, former Liberal finance minister and now head of the Canadian Council of Chief Executives, said it’s time to raise the GST.

      At the end of the recent Liberal party thinkfest, leader Michael Ignatieff showed that party is finally coming to grips with the reality of taxes. He said Canada can’t afford to rush ahead with any more corporate tax cuts.

      For the first time in more than 15 years, Canadians are beginning to rethink the tax cut agenda that dwarfed all other public policy discussions.

      It’s more out of sober necessity than anything. Tax cuts cost us more than we can afford.

      The OECD estimates that between 1995 and 2005 tax cuts reduced Canadian government revenue capacity by $50 billion per year.

      Since the Stephen Harper government came to power in 2006, its super-charged tax cut agenda reduced federal revenue by an additional $34 billion in 2009-10 alone—and that price tag keeps ballooning. To put it into perspective, the federal government’s 2009-10 deficit is estimated at $53.8 billion.

      In its 2010 budget, the Harper government confirmed yet another round of corporate tax cuts that will cost the public treasury $20 billion over the next five years. To pay for those tax cuts, the Harper government is unleashing a round of public service cuts and holding back on $4.5 billion in aid to the poorest nations on Earth.

      Tax cuts are hamstringing our ability to pay for the things Canadians want and need while privileging those who are already doing very well.

      Our research shows that over the past 15 years Canada’s tax system—federal, provincial, territorial, and municipal—has undergone massive reconstructive surgery.

      Our tax system used to be more progressive. The richest 10 percent—those best positioned to contribute to the well-being and quality of Canadian life—used to pay progressively more in taxes than middle- and low-income taxpayers.

      Not anymore. It has become regressive at the top. And shockingly, the richest one percent of Canadians now pay less as a portion of their income than the poorest 10 percent.

      The vast majority of Canadians have been the net losers. Tax cuts have compromised Canadian public services: whittling away our social safety net, diminishing the quality of our public education and health care systems, and eroding our basic transportation and communication infrastructure.

      It’s time to bring fairness back into Canada’s tax system. As conservative historian Michael Bliss recently wrote: “Inequality of compensation has soared in our time, as the rich have become much richer and much less taxed. Higher taxes on high incomes would begin to narrow the immense chasm that has opened up between the uber-rich and the ordinary North American.”

      The first step is to make Corporate Canada part of the solution, instead of being part of the problem. It starts with reversing broad based cuts to Canada’s corporate income tax system. These cuts do nothing for corporations whose profits have been obliterated by the economic crisis. They benefit profitable companies, notably banks and oil companies, which are more likely to build up cash balances, take over other companies or buy back their own shares instead of making real job-creating investments.

      The second step is to bring fairness back into Canada’s personal income tax system, beginning with a new higher tax rate for those with incomes over $250,000 a year.

      Reversing the Harper GST cuts is also important. The additional $12 billion a year that our federal coffers would gain from restoring the GST to seven percent (with an expanded tax credit to protect low-income earners) could build a national pharmacare program and a home care program for our senior citizens. It could fund a national child-care program for the next generation of young Canadians. It could plant the seeds for a green economy.

      They say timing is everything. Any move to increase taxes will need to be phased in once Canada’s fragile economic recovery takes firmer root. But that Canadians are finally starting to have an adult conversation about taxation—instead of only seeing red—is a healthy sign. It bodes well for Canada’s future.

      Bruce Campbell is executive director of the Canadian Centre for Policy Alternatives.

      Comments

      7 Comments

      glen p robbins

      Apr 9, 2010 at 7:49am

      I know what the public thinks -- and it isn't proscribed anywhere in this article by anyone who would matter to them. The public doesn't care what Manley thinks -- or what CEO's think -- the latter still without credibility from the market fallout and subsequent bailouts. There is no credibility -- as it used to be. Show me one of these mopes out doing some real work -- shirt off sweating (for the lads) digging -- doing some work -- not shufffling paper.

      The public does not trust the government (provincial or federal) with money -- and understands better now then they ever have before that all of this talk about taxes is simply to fund 'the party' and fast times at Ridgemount High for the 'easy street' of work at the government-public service level -- they aren't buying in--don't buy the pitch--and won't buy this one--work too hard to underwrite the loafers and scoundrels--and there is far too many of them.

      This is simple--for folks with common sense -- not with a 'stake' in the game. In BC -- more money in Gordon Campbell's treasury -- simply means more money to misallocate to friends projects--how does 7 to 8 out of ten people continue to be vigorously against the HST---? yet IT is the unequivocal symbol of more money for government.

      The public has figured out the scam called government---they will reject these taxes, and are waiting for the banks and automobile companies -- both based in Ontario -- to pay back the money they borrowed----in BC its another story--worse I suspect.

      This is propaganda -- or wishful thinking.

      C-Man

      Apr 9, 2010 at 9:49am

      While I agree with Campbell's comments regarding the need to rethink taxes, I still think most BC'ers believe that we are already overtaxed. The anti-HST movement is rife with comments about "taxes have gone through the roof" or "we have hit the tax wall". When I show them gov't websites showing the significant drops in income, corporate and GST taxes, they are incredulous. I've actually had one person - who writes letters to the local papers all the time - accuse me of faking the Government of Canada website. The belief in rising and out-of-control taxes is so ingrained in our collective consciousness that I think we need to view the corporate media as a central impediment to citizenship. The tax hysteria campaign by Canwest and the G&M has been masterful.

      To be sure, other taxes and especially fees have gone up as compensation - that's the central point of the HST, I believe - but even there the dominant but mistaken belief is that social spending, not a gutting of gov't revenue, is the cause of these increases. The I-want-something-for-nothing tax cutters have all the bases covered, even if it's hogwash.

      By the way, the CCPA should make taxes and revenue a bigger part of their research agenda, and update the issue at least every 6 months. Most of their best general analyses of tax cuts is at least 5 years old.

      ds

      Apr 9, 2010 at 2:36pm

      I'm just a retired working stiff but the way I see it they should lead by example. They've rolled back wages and torn up contracts and cut funding like never before but you don't see them rolling back their pay checks or pensions. I wouildn't call these people very good leaders, it's the old story "not in my back yard."

      glen p robbins

      Apr 10, 2010 at 8:17am

      The average person doesn't care about the analysis -- or the people who analyze it. It is experience -- their living experience with current taxation and the expectation of what is to come (HST) brings this to this conclusion. The public follows the media a lot less than you might think -- or is often suggested.

      The average person now believe that working for the government is a dream job.

      pwlg

      Apr 10, 2010 at 8:36am

      In BC, the Campbell government has reduced provincial corporate taxes by 40% and to make matters worse, some of the companies making money in BC refuse to pay their municipal taxes and want the government to put restrictions on local governments taxing corporations...Corporations in BC even want more than one vote.

      kreativekaur

      Apr 12, 2010 at 9:37am

      While I certainly can agree with the idea of "re-thinking taxes", how about some transparency on how our tax money is spent???

      Every time there are tax increases, the money keeps going to an empty pit in la la land and the elected government, who is responsible to the tax payer, never has the courtesy or respect in informing it's public of how they are spending our money.

      Transparency first before more gouging occurs!!!
      kreative kaur
      - Imagination is more important than knowledge.
      Knowledge is limited. Imagination encircles the world." - Einstein

      RodSmelser

      Apr 15, 2010 at 2:15pm

      C-Man

      When I show them gov't websites showing the significant drops in income, corporate and GST taxes, they are incredulous. I've actually had one person - who writes letters to the local papers all the time - accuse me of faking the Government of Canada website.
      ================================

      I can sympathize. While I haven't had that exact experience, I can easily picture it.

      Real incomes have remained static for years, and the price of housing has been allowed to double in just five years in many areas. People under pressure are in no position to voluntarily agree to any increases in living costs, private or public.

      Rod Smelser