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An Adult Conversation About Taxes

April 18, 2011

2-minute read

To paraphrase the immortal words of Ronald Reagan, here they go again.

“Middle-income friendly tax cuts.” “Tax cuts, a balanced budget within four years, no service cuts.” Reduce the tax burden. Get the government’s hand out of my pocket.

In this election, we’re back to a familiar kind of tax cut: the special kind that reliably delivers relief to all the right people, at no cost whatsoever. The kind of tax cut that simply does not exist.

We’re back again to having half a conversation about taxes and public services. The kind of conversation that deals with only one side of the government’s budget. The kind of conversation that invites people to ignore the inevitable consequences that flow from our governments having less revenue than they need to pay for the public services we want. A half-conversation whose objective is to put off the tough questions about what happens to public services when government revenue falls short until after the election, when it is too late to do anything about it.

So what’s wrong with this kind of conversation? Let’s count the ways.

In the first place, tax cuts are presented as if they are some kind of magic key that benefits everyone equally. So in the current election campaign, the Conservatives are running on their tax cut platform as if it benefits everyone in the same way, when in fact the cuts are very tightly targeted to people who have enough disposable income to double their savings in their tax free savings accounts, or who have children in arts programs, or who are in a couple with one very high income earner and one very low (or no) income earner and when by far the biggest tax cut goes to corporations in the financial services and energy industries.

In the same vein, in the early 2000s, a smattering broadly-based personal tax cuts masked a massive cut in corporate tax rates and a huge cut in capital gains taxes that stands as the single most regressive tax change in Canadian history.

Equally important, talking up tax cuts without coming clean about their impact on public services is profoundly dishonest. Every cut in public fiscal capacity results in cuts to public services that we depend on – services that a study by the CCPA estimated in 2006 were worth an average of $16,000 to every Canadian woman, man and child. To illustrate the point, that study found that if the Harper government had turned the money raised by 2 percentage points of the GST over to local governments to spend on local services instead of cutting the GST, 80% of Canadians would have been better off.

What that means is that, when you take into account what happens to public services as a result of tax cuts, there really isn’t such a thing as a middle-income friendly tax cut.

Of course, for conservatives, the impact of tax cuts on our ability to pay for public services isn’t an accident; it’s the main reason for the policy in the first place.

And so, for conservatives, having half a conversation about taxes and public services isn’t an oversight, it is a strategy.

Every six year old knows it doesn’t make sense to offer you something without coming clean about how much you’re going to have to pay for it.

That’s why we need that need that adult conversation about taxes and public services.

Hugh Mackenzie is a CCPA Research Associate.

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