Canada is the 10th largest economy in the world, with a fraction of the other economies’ populations. We can build whatever kind of world we want. Pharmacare? Child care/early childhood education? Dental care? Post-secondary education? Housing? Public transit? Legal aid? Access to high speed internet? Basic income? We can improve any dimension of our lives we choose.
What we can’t do, if we want to see continued improvement in the quality of life for most people, is continue to focus on tax cuts. That includes failing to enforce existing tax rules, and turning a blind eye to tax avoidance.
Tax cuts are often sold as the best thing that politicians can do to put “more money in your pocket”. Two things are misleading about that framing:
1) The people who most need more money in their pockets are the least likely to be helped by tax cuts. A third of
Canadian tax-filers didn’t have enough income to pay income taxes in 2016 (37% of women, and 27% of men). Tax cuts can
be designed to go to the poorest, but in Canada they’ve tended to most benefit the most affluent over the past 25 years,
because the most affluent pay the most taxes.
2) “More money in your pocket” may mean you have more purchasing power, but you still can’t buy something that doesn’t exist. Tax cuts don’t create one single new child care space in a high-quality early learning centre. They don’t add new streetcars, buses or subway cars to congested systems. They don’t build or renovate a single new unit of affordable housing.
Not cutting taxes, and collecting taxes that are owed, makes it easier to expand public programs like pharmacare, dental care, child care, housing, public transit, all of which improve affordable access to high quality services that are basic to the quality of life. That puts more money in your pocket too, because if you are paying less for child care, more money is freed up to spend on other things. More importantly, improved access to key services that improve the quality of life means more people can optimize their contributions to the economy. Healthier, more educated, more connected societies deliver better economic performance. More growth. Better lives, individually and collectively.
It drives me crazy when politicians promise to keep your taxes low, freeze them, or cut them, as if that’s a good thing. What the tax cut agenda is really saying is “you can’t have more, you can’t have better”. It’s framed as being about choice: you are bound to make better choices about how to spend your money than the government. But you can’t choose to buy things that markets don’t create: affordable housing, childcare, good transit etc.
Politicians who offer tax cuts as the centrepiece of their platform don’t want you to think too far ahead on the logical consequence of their promises, because they are going to give you less than what is currently possible. What happens if revenues don’t grow, or even fall because of bad economic times and lower rates? Inflation and maintenance costs will mean you get less quality and less quantity of public service. These days, tax cuts are a recipe for collective decline, dressed up in individual liberty. It’s an empty promise that should be challenged at every election, at the city, provincial or federal level.
Personally, I’d prefer to pay more and improve things while the going is relatively easy, because things are going to get a lot harder and more expensive to improve in a few years. Still, I’m totally OK if the democratic decision is that people don’t want to raise taxes and make things better. But we absolutely need to escape this fiscal fantasy that we can improve things, or even maintain them, while paying less in taxes. And if we don’t pay more, nothing improves. Even hanging on to what we’ve got is not going to come cheap. For most of the past 70 years, economic growth delivered more revenues without the need for raising rates of taxation. In fact, we’ve seen dramatic cuts in tax rates over the past three decades but growth offset the hit that public revenues could have faced. Now, a slowing global economy due to population aging, escalating trade disputes, and more extreme climate events means growth isn’t the reliable secret sauce it used to be. The audience for tax hikes may be small, but the majority will soon realize tax cuts are not a 21st century solution to any of the problems we’re wrestling with.
Repeat after me: Canada is the 10th largest economy in the world, with a fraction of the population. We can create any type of society we want. Whatever we choose to do, we’ll pay for it: through paying more taxes or through demands for more “money in our pockets” that lead to accomplishing less, individually or as a society. That’s the choice in front of us. What’s your choice?
This entry was adapted from a Twitter thread by Armine Yalnizyan from April 21, 2018