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CCPA argues for tax hikes, and some politicians may be listening

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Photo: flickr/Rick

Alberta Premier Jim Prentice has, miracle of miracles, raised taxes in his trademark low-tax province.

Moving from a flat 10% income tax rate to one that is nearly flat, but has a slight element of progressivity, does not make of Prentice an overnight social democrat.

And the Alberta government is motivated by dire necessity, not any change in fiscal philosophy.

Still, in even incrementally increasing the tax on upper incomes, the Alberta Premier went further than any of the federal political parties seem willing to go at this stage.

None of them -- not the governing Conservatives, not the Greens nor Liberals, and not even the NDP -- want to talk much about raising taxes, especially income taxes.

Even if some of the federal parties say they wish to create greater equality and increased opportunity for those at the bottom of the economic ladder, raising taxes on the rich is not one of their chosen means.

The Canadian Centre for Policy Alternatives (CCPA) is not a political party, however.

In the CCPA’s 20th Alternative Federal Budget (AFB), which it unveiled in the middle of March, there are plenty of robust tax proposals.

The AFB would eliminate, or limit, a whole series of what it calls "regressive and ineffective tax loopholes".

The biggest cut would be to end the capital gains deduction. That longstanding loophole allows individuals and corporations to pay half the tax rate on income from capital investments that working people pay on their wages and salaries.  The CCPA would tax all income equally, for a savings to the government of a whopping $7.5 billion per year.

To give a sense a sense of the proportions of that measure, that $7.5 billion would pay for about seven CBCs, at the current rate of public financing.

The CCPA says that its capital gains measure would only apply to income from investments. The Alternate Federal Budget would maintain "other existing capital gains exemptions, such as for principal residences, family farming, fishing, small business, personal use property, etc."

The Alternate Budget also proposes capping RRSP contributions at $20,000, for a savings of $2.6 billion; cutting the corporate meals and entertainment expense deduction, for savings of $400 million; and eliminating the stock option deduction for corporate executives, which allows many to pay tax at half the rate most of us pay, for a savings of $610 million.

New Democratic Party Leader Tom Mulcair has just (on Friday afternoon) told the Broadbent Institute’s annual Progress Summit that his party will adopt the stock option measure and devote the saved revenue to fighting child poverty.

Closing other loopholes, taxing inheritances and boosting taxes on the rich

The CCPA’s Alternative Federal Budget proposes a number of other loophole closures, including capping Tax Free Savings Accounts at their current level and doing away with income splitting, which would cost the federal treasury $2 billion.

That latter measure is also in the policy books of the New Democratic and Liberal Parties.

But the CCPA goes further than the political parties in proposing a new tax bracket of 35% for incomes over $250,000.

It would also increase the federal corporate tax rate from 15% to 22%, where it was before 2006.

The New Democrats agree on the corporate tax measure, but the Liberals have indicated they would maintain Harper’s corporate tax cuts.

The AFB notes that banks and other financial businesses benefit from an excess of government generosity, including the exemption of financial services from the GST.

The Alternate Budget "would rectify this by introducing either a Financial Activities Tax at a rate of 5% on profits and remuneration in the financial sector, or a broad-based Financial Transactions Tax at a rate of 0.5% on transactions of stocks and at lower rates on bonds and financial derivatives. Each of these would generate a similar amount of revenue, estimated at [a whopping] $5 billion annually."

As well "the AFB would introduce a minimum inheritance tax of 45% on estates of over $5 million. This would produce estimated annual revenue of $2 billion."

Green fiscal meaures to combat climate change

And, finally, there is the CCPA’s major climate change fighting measure: a carbon tax proposal that no political party, save the Green Party, would dare touch.

Here’s how the CCPA explains that idea:

"As we have proposed for many years, the AFB will introduce a national harmonized carbon tax that would be integrated with existing provincial carbon taxes to ensure a minimum rate starting at $30 per tonne across Canada...At least half the revenues generated would go towards a progressive green tax refund that would ensure a majority of Canadians would be better off after accounting for their increased costs as a result of the carbon tax. Every adult... would receive an annual green refund cheque for $300 while children would receive $150... The remaining revenues would be used to fund climate change... measures, including investments in public transit, green energy, and energy retrofit for low-income households."

"The carbon tax," the AFB says, "Would generate annual revenue of $16 billion. The Green Tax Refund would incur a net annual cost of $8.8 billion."

Beginning of a sea change in attitudes... ?

The purpose of all these tax increases would not be to fatten federal coffers gratuitously.

The purpose would be to allow federal spending on and investment in education, the arts, scientific research, the environment, health, pensions and infrastructure.

The increased tax revenue would also allow the federal government to seriously tackle poverty and inequality, especially as regards First Nations people and children.

As we noted above, most of the AFB’s tax measures are too rich for most politicians’ blood.

Mind you -- again as we noted above -- the Liberals and NDP are committed to scrapping income splitting, and the NDP has a longstanding commitment to restoring corporate taxes to their pre-2006 rate.

And those who favour a more equitable tax system will take heart in the NDP’s very recent adoption the Alternative Budget’s proposal to eliminate the tax break on corporate remuneration via stock options.

If you put those moves together with Alberta Premier Jim Prentice’s willingness to raise the taxation rate on higher incomes (however timidly) is it just possible that we are seeing the very beginnings of a sea change in attitudes on taxation? 

 

 

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