Stephen Harper knows he can't come right out and reveal his radical agenda to downsize government. But if he gets his majority, expect Harper to slash and burn on the pretext that the federal debt and deficit requires massive evisceration of government.
Since he welcomes a future fiscal squeeze to justify his small-government agenda -- Harper is busily bribing us with our own money to enhance his electoral prospects. Perhaps the most blatant recent example was the G20 and G7 money burn. It seems that Harper just can't get enough cash flowing to Tony Clement's riding in Muskoka.
It's obvious that the tab for Conservatives' fighter jets and the prisons are knocking a big hole in the federal budget. I'm not even going risk insulting your intelligence by critiquing the corporate tax cut (costing $11.5 between 2010 and 2012 according to the folks at Canadians for Tax Fairness, who are lobbying to stop this gratuitous give-away to business). I figure that anyone who is not yet convinced of the folly of corporate tax cuts after the recent front page Globe and Mail article is afflicted by an intellectual coma or a partisan delusion.
Vote buying with designer tax cuts
Let's talk about the somewhat less obvious way that Harper is bleeding the treasury dry: his pernicious agenda to engineer a majority with a smorgasbord of designer tax cuts.
A designer tax cut is a smallish, oddball tax cut engineered to woo voters of some particular demographic. Say, for example, tax rebate for snowmobilers in ridings where the Conservatives placed second in the last election.
But seriously, even though snowmobilers don't yet have their own tax cut, every election Harper has a menu of this sort of custom-designed tax cuts that are engineered to tip the Conservatives into a majority. This year it is the Children's Art Tax Credit (which the Conservatives estimated will cost $100 million per year). Earlier Conservative's introduced the Public Transit Tax Credit (which the Finance Department projects will cost $145 million per year), First-Time Home Buyers' Tax Credit ($145 million per year) and the Children's Fitness Tax credit ($115 million per year).
A new twist this campaign is the promise of further tax cuts once the deficit is gone. So if you stick with Stephen, you can anticipate an Adult Fitness Tax Credit ($275 million per year according to the Conservatives), and doubling of the Children's Fitness Tax Credit ($130 million per year).
What is wrong with designer tax cuts?
Tax cuts give Harper "announceables." He can look like he is doing something by announcing attractively named tax cuts, regardless of whether these tax cuts actually have any reasonable chance of achieving their stated purpose. If you really wanted to promote public transit or fitness there are much more efficient ways to do it. These quirky tax cuts have nothing to do with solving genuine problems and everything to do with buying votes.
Even if you qualify for some of these tax cuts (and many of us do not) they are not really much help to most Canadians. I know the Conservatives argue that every bit helps, so you should be grateful if you save $40 here and $15 there on your taxes. But that is not the point. Consider how much better off you would be if all of the money used up by those tax cuts were put towards something truly meaningful -- like a national childcare or pharmacare program.
Harper markets these tax cuts to Canadian families who are struggling to make ends meet, but they are often useless for lower income households. To get money back on your taxes you have to have the upfront cash to pay for your public transit pass or child's fitness program. Many households can't afford to pay for stuff now and wait until tax time to get a little something back. And if you are so poor that you don't have enough income to pay taxes, these tax credits give you zippo.
For a guy that is supposedly committed to smaller, less in intrusive government, these tax cuts are dripping with hypocrisy. Every time Harper makes the tax system more complex with a designer tax cut, more bureaucrats are needed to manage it. Somebody has to answer the calls from taxpayers wondering if Junior's attendance at "graffiti for beginners" class is eligible for the Children's Arts Tax Credit. So with each new tax gimmick, our tax returns become more complex to fill out. After years of this foolishness, you will never throw away receipts for anything, and even folks with simple tax returns will resort to hiring professionals just to make sure they are filling in the forms properly.
Tax cuts are also hard to get rid of, even if they serve no useful purpose. Government spending measures are reviewed constantly, ostensibly to verify that taxpayers are getting value for their money. But tax cuts stay in force indefinitely, with virtually no scrutiny to check if they are actually achieving anything for the forgone tax revenue.
Tax cut now, pay later
Canadians have a right to know what they are getting back for all of these tax cuts. For example, what benefits do Canadians get from the $400 million or so per year in revenue we lose on the meals and entertainment expenses that corporations and some lucky individuals claim on their taxes? How about the Employee Stock Option Deduction ($590 million)? If we really set out to review this very long list of dubious tax measures, taxpayers might save a whole lot of money.
Of course we lose billions in big tax cuts like the reduction in GST (likely costing over $11 billion per year) and the corporate tax cut. But the many small tax cuts also hemorrhage money from the government, with very little evidence of their effectiveness, let alone public debate about the missed opportunities implied by all of that lost revenue. A hundred million dollars here and there can really add up.
Harper is accelerating Canada's federal debt with his tax-cut vote buying. And that is just fine with him. It will give him all the more reason to cut deeply later. We are going to pay very dearly for these tax cuts if a majority Conservative government guts popular programs on the pretence of a sudden post-election alarm about the federal finances.
Economist Ellen Russell is a research associate with the Canadian Centre of Policy Alternatives. Her column comes out monthly in rabble.ca.
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