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Trudeau cuts taxes for six-figure members of the 'middle class'

Photo: flickr/ Prime Minister of Canada

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Canada's new government is, so far, on the right track on climate change.

Its role in Paris has been a huge contrast to what we got from Stephen Harper's series of passive-aggressive environment ministers.

Who can forget John Baird at the 2007 Bali climate change conference, ducking away from media, pushing back on any constructive proposals, and sneering at protesters?

We're a long way from those dark days.

But for the new Liberal government, the real, hard work on global warming -- as on other priorities, such as refugees and missing and murdered Indigenous women -- starts now.

We have had some concrete action, though, on at least one file.

Finance Minister Bill Morneau has moved quickly on what is, arguably, the Trudeau government's biggest priority: doing something for the middle class.

During the House of Commons' one week sitting, Morneau brought in the promised tax rate cut for the $45,000 to $90,000 bracket. As part of the same measure, he introduced a rate increase for taxable incomes over $200,000.

There was much media fuss, led by the reliably pro-business and deficit-obsessed Globe and Mail, over the fact that the increased revenue from the upper bracket rate hike will not cover the cost of the cut for the middle bracket.

At a news conference, journalists peppered the prime minister with questions on that point.

None, however, asked the more pertinent question: Is Trudeau comfortable that his government's signature new measure will give the biggest tax break to those with taxable incomes between $90,000 and $200,000?

Taking from the über rich to give to the very rich

A fact that few in the media or elsewhere have noted is that when you cut the rate on the $45,000 to $90,000 bracket, you are not just cutting it for those whose taxable incomes fall within that range.

You are also cutting it on the $45,000 to $90,000 portion of taxable incomes over $90,000.

As a result, the maximum benefit of this rate cut, in straight dollar terms, will go to those in the $90,000 and up group.

The NDP issued a news release on this, which, while politically partisan, accurately illustrated the point.

It showed that Finance Minister Morneau's measure will give a wealthy person with taxable income of nearly $200,000 a gift of $679. To those earning less than $45,000 (such as the prime minister's nannies) it will give nothing. Zero. Zip. Zilch.

Taxpayers who make at or slightly above the taxable $45,000 minimum threshold will get something.

But their tax cut will be worth less than half of what the six figure folks will get.

It is true that people whose taxable income exceeds $216,000 will pay more. And as their taxable income increases they will pay quite a bit more.

That is the salutary part of Morneau's new tax rate package.

As Nobel laureate Paul Krugman wrote in the New York Times shortly after Trudeau was elected, finally we have a government in the West that has gotten over the fear of raising anyone's taxes.

The NDP has had to be fairly discrete on this point, because it opposed an upper income tax hike during the election campaign.

The problem, however, is that billions of dollars of this upper income hike go to the wealthy group just behind the richest of the rich.

A fair to middling amount goes to those taxpayers in the middle who are notionally targeted. And, of course, nothing goes to the poor.

Why the middle class obsession?

It is all supposed to be about the middle class, although that might depend on one's definition of middle.

You never hear politicians talk about the working class any more, let alone the poor.

Some on the right used to talk about the investor class, back in the early part of this millennium. That class is not too popular any more either, after the crash of 2008.

Middle class is what most of us think we are, it seems, so middle class is the political buzz word of the year -- or decade -- or century.

We can blame the Bill Clinton campaign of 1992 for inserting that middle-class obsession into politics.

When the Democrat Clinton threw his hat into the presidential ring, the Republicans had won three presidential elections in a row, and five of the preceding six.

Clinton and his fellow moderate, pragmatic Democrats argued that so-called mainstream Americans no longer identified with the Democratic Party.

Mainstream folks believed, the Clinton moderates argued, that the Democrats had become exclusively the voice of minorities and special interests.

And so, Clinton made it his mission to reclaim those mostly white, lunch bucket voters. But he couldn't call them working class, because nobody would identify with that archaic label.

Middle class filled the bill perfectly.

When he accepted his party's nomination in 1992, the first words Clinton uttered were about Americans who "work hard and play by the rules." Later, as president, he was more specific. He called for a "middle class bill of rights."

When Barack Obama faced electoral headwinds in 2012, some of the old Clinton gang advised him to latch onto that pro-middle class rhetoric and not let go.

Obama did just that, and was rewarded with a second term.

Trudeau did a better job than Mulcair of identifying with the middle class

U.S. Democratic Party apparatchiks gave similar advice to both the Liberals and New Democrats in the run-up to the last election here.

But it was Trudeau's people who were most consistent and effective in waving the "Free the Beleaguered Middle Class" banner.

During the campaign, the Liberals even came out with a comic-book version of their policies, in which they answered the question: Why bother so much about the middle class?

The answer: The middle class does most of the heavy lifting in the economy.

If you're not so sure what that means, join the club. It might not make much sense, but it does sound plausible and reassuring.

It says to voters: We are not narrowly focused on one, little old social class. We care about the vast, nebulous entity we call the economy -- which means we care about everybody.

The Liberals are now in power, and have just brought in a tax change that will give the most generous benefit to an elite, wealthy group.

You can call six-figure earners middle class if you like, but that would be stretching the definition. They are certainly not middle income. They are near the top. And they are definitely not the most in need. 

A few, such as the Canadian Centre for Policy Alternatives (CCPA) and the now third party NDP, have called the Liberals on this choice.

The CCPA has even proposed alternatives. One is to use a tax credit, which can be more precisely targeted, rather than a tax cut for the middle bracket.

So far, its odd and unfair fiscal choice has not had much political impact on the honeymooning Trudeau government.

There is still time, however.

Let's see what happens around tax time when Canadians start to pay closer attention to how much they, and others, actually do or do not get from this much-touted middle class tax cut. 

Photo: flickr/ Prime Minister of Canada

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