Finance Minister Graham Steele is doing the rounds, consulting the public on what to do in the upcoming budget to stave off a brutal rise in deficits and debt. Spending cuts are on the table, as are tax increases.
He has mentioned a possible rise in the HST/GST. This would be a mistake — one which taxes the low-income and the unemployed disproportionately. If more money must be raised, it must be through the income tax, the only one which is progressive.
If raising income taxes sounds “radical” to you — and to the finance minister — then both of you can think again. Things are happening.
If you follow these things, you might have been taken aback, as I was, by an opinion piece in the Globe and Mail on Feb. 17 by historian and consummate small-c conservative Michael Bliss entitled “Taxing the uber-rich would reduce the deficit, social resentment.” He was defending, even more astonishingly, TD Bank CEO Ed Clark, who had suggested that he and many colleagues wouldn’t mind having their taxes raised to alleviate the nation’s problems, and who was hit for being soft-headed by hard-liners of the wealth cult.
Then, flicking the channels, I spied one Alan Simpson on CNN, a former Republican senator and co-chair of President Barack Obama’s National Debt Commission, saying it was time to “bite the bullet” in America by applying the income tax to the wealthy as to everyone else so the country can pay its bills.
After some 40 years of anti-tax assault by big business forces, going back to Ronald Reagan, democracy in America risks degenerating into right-wing anarchism. In California, tax cutting has become constitutionalized. It takes a two-thirds vote in the state legislature to raise a tax, but only 50 per cent to reduce one. Meanwhile, it also takes a referendum to endorse any rise. As a result there is deep crisis — and sharp deterioration of public services in this once world-leading place.
The question: How fast is this plague jumping from the biggest state to the entire nation, with its Tea Party radicals and a Republican opposition waging war on taxes, but refusing to say what it would do to restore the nation’s balance sheet?
Here in Nova Scotia, we’re more sedate but not immune. At my local store, I found an anti-tax petition circulated by the Canadian Federation of Independent Business that was filling up briskly. Another group apparently linked to the fledgling Atlantica Party is also fomenting opposition.
For the finance minister, his duty is not just to choose the income tax over other forms, but to hone his steel blade and cut any argument to pieces that merely squawks about taxes without proposing any alternative. This applies to the general public as well, which tends to be as hypocritical as any politician: opposing taxes, but also demanding more services and hollering like crazy every time something is cut, meanwhile (as in California) nursing the illusion that cutting mostly symbolic politician perks will make up the difference.
There are other fictions around this issue that need to be put to rest. One is that cutting taxes necessarily stimulates the economy. Ireland, the “Celtic tiger” beloved of tax-cutters, slashed taxes and boomed, it’s true. Then it busted. It was a bubble. Ireland is now one of the sick puppies of Europe.
The CFIB petition mentions New Brunswick, which also swallowed the bait and slashed taxes. But all it did was deprive itself of revenue and its financial situation is deteriorating fast. For those worried that Nova Scotia is not competitive with New Brunswick, here’s the solution: wait a year or two.
The rudiments of a real tax debate are emerging at the federal level as well. Venerable Pearson-era civil servant Tom Kent has emerged to remind us of the 1966 Carter Report on taxation. In spirit, this is still a work in progress. It said that if you do real work and make a dollar, you get taxed. If you make the dollar by capital gains, financial shuffling or whatever, you don’t; and that a dollar should be taxed as a dollar no matter where it’s from.
The answer we’ve given to that is no, you can’t tax the rich because they reinvest their money and create jobs, and taxing them would kill jobs.
The answer to that quarter-truth is that every dollar should be taxed as a dollar, and tax credits returned to those who do invest in productive activity instead of hiding it offshore, blowing it on corporate frills that put politicians’ perks to shame, executive bonuses and what have you.
Far from being radical, the idea whose time is swiftly coming is this: Mere prudence requires governments, like individuals, to pay their bills. Along with making public services as efficient and cost-effective (and fair) as possible, this means taxation geared to those capable of paying. And that’s the income tax.
Finance minister, your road is clear even if it’s straight uphill.