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When the Conservatives were in power the Canadian Centre for Policy Alternatives’ (CCPA) annual Alternative Federal Budget, or AFB, really did seem to come from an alternate universe.
There was little chance the Harper government would even read what the CCPA had to say, let alone heed any of its recommendations.
Now, with the new-look, self-described progressive Liberals in power, the CCPA can hope someone in government might at least consider its ideas.
In that light, the CCPA has decided to be bold and unflinching in this year’s AFB.
It recommends making undergraduate university education free of charge (echoes of Bernie Sanders); including pharmacare, long-term care and home care in Canada’s universal health-care system; increasing parental leave and bringing in a national daycare plan; and instituting what it calls a “comprehensive federal poverty reduction plan.”
To pay for this ambitious spending agenda the AFB projects a deficit about double what we can expect from Finance Minister Bill Morneau on March 22.
More important, the AFB proposes some equally ambitious tax measures. If many of those sound familiar, maybe it is because the CCPA has been proposing them for years.
The CCPA starts out by saying, bluntly, that the tax system no longer acts as an “income equalizer.”
The top one per cent of earners, it says, now pay a lower share of income tax than the poorest 10 per cent.
This is not only unfair, the AFB argues, it is actually bad for the economy.
To buttress its argument the AFB quotes such un-radical authorities as the IMF, the World Bank, the OECD and Standard and Poor’s.
They all agree that income inequality in Canada hampers economic growth.
AFB targets executive pay, professionals’ loophole and capital gains
Here is what the CCPA alternative budget proposes on taxes.
First, the AFB would eliminate the stock option deduction for corporate executives. When executives get paid in stock options rather than straight salary, they pay half the tax rate of ordinary workers. Closing this loophole, says the AFB, would bring in over $600 million.
Next, the CCPA would no longer allow professionals such as accountants and doctors to receive the first $500,000 of their income as small businesses rather than individuals. The tax rate on small business is now 11 per cent and will drop to nine per cent. If professionals had to take their income as salaries, they would, like ordinary working people, pay a tax rate up to 33 per cent. Ending the small business loophole for professionals would yield about $500 million in revenue.
The CCPA’s budget would also tax income from capital investments at the same rate as employment income, while maintaining the lifetime capital gains exemptions for homes, farming, fishing and small businesses. This measure would bring in a whopping $8 billion annually.
In addition, the AFB proposes capping RRSP contributions at $20,000 per year (a figure far beyond the reach of most taxpayers) and cancelling both family and pension income splitting, for total savings of $4 billion.
Moving in that way on pensions could be politically poisonous. It will be shocking if any political party adopts the idea.
More politically palatable, perhaps, is the CCPA proposal to limit deductions corporations make for executive compensation to $1 million each for the CEO and the top three executives of a firm — for a savings of over $150 million.
Plus, the CCPA would drop meal and entertainment deductions for businesses, for a revenue gain of $400 million.
A new tax on the financial sector and a carbon tax of $50 per ton
Not surprisingly, the AFB proposes increasing the corporate tax rate, gradually, from 15 per cent to 21 per cent, which would still be lower than the 2006 rate. This measure would bring in increased revenue of — wait for it — $9 billion.
The alternative budget also advocates for a new tax on banking activities: either a financial activities tax of five per cent on profits and remuneration in the financial sector, or (in cooperation with the provinces who have constitutional jurisdiction in this area) a tax of 0.5 per cent on all stock transactions. Either way, the CCPA estimates there would be a revenue gain of $5 billion.
And — again taking a risk any politician might be loath to — the CCPA suggests that Canada needs an inheritance tax of a bracing 45 per cent on all estates over $5 million. The alternative budget calculates that such a tax would bring in revenue of $2 billion per year.
The AFB is with the Liberal government in wanting to make the income tax system more progressive. It would keep the Liberals’ new 33 per cent tax rate for incomes over $200,000. In past years, the CCPA proposed a very similar 35 per cent rate for upper incomes.
But the alternative budget strongly suggests replacing the Trudeau government’s so-called middle class tax cut, which disproportionately benefits six-figure income earners. Rather than that across the board rate cut, the AFB suggests enhancements to the existing Guaranteed Income Supplement (for seniors) and the soon to be inaugurated Canada Child Benefit. Investing in these programs would, in the words of the alternative budget, “better target those in need.”
Finally, the alternative budget unabashedly proposes a new national tax on carbon dioxide emissions. It would start at a modest $5 per ton in 2017 and reach a whopping $50 per ton by 2021.
Most of the revenue generated from this new carbon tax would be re-directed to what the CCPA calls a green tax refund for Canadian households. The remainder would go to investments in such environmentally friendly activities as public transit, renewable energy and retrofits for low-income housing.
There is a lot more in the CCPA’s alternative budget for 2016, including a major investment in clean water for all First Nations communities, and a significant infusion of cash into cultural institutions such as the Canada Council and the CBC.
We now have a government that at the very least talks the talk the CCPA has been talking for many years.
On budget day, March 22, we will see how the current group of Liberals, now in power, walk the walk.
Infographic: CCPA
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