Tax the rich: How the Liberals outflanked the NDP

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Political commentators say that the campaign turning-point was Justin Trudeau's late August deficit announcement. But Tom Mulcair was backed into a corner in the first week of May. Unfortunately for the NDP, they did not feel the knock-out blow because the pain was numbed by the Alberta NDP's surprise victory on May 6.

Pollsters found that Rachel Notley's victory put wind in the sails of the federal NDP, but few understood that it distracted from another developing story: how the Liberals outflanked the NDP on the left using the narrative of "taxing-the-rich." In the end, this sleeper of a story helped seal the fate of the federal NDP.

Just two days before Notley's victory, on May 4, Trudeau had announced that the Liberals would tax the "top 1%" (those making over $200,000) and give tax-cuts to Canadians he called "middle class," but who earned between $44,701 and $89,401 -- far more than the Canadian median individual income of $27,600.

In part this served to create contrast between Trudeau and Stephen Harper by making the Conservatives' various tax-break programs more progressive -- that is, cancelling the benefits of income tax-cuts, the child tax benefit, and income-splitting for higher tax-brackets, while increasing these benefits for the so-called "middle-class." Bloomberg News recognized the strategy, remarking that "Justin Trudeau borrows from Obama playbook to battle Conservatives."

But the real target of the "tax-the-rich" strategy was the NDP. Mulcair had previously signalled that the NDP wouldn't raise income taxes on anyone, not even the rich. Back in August 2013, Mulcair told the St. John's Telegram: "Several provinces are now at the 50 per cent rate. Beyond that, you’re not talking taxation; you’re talking confiscation. And that is never going to be part of my policies, going after more individual taxes. Period. Full stop."

The Liberal's tax-the-rich policy was designed to make Trudeau appear more progressive than Mulcair on the popular issue of income inequality. Would the NDP adapt to this new reality, or would they allow themselves to be boxed in and risk losing progressive voters?

"Focusing on class and income stagnation allows Trudeau to bring more left-leaning voters to his side...[The Liberals'] main path to a good election is getting soft NDP voters and they need signature initiatives that make them palatable," noted pollster Nik Nanos in April. Taxing the 1% was that signature initiative.

The NDP walked right into the Liberal trap. Immediately following Trudeau's May 4 announcement, Nathan Cullen spoke on behalf of the NDP at a press conference on Parliament Hill: "We've committed to not raise personal income taxes for Canadians across the board."

That day's NDP press statement did offer a good criticism of the Liberal tax cut: "nearly 18 million people -- over two-thirds of all tax filers -- had incomes below the cut-off for the Liberals tax plan. They will get no tax savings. Meanwhile, the maximum tax break goes to those who earn between $89,401 and $200,000 -- and even some people making more than $200,000 will see their taxes reduced under the Liberal plan. Canadians deserve better."

The ball was in the NDP's court -- how would they respond?

Economist Kevin Milligan wrote in Maclean's magazine: "I'm eager to see if and how the NDP will try to match the Liberals on bending the progressivity of the tax system." Maclean's, excited about a national debate about income inequality, called for the "Great Family Tax Debate" to begin.

But the NDP did not change course. Mulcair stuck to his talking points: "The only Canadians not paying their fair share are the large Canadian corporations," he said. By noting correctly that Liberal corporate tax cuts had contributed to income inequality in the first place, the NDP may have made the common campaign communications mistake of relying on voters to reason to the correct conclusion from complicated arguments, rather than using inspirational or positive messages that reflect voters' progressives values.

The pro-Conservative media immediately attacked the Liberals for their strategy of so-called "class warfare." The Globe and Mail declared "Taxing the rich will not pay off for Trudeau." John Ivison wrote in the National Post that "Justin Trudeau [is] pinning his hopes on a class war is a losing strategy." Ivison admitted that the Liberals' own polling showed that the strategy could work: "The Liberals say their research suggests the highest earners are willing to do more. But that consensus is likely to shatter under sustained 'them and us' rhetoric that demonizes the wealthy." Ivison did not have any data to support his latter claim.

The Liberals next made a direct pitch to the business elite. After reiterating his belief in competitive corporate tax rates, Trudeau asked the elite to accept a small personal tax hike to help him defeat the "radical" NDP by managing the dangerous forces of "change." On May 11, Trudeau told the Canada Club of Toronto's business elite: "I might say, if we don’t deliver fairness, Canadians will eventually entertain more radical options...either we choose to act now, or we will be forced to react later."

At this time in mid-May, the NDP began to rise in the polls at the expense of the Liberals. It is possible the NDP mistook the Liberal sinking as a reaction to their taxation announcement. But most pollsters attributed the federal NDP rise largely to the Notley win in Alberta. It appears in retrospect that the temporary Alberta bump confounded the equally important narrative of progressive taxation.

Ironically, Notley had soared to victory on a platform that included fighting austerity -- not simply by taxing corporations, but also by making tax-brackets more progressive and pushing aside Prentice's plan to slay the deficit. There were lessons to learn from this stance.

Another source of the NDP's rise vis-a-vis the Liberals was their opposing positions on Bill C-51. Mulcair's stand against Harper paid-off. However, Trudeau's stand against Harper's budget and tax-breaks was itself a form of opposition, while Mulcair's centrist position on taxes could be as toxic as Trudeau's mushy support of C-51. The stage was set for trading places.

NDP strategists were not unaware of the danger of being outflanked. The left in the NDP started raising the alarm. Immediately following Trudeau's announcement on May 4, leftist intellectual Michael Laxer wrote:

"the fact is that [Trudeau] is now proposing taxing the "1%" in a way no other politician has in some time. This is very clever. While Trudeau has been leaning right of late to eat into Tory support, this is clearly an attempt to tap into widespread progressive concerns that the wealthy pay far too little in taxes and that inequality has grown far too much. The ball is now in Mulcair's court -- but he does seem to have fenced himself in and Trudeau's tax plan, a plan that on this front is significantly more progressive than his own, presents a real challenge to those who seek to claim that the NDP is the party that will best confront and deal with inequality. Are Mulcair and the NDP really going to advocate against higher personal taxes on the wealthy? NDP head office had better take note -- I rather suspect Trudeau's stance on taxing the wealthy will prove very popular -- and popular with the very people the NDP sees as its natural constituency."

In late August, as the NDP remained boxed into their anti-tax and balanced budget positions, the NDP Socialist Caucus finally went public with its concerns. "The NDP won’t have the money to finance their own promises in government unless they’re willing to realistically increase revenues and properly tax corporations and the 'super rich," a party spokesperson told The Globe and Mail.

The Globe also quoted Henry Jacek, a political science professor at McMaster University: "[Mulcair]'s been outflanked in various ways by Trudeau and Trudeau is actually sounding like a Keynesian New Democrat in terms of economic policy. He cannot allow himself to be outflanked by Trudeau."

In early September, Linda McQuaig won the nomination for Toronto Centre, and immediately went public in favour of taxing the rich. Again Mulcair reiterated the leadership's opposition to tax hikes for the rich.

The NDP knew that there was a potential to be outflanked on the left during the campaign. If anything, the Liberals made an error of showing their cards too early -- over two months before the start of the campaign. The NDP had plenty of time to revise its position on taxing the super-rich before the official campaign period. Such an adaptation would have been consistent with official NDP policy. The NDP Policy Book did commit to "Targeting tax reductions to help the middle class, working families, and the poor."

Taxing the rich turned out to be one the Liberals' key messages. Almost every paid advertisement centred around this message. What if the NDP had announced a policy on taxing the super rich in June, and attacked the Liberals for their largely symbolic tax shift? Would the NDP would have forced the Liberals to find some other way to outflank them on the left?

Indeed, the Liberals did have one more fiscal tool they were planning to use to use for this purpose: running deficits. Again, the NDP had every opportunity to prepare for this move, as we'll discuss next time.

This was part one of a three-part series: "How the Liberals outflanked the NDP on the left."

Read part two: Balanced budgets a terrible hill for the NDP to die on.

Read part three: The NDP's queasy opposition on the niqab

Sarah Beuhler is an activist campaigner who runs issue-based digital campaigns for non-profits and unions. She was the Campaign Manager for the 2014 COPE municipal election campaign.

Tristan Markle is a writer and activist based in Vancouver. He co-founded The Mainlander, an online publication for progressive civic politics. He has been active in provincial NDP campaigns, as well as municipal campaigns for the left-wing COPE.

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