Columnists

Winnipeg Free Press - PRINT EDITION

Right hook weakens Canada

By: Frances Russell

Posted: 11/3/2010 1:00 AM | Comments: 0 (including replies)

The more tax fairness erodes in Canada, the more unfair taxation will become.

This is the message from Rob Ford's mayoral victory in last week's Toronto municipal election. Ford's right-wing populist surge was triggered by Torontonians' anger at a plethora of new, often regressive, municipal taxes.

Right-wing populism hurts right-wing populists most. As low- and middle-income earners, they are the most reliant on the services governments, particularly municipal governments, provide -- public transit, parks and recreational facilities, libraries, police, garbage collection, maintenance of municipal infrastructure, housing and front-line social services.

The nature of right-wing populism is to kick down, never to point up. Its stock pledge is to "get the government off the backs of the people." Never does right-wing populism talk about Canada's growing social and economic inequality, the growing gap between rich and poor, let alone the escalating inequalities embedded in the Canadian tax system.

That inequality was graphically revealed in the 2006 census. The median earnings of full-time Canadian workers increased by just $53 annually -- that's right, $53 annually -- between 1980 and 2005. This 25-year income stagnation affecting the all-important middle class contrasts dramatically with the 16.4 per cent income gain posted by the richest Canadians and amplifies the shocking 20.6 per cent income drop afflicting the poorest.

The Canadian Centre for Policy Alternatives' 2007 Growing Gap project found "greater inequality isn't just a statistic . . . (T)he income gap is being driven by the extreme gains the market is delivering to the richest among us -- and the richer they are the richer they are becoming. The share of total earnings going to the richest 10 per cent of families soared from 23 per cent in the late 1970s to almost 30 per cent in 2004."

Since 2007, the disparities have gotten worse, driven by ever-higher household debt, the 2008 financial crisis and a tax system that now has little to do with ability to pay.

Economist Hugh Mackenzie, a Toronto CCPA research associate, says Canadian federal and provincial governments now collect $90 billion a year less in income, corporate and GST taxes than at the beginning of the 1990s. Mackenzie points out that $90 billion could create another entire Canadian medicare system.

The most regressive tax cut, Mackenzie believes, was former Liberal finance minister Paul Martin's lowering of the capital gains tax from 75 per cent to 50 per cent in his 1995 budget. "Ninety-five per cent of the benefit from that goes to people already earning $100,000 a year and up."

Another inequality driver was the virtual halving of the top marginal federal and provincial personal income tax rate from 70 per cent in the 1970s to 48 per cent today.

"Since the Thatcher-Reagan era of the 1980s, we've had this mantra from the right that we would unleash a tsunami of productivity if only we did away with these taxes," Mackenzie continued in an interview. "What we unleashed was unprecedented growth in inequality."

To fund the cuts, governments began slashing services. Martin slashed transfer payments to the provinces, the provinces slashed transfers to municipal governments. When federal transfers began to grow again, provinces did not pass them on to their municipalities but continued to cut taxes. Municipalities had no choice but to impose their own -- largely regressive -- taxes.

This set the stage for the right-wing populist rage exemplified by the Rob Ford victory in Toronto.

"This is the first generation in a long time that doesn't think its children will be better off. They feel they've been sold a bill of goods," Mackenzie said. People nearing their retirement have seen no growth in their incomes for years. They are left struggling to maintain their standard of living by having a spouse and sometimes children go out to work and taking on ever-greater consumer debt. Meantime, the corporate sector and the well-off keep preaching that government is bad.

"At first, they attacked government services. That didn't work because people liked those services," Mackenzie continued. "They figured out that while people liked the services, they didn't like the taxes. So they started attacking the taxes. Governments wouldn't defend public services. Then there was no one to defend public services."

This summer, Ottawa scored another huge victory in the right-wing war against government. By killing the 2011 long form census, the Harper Conservatives have ensured Canadians will no longer have the reliable data even to know how quickly the gap is growing between rich and poor and how wide it is becoming.

Frances Russell is a Winnipeg author and political commentator.

Republished from the Winnipeg Free Press print edition November 3, 2010 A13

(You must be logged in to post your reaction)

Your reaction?

More Columnists

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010; View the changes. New to commenting? Check out our Frequently Asked Questions.