Tax cuts did into the poor

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This article was published 22/04/2009 (6060 days ago), so information in it may no longer be current.

EXPLODING wealth gains at the tip-top of

Canadian society. Declining middle-class

status for the vast majority of Canadians.

And growing destitution for those trapped at the

lowest income levels.

This, says economist Hugh Mackenzie, the

former head of Ontario’s Fair Tax Commission,

is the legacy of 30 years of non-stop, tax-cutting

propaganda.

Tax cuts are a clear loser for almost all Canadians,

he continues. And he

has the statistics to prove it.

He provides a kitchentable

rebuttal to today’s

omnipresent, "get the

government’s hand out of my

pocket," ideology.

"I’ve been engaged in

arguments about public services

with Conservatives for

25 to 30 years and I’ve found

the best way of silencing

them is just to invite them

to walk through their day… From the moment

you brush your teeth until the moment when

you flush the toilet before bed you’re consuming

public services almost all the time…

"I get up, I brush my teeth. Where does the

water come from? I walk out onto the sidewalk.

Why is the sidewalk there? It’s there because

I pay taxes. I could probably put a sidewalk in

front of my house, but it wouldn’t do me much

good just to be able to walk up and down in front

of my house. I really depend on the fact there is

a sidewalk in front of my neighbour’s house as

well. And then I get into my car and I drive on a

road. And again, I could pave a road in front of

my house but it’s not going to do me much good

if I want to go to the grocery store. And I drop

my kid off at school and that wouldn’t be there

if I didn’t pay my taxes. Then I went to see my

doctor…"

Mackenzie and Richard Shillington, a senior

associate in Ottawa’s economic consulting firm,

Informetrica, decided it was time to "to put some

numbers" on exactly what value Canadians get

from their taxes.

The startling results appear in Canada’s Quiet

Bargain — the benefits of public spending, a

paper released last week by the Canadian Centre

for Policy Alternatives.

Among the conclusions:

Middle-income Canadian families enjoy public

services worth about $41,000 — or 63 per cent of

their income — every year.

Households earning $80,000 to $90,000 enjoy

public services equivalent to about half their

income.

The tax cuts implemented by federal and provincial

governments over the past 15 years have

reduced the living standards of the majority of

Canadians.

Seventy-five per cent of Canadians would be

better off if their provincial governments had invested

in public services instead of broad-based

income tax cuts.

Eighty per cent of Canadians would be better

off if the federal government hadn’t cut the GST.

And 88 per cent of Canadians would be better

off without federal capital gains tax cuts.

Tax cuts at all government levels since the

early 1990s have transformed a mildly progressive

tax system into a regressive one; exacerbating,

not alleviating, market income inequality in

Canada.

Tax cuts inevitably increase inequality in society,

the paper states. "The movement for tax cuts

in Canada has been the political equivalent of a

‘bait and switch’ sales campaign. The populist

rhetoric about the tax burden on the ordinary

family has given way to actual tax policy changes

that have overwhelmingly benefitted only a very

small proportion of the population — Canada’s

richest taxpayers."

Statistics Canada reports that gains in individual

real incomes since the early 1990s have gone

entirely to the richest 10 per cent of Canadians.

And more than 25 per cent of the top 10 per cent’s

tax savings went to just the richest 1/100 of one

per cent of tax filers.

Effective tax rates on Canadians at the very top

of the income ladder have dropped dramatically:

by three percentage points for the richest one per

cent; five percentage points for the richest 0.1

per cent and 11 percentage points for the richest

0.01 per cent.

All Canadian households with incomes under

$110,000 would be better off had Ottawa not

shaved one point off the GST and instead transferred

the $5.7 billion annual "saving" to local

governments.

The same story is true for the "race to the bottom"

interprovincial tax-cutting competition that

led to major cutbacks in health and education,

causing financial pressures on school boards,

large and growing student debt, deteriorating

standards in post-secondary education, and the

health care crisis.

The most regressive change of all was the

capital gains tax reduction, dropping the inclusion

rate from 75 to 50 per cent of income.

Everyone with incomes under $130,000 suffered

a net loss; households between $140,000 and

$200,000 gained less than $100 per person; but

$200,000-plus households reaped nearly $900 per

family member.

Conclude the authors: "This path-breaking

study raises serious questions about continuing

Canada’s tax-cut agenda… Public policy debate

over taxes without reference to the public services

impact of tax cuts is like shopping without

looking at the price tags."

Frances Russell is a Winnipeg political writer.