Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW
He also offers his thoughtful perspective of Stephen Harper’s last 10 years in his recent eBook, The Harper Decade.

Categories: Blog Central, Inkless Wells

PermanentTaxOnEverything: If you're going to get beaten up, you might as well fight

by Paul Wells on Thursday, June 19, 2008 3:02pm - 0 Comments

I went camping with my brother and his hilarious kids a couple of weekends ago in Algonquin Park. We got eaten alive by blackflies. It was fun. In the gas-guzzling SUV on the way back to Mark’s home in Oshawa (Liam: “Dad, when are we gonna get there….”), I noticed the acre on acre of new housing developments, eerily Truman Show-esque subdivisions of truly immense new homes. Yes, Mark said, people are flocking to Oshawa, even though property taxes there are roughly double what people pay in Toronto, because Oshawa’s municipal council has decided to build up local infrastructure and try to make the place more livable. Incidentally, the mayor who made that call was re-elected in 2006 with nearly three-quarters of the vote.

This is only the umpty-dump-jillionth demonstration that people don’t build their whole lives around their tax bills. If you like a place, you are willing to take a tax hit to live in it. If you like a policy, you are not likely to fuss too much about its tax cost. This may be some consolation to the Liberals, because like Andrew Coyne, I don’t see anything revenue-neutral about their PermanentTaxOnEverything™. Nor do the Liberals even put much effort into pretending otherwise. Their pamphlet (which is easily three times longer than it should be; the Liberals must hand it over to an elementary-school grammar teacher, chosen at random, for the basic edit it should have received long before today) handily divides fiscal measures into “Personal tax reductions,” “Business tax reductions,” and “Additional support.” Hmm. Additional support. Government programs.

The Liberals will take serious criticism for this. They could have avoided it by arguing frankly, from the outset, that their scheme shouldn’t be revenue-neutral because the federal government exists to do things and it needs revenue for the job.

Courtesy of the Fraser Institute, here’s that think tank’s Tax Freedom Day over the years: the day on which Canadians stop working to pay thee median federal, provincial and municipal tax bill for a double-income, two-child family. (No link because I asked the Fraser Institute to do the time series for me.)

1992   1 June
1993   4 June
1994   9 June
1995   11 June
1996   16 June
1997   19 June
1998   20 June
1999   23 June
2000   24 June
2001   18 June
2002   22 June
2003   22 June
2004   22 June
2005   25 June
2006   23 June
2007   18 June
2008   14 June

So since the Harper Conservatives took office, Tax Freedom Day has moved forward 11 days in 3 years, its fastest forward move ever. Other data provided to me by the Fraser Institute suggest the federal share of the tax burden, used to calculate Tax Freedom Day, is now at its lowest since 1995. That GST cut imposed a significant hit on federal revenues. Stéphane Dion used to argue — at the first Liberal leadership debate in 2006 in Winnipeg — that the second cent of GST cut should be cancelled and used to pay for an enhanced National Child Benefit. A version of that proposal has survived to become part of today’s PermanentTaxOnEverything™. The difference is that the Dion who used to argue for a larger federal state now plans for a larger federal state while denying he’s doing so. I fail to see how that is “smart politics,” but I have rarely understood what makes the advocates of “smart politics” so smart.

No matter. The Conservatives’ interest now lies in narrowing the debate to two questions: Dion’s consistency, now that he has pinned his party’s fortunes to a policy he used to decry when its most prominent proponent was Michael Ignatieff; and this question of revenue neutrality.

The Liberals’ interest, then, lies in broadening the debate. If this turns into an argument about whether Dion’s numbers sum to zero, he will lose and deserve to lose. Liberals need to argue that what they are doing is worthy policy as such. On one hand, that it is important to quickly put a price on carbon because too much Tory inaction has followed too much Liberal inaction. On the other hand, that the Liberals are not interested in apologizing for income-tax cuts or for the other measures they will propound for seniors and families with children.

On that second note, something truly extraordinary got buried in the mounds of Liberal verbiage today.

That’s the “new, universal child tax benefit worth $350 per child, per year, on top of all existing child benefits. This will provide direct financial assistance to Canadian families whether or not they pay significant income taxes.”

Sound familiar? It should. Under Paul Martin, the Liberals expended considerable resources, including the credibility of one communications director, fighting against just such a universal benefit in 2006. (See “beer and popcorn.”)

This Universal Child Tax Benefit, worth $2.9 billion when the program reaches maturity in four years, will probably be accompanied, in the next campaign, by some Liberal proposal to increase the number of state-supervised daycare spaces in the country. But so what. It represents a formidable attempt to grab back the political centre and to acknowledge that three years of Harper government cannot simply be erased if a Liberal government replaces it. Or it could, if the Liberals would admit (first to themselves, then to Canadians) what they are doing.

Tags: permanent tax on everything, policy talk make brain hurt, Stéphane Dion

More by Paul Wells

Two Hats

sf is, of course, trying to be funny. (He points to a CPC mock site)

The actual website under discussion is the Liberal-created one at http://www.thegreenshift.ca

I messed up the link HTML the first time, but I think I got it right here. If it doesn’t work, type it in.
Two Hats

Come to think of it, why is the CPC (or is it just Stephen Taylor, personally) allowed to use Liberal logos on the site? Is that trademark infringement, or allowed as fair use or some other reason?
Two Hats

? sf’s comment with the CPC mock site has disappeared.
Paul Wells

Sigh. Anyone can wish any comment into the cornfield with the “Report Abuse” button. Some of you are WAY TOO HEAVY-HANDED with the “Report Abuse” button. Here, let me go get some o’ those comments back.
Mike T.

Sorry! I flagged an earlier post because it contains a link which misappropriates the Liberal party logo, which is probably trademarked. I thought it would just notify a moderator who could make their own decision.
http://cork2toronto.blogspot.com Mark Dowling

What the Liberals are doing is remaking the tax system while imposing a carbon tax. I’m not sure that’s necessary. BC’s approach is laudably straight-forward: emitters are taxed as consumers while taxpayers get equal refunds. The virtuous among us get out ahead and the refund’s size makes the most difference to low earners.

Instead the Liberals are just creating a tax to fund their spending priorities and income redistribution thinking and that really isn’t very special.

I’m a bit concerned about the tax increase on diesel if there’s going to be no offsetting relief for transit operators. This need not come in the form of fuel price reductions but some other form of assistance (such as a “Public Service Obligation” grant on the basis of passenger-km served) could help offset the imminent fare hikes in many transit systems.

That said since the City of Edmonton just canned their trolleybuses in favour of diesel buses might indicate how likely any of this is going to happen.

+1 Sophie on the word “optics” by the way…
http://cork2toronto.blogspot.com Mark Dowling

hmm… year 4 revenue – year 4 expenses = $85,000,000. Not exactly pocket change. I know there’s margin for error and all that but you’d think at least the back of the envelope figures would add up to “neutrality”.

Is Greg Sorbara doing these numbers from retirement? Some of the tax “rebate” numbers look depressing like the shafting that middle income Ontarians, particularly those with two incomes, got from the Health Tax.
ESJ

Mr Dowling,

So the plan gives back more in tax cuts and benefits than it takes in. This is bad? How can a plan be a tax grab if it flows more back than it takes in?

And middle income Canadians are getting a shafting?

StatsCan (http://www40.statcan.ca/l01/cst01/famil05a.htm) says the average 2 earner household has $91,400 in income in 2006. Liberal plan will deliver $700 in relief assuming the two earners make the same.

Average 2 earner household makes $93,300. Assuming 2 children this family gets back $1350.

Plan says average firect energy costs will go up about $250. Call it $300. Family with no children has $400 more and family with 2 kids has more than $1000 more.

This money is delivered to help people pay the indirect cost increase on other things.

Bottom line is that energy costs and the cost of things that require energy to make or transport (so basically all goods and some services) are going up WITH OR WITHOUT a carbon tax.

Cap-and-trade (either the Conservative’s weak version or the NDP’s version) will increase costs.

The issue here is not “Liberal tax = higher energy prices.” The issue is WHICH PARTY has a plan to put money into the hands of Canadians to help them pay costs that are going to rise with or without a carbon tax?
boudica

No Sophie. You weren’t the only one. Frankly, the only issue I take with what Paul wrote is that he assumes that Canadians pay any attention to what the pundits have to say on this matter. I’m sure that, as someone above just said, the Ottawa Intelligentsia will tear Dion’s proposal to shred because… well… It’s from Dion.

But in the rest of Canada, what we see is the first serious proposal aimed at tackling climate change and it didn’t come from the government. Polls have consistently shown that despite the Punditry, Canadians want a carbon tax. We didn’t even ask for it to come to us with a tax cut attached. We didn’t ask for a revenue neutral policy. Most of us don’t need to be bribed into doing the right thing for our planet and our children who are to inherit it. Dion understands this and it is why he is betting everything on that very fact.

I personally welcome the debate and the differing views but the notion that Dion has to worry about a backlash at the polls when he’s the only to have provided leadership on this issue (well Elizabeth May did also) only serves to show that some people need to spend time outside of the Ottawa fish bowl.
Wayne

AH! now I remember why this whole thing seems familiar : Those with short memories about the impact of gasoline taxes can look back to 1980, when Joe Clark’s Conservative government fell over an 18i?? per gallon gasoline tax, in what then-finance minister John Crosbie famously called “a short-term pain for a long-term gain,” of improving the federal fiscal framework. In what became known as the the 18i?? election, Pierre Trudeau came out of retirement, cruised to easy victory and gave us the Charter of Rights and the National Energy Program.
Sophie

Naturally, Wayne, that wouldn’t have anything to do with the fact that most of the country saw Clark as being ridiculously incompetent.
Wayne

Hey Sophie : I am afraid you are incorrect as it had everything to do with it!~ regular canadians thought he was incompetent … kinda like someone else who is a poltical leader right now. In fact I was a Liberal at the time and if I recall the slogan we used then it was Joe WHO?