Dewar on taxes

By Aaron Wherry - Tuesday, February 7, 2012 at 9:30 AM - 0 Comments

Paul Dewar talks to the Toronto Star editorial board.

On taxes:
What I call tax justice in this country. The corporate tax level is down to 15 per cent; obviously I think that should be increased to 19.5 per cent. That keeps us competitive with our competitors. Tax havens, between 2000 and 2008, $17 billion left our country for foreign shores — and that was just from our banks. I’d like to see that dealt with. I’d like to see us look at a financial transactions tariff, which is being contemplated in Europe.

What about hiking personal income tax?
I’d like to fix the leaks in our system before I look at that. I have no problem in looking at an increase in personal income tax if I knew that it was going to stay in revenues and I say that because there are ways, which many people are probably aware of, to avoid taxes. So the first thing you need to look at is tax loopholes.

How much would all that raise?
I couldn’t tell you to a dime. But I can tell you in the case of tax havens we’re talking more than $20 billion, I can tell you in the case of the corporate tax level that we’re talking tens of billions of dollars and I can tell you in the case of the financial transactions tariff a very conservative estimate is about $4 billion dollars.

The NDP proposed a crackdown on tax havens in last year’s election. At the time, they booked $1 billion in new revenue for the current fiscal year, rising to $3.2 billion in 2014-2015. Ira Basen deemed that “wishful accounting.” The Liberals posed various questions.

The Harper government proposed in its 2007 budget to deal with tax havens and a few months later, the Finance Minister explained the “Anti-Tax-Haven Initiative.” Two years later, following the recommendations of the Advisory Panel on Canada’s System of International Taxation, the Harper government repealed the “double dip” restrictions.

After the photo op

By Aaron Wherry - Friday, February 3, 2012 at 11:13 AM - 0 Comments

March 2008. He also toured the Electro-Motive Diesel plant on Oxford Street where he met many of the firm’s 900 employees. Harper said his visit to the rail locomotive plant was intended to highlight tax measures from his government aimed at keeping manufacturers competitive.

Today. The company that owns the locked-out Electro-Motive plant in London, Ont. has decided to close the plant permanently. Progress Rail Services Corp., a subsidiary of U.S. construction conglomerate Caterpillar, announced “it is regrettable that it has become necessary to close production operations at the London facility,” in a release on Friday. The company locked out 450 workers from the facility on Jan. 1. Costs were the main factor in the dispute, with the company pushing employees to take a 50 per cent pay cut.

Topp on centrism, paying the bills, cooperating with Liberals, fighting the Conservatives and Norway

By Aaron Wherry - Friday, January 27, 2012 at 2:32 PM - 0 Comments

As vaguely promised a few days ago, here are several excerpts from my conversation with Brian Topp. My brief survey of his candidacy is on newsstands now and if you’d like to follow along with all our coverage, you can bookmark the tag “NDP leadership.”

These first three excerpts follow from a question I asked about whether there would be more debate as the leadership race proceeded. The fourth excerpt comes from a question about the inevitable attacks his tax proposals would attract. The fifth excerpt follows a question about international models the NDP might look to.

On whether the party should move to the centre. ”I think faced with a choice between two Liberal parties on the opposition benches in the next election that the electorate will pick the real one. So I don’t support the idea of morphing our party into a more quote-unquote ‘centrist’ political party that resembles the Liberal party. Which I assert Tom was essentially talking about in the early days of his leadership and that is consistent with his background as a cabinet minister in a Liberal government. I think we can win and we should win by remaining true to our principles and our values and sticking to the hopeful and optimistic approach that Jack Layton offered because it’s such a notable contrast from what is available from Mr. Harper and we need to marry it to the deep traditions of competent government that we have in our provincial sections … I think if we offer the people of Canada that combination I think we will be very competitive indeed and we will do so in a way that when we win we won’t be defeating ourselves even as we’re winning by adopting the agendas of our opponents.” Continue…

Sound familiar?

By Aaron Wherry - Wednesday, January 25, 2012 at 8:30 AM - 0 Comments

Barack Obama, last night. “My message is simple.  It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.”

Jack Layton, last March.  “As prime minister, I wouldn’t use your hard earned tax dollars to reward companies that ship jobs to the States or overseas. I’ll target investment to create jobs right here at home.”

Brand reform

By Aaron Wherry - Monday, January 16, 2012 at 10:33 AM - 0 Comments

If the Prime Minister is looking for advice, Scott Clark and Peter DeVries have already posted their budget submission.

Mr. Flaherty, you have recently referred to the need for politicians in Europe “to show political leadership and courage” to solve the EURO area’s problems.

Although Canada is not in a fiscal crisis, the federal government, nevertheless, does face policy challenges that will require that you also show political “leadership and courage” to address them. You will need to put ideology aside. You will need to reverse some past budget decisions. You will need to confront entrenched economic interests and do what is right for the economy. You will need to become more transparent and accountable, and you will need to make Canadians part of the policy development process.

Included in their recommendations is major tax reform: the elimination of special tax breaks, the elimination of EI premiums, raising the GST by two points and lowering both personal income and corporate taxes. They also advise deeper expenditure cuts, with that money reallocated to infrastructure spending.

From the magazine

By Aaron Wherry - Monday, December 19, 2011 at 1:18 PM - 0 Comments

From the most recent print edition, 900 words or so on the tax debate we might have to have. And, from a couple issues ago, 600 words or so on Ruth Ellen Brosseau and Parliament’s new arrivals.

If all had gone according to plan, the NDP candidate in the riding of Berthier-Maskinonge would have been noted little beyond the historical record. She would have been nothing more than an entry on the ballot that the majority of voters in that riding passed over as they marked an X beside the name of the incumbent, Guy André of the Bloc Québécois, or perhaps the Liberal candidate, Francine Gaudet, a former member of the national assembly of Quebec.

But then the polls changed and Ruth Ellen Brosseau became an example of democratic absurdity. And then our political hierarchy changed and Brosseau became a duly elected member of Parliament.

Greater equality through taxes

By Aaron Wherry - Monday, December 19, 2011 at 11:50 AM - 0 Comments

Kevin Milligan and friends consider how to deal with inequality.

Brian Topp assumes his proposed 35-per-cent federal rate would yield $3 billion in new revenues. Economists have fairly good estimates of how much revenue “slippage” we might expect for top earners, and these estimates suggest the additional revenue might slip down closer to $1.5 billion … How could this new money be used to help those who are struggling at the bottom? Cutting income tax rates in the bottom bracket doesn’t do much, since the basic exemption and other tax preferences mean that few low-income earners actually pay income tax. Instead, the right target is to enhance our system of refundable tax credits. As examples, think of the HST/GST credit, the Canada Child Tax Benefit, or the B.C. Family Bonus. These payments can be targeted by family income and delivered efficiently through direct deposits into recipients’ bank accounts.

More from Kevin and the gang here, here and here.

‘Some practical first steps’

By Aaron Wherry - Tuesday, November 29, 2011 at 9:36 AM - 17 Comments

Within a longer treatise on taxation, Brian Topp has released his proposals for tax reform.

The first step in restoring fairness to Canada’s personal income tax system is to end the free ride for Canada’s highest-income 1% by introducing a higher marginal tax rate on income in excess of $250,000. I propose a new 35% rate on income in excess of $250,000.

With two important caveats, capital gains should be taxed as ordinary income – 100% of this form of income should be recognized – and not be discounted by 50%.

Income from cashing in stock options should be taxed at full rates, abolishing a tax benefit for the wealthiest that cost the federal treasury $750 million in 2008.

Under Harper’s plan, the corporate income tax rate will drop from 16.5% to 15% on January 1, 2012. That cut should be rescinded. Thereafter, corporate income tax rates should be increased by 1.5% each year until they reach the rate of 22.12% that applied before the Harper.

The two caveats on capital gains are that they should be protected from inflation and that the changes would not apply to sale of homes, small businesses and farms.

Down with taxes, up with inequality

By Aaron Wherry - Friday, November 18, 2011 at 12:20 PM - 7 Comments

Stephen Gordon troubleshoots a proposal—championed by the New Democrats and Conservatives in Ontario, but also the federal NDP—to cut the sales tax on home heating bills.

Removing the HST on heating will cost a certain amount of money – apparently on the order of $350m. The share of those foregone revenues that will go to households in the highest income quintile is almost three times the share that will go to the low-income households that the measures’ proponents loudly insist are its focus. More than half of the money will go to people in the top 40%; only a quarter will go to the bottom 40%. As redistributional measures go, it’s more progressive than offering free yacht maintenance, but not as progressive as actually giving more money to those with lower incomes.

More from Livio Di Matteo.

‘The trouble with the populist narrative’

By Aaron Wherry - Wednesday, November 9, 2011 at 1:28 PM - 20 Comments

Bob Rae appeals to economics.

A premium is a tax, and payroll taxes discourage hiring. Make no mistake, payments to people who have no work is essential, and a hallmark of a decent society and an effective automatic stabilizer for the economy. But how we pay for them should be the subject of a serious debate. The Liberal Party is calling today for a freeze on employment insurance premiums, and a review of the tax into the future. The payroll tax increases planned by the Conservatives will put a new tax burden of 1.2 billion on businesses and workers just as the economy is slowing down. It is a very bad idea, and the Conservatives should change course.

We need to go further and address the income tax code itself. Like their other favourite statute, the Criminal Code, the Conservatives cannot resist tinkering with endless boutique tax credits and changes that respond to the flavour of the month politics that is now the hallmark of the political right. These credits are rarely refundable, which means that those who really need help don’t get it. Out of the roughly 25 million tax filers in Canada, eight million do not have enough income to pay taxes. Those are the people who need these tax credits the most and they are the ones who don’t even get to apply.

An opportunity to show real leadership

By Aaron Wherry - Friday, November 4, 2011 at 10:30 AM - 3 Comments

Scott Clark and Peter DeVries lay out what the Harper government should do with its fall economic update.

The current commitment to eliminate the deficit in 2014-15 would be discarded. It is neither realistic nor necessary to eliminate the deficit in 2014-15. Eliminating the deficit two or three years later would be more realistic and acceptable in the current economic environment…

A commitment to reallocate these savings from the program expenditure reviews to new initiatives to support research, investment, innovation and infrastructure in a federal-provincial partnership … A commitment to begin the difficult but necessary process of tax simplification and reform to support efficiency, economic growth and job creation. The government would commit to use the savings (which would be substantial) to lower both personal and corporate income taxes, thereby supporting economic growth and job creation.

Not going there

By Aaron Wherry - Friday, November 4, 2011 at 8:30 AM - 3 Comments

Paul Dewar announced his jobs agenda yesterday.

An NDP government led by Paul Dewar will protect jobs and help make life more affordable for families by saying no to new sales tax increases and expanding the HST.

That much sounds like the makings of a disagreement with what Brian Topp seems prepared to consider.

When taxes aim high

By Aaron Wherry - Monday, October 24, 2011 at 2:35 PM - 33 Comments

Stephen Gordon questions the effects of taxing the rich.

What becomes more problematic is just who will bear the burden of those taxes – or, in the language of public finance, what is the incidence of increased income taxes on high earners? The ostensible targets of the UK bonus supertax were high-earning bank employees, and since they bore the statutory incidence of the supertax, they did indeed pay more taxes. But since they were able to obtain increases that left their after-tax incomes untouched, they weren’t left out of pocket by the measure: the economic incidence was passed on to shareholders, other employees and bank customers – in short, everyone except the original target. If the goal of the bonus supertax was to reduce the gap between high earners and the rest of the income distribution, it’s hard to see how it could be considered a success.

Greg Fingas questions Gordon’s analysis. Continue…

So is that a no?

By Aaron Wherry - Friday, October 21, 2011 at 12:32 PM - 17 Comments

I’ve noted Bob Rae’s persistence in this regard before, but here, from yesterday’s QP, is the interim Liberal leader asking the Prime Minister again about tax relief.

Rae: Mr. Speaker, the small business federation has been clear about the fact that taxes on employment kill jobs. I have a simple question for the Prime Minister: in light of the current difficult economic situation in Europe and in the United States—we are seeing signs of a recession—why not freeze taxes on employment now and ensure that people are not contributing to killing jobs in Canada?

Harper: Mr. Speaker, I am surprised by this question from the leader of the Liberal Party because that party voted against tax cuts for small and medium-sized enterprises in Canada. This government has a clear objective: to keep taxes low. Obviously, it is an essential aspect of our plan for the Canadian economy, a plan that continues to create jobs. Continue…

Brian Topp goes there

By Aaron Wherry - Friday, October 21, 2011 at 11:08 AM - 21 Comments

The NDP leadership candidate talks taxes.

“I will be talking about income taxes and I think it’s time for our party to step up to that plate and to be pretty clear about that because then we’ll have a mandate to act if we’re elected,” Topp said in a wide-ranging interview. He also called for a hike in corporate taxes and did not rule out a sales tax increase “at some point,” once the fragile economy is on surer footing.

Maybe we have it all wrong

By Aaron Wherry - Thursday, October 20, 2011 at 10:00 AM - 36 Comments

Alex Himelfarb considers taxes and the decline of trust, transparency, honesty and equality.

Most Canadians do know that the teachers and firefighters, the police and health care workers, the roads and bridges and traffic lights, the help when we are down or temporarily out of work, the child and elderly benefits we receive are all paid for through taxes. But, we are still reluctant to pay those taxes. We will always say no to taxes if we believe government is inefficient and wasteful or incompetent or worse.

We are falling into what game theorists call a social trap. Even when we know that cooperating with others would serve our collective interests, absent trust, we go off on our own. The absence of trust limits our ability to act collectively and imagine new possibilities. It takes the future away from us and hands it to “the market”. No trust. No taxes. Trapped.

Stephen Gordon quibbles with Himelfarb’s prescription. Continue…

The Commons: Life under occupation

By Aaron Wherry - Tuesday, October 18, 2011 at 5:55 PM - 30 Comments

Simon Hayter/Maclean's

The Scene. These are awkward times. Various people are marching in the streets and camping in the parks, shouting various things about various concerns. No one is quite sure what it means or if it means anything except to say that some people are somehow unhappy about something. And that they may have some cause to be somehow disenchanted.

Our elected leaders are thus put in variously awkward positions. And so increases the likelihood that they will say awkward things.

Witness Ted Menzies, affable-seeming minister of state for finance. Yesterday he was presented with the spectre of said protests and the suggestion that perhaps said protestors were on to something.

“Mr. Speaker, it is fortunate that all Canadians have the right to peacefully express their views,” he said, as if this were some kind of profound observation.

“Canada does not, by the way,” he continued, “have the degree of economic inequality that we are seeing in other countries that have perhaps started this movement.”

Two sentences in, Mr. Menzies had already gone wobbly. For while we can indeed boast a level of inequality less crushing than that of the United States, our gini coefficient is still on par with that of riotous Greece. Which is to say that the sea of troubles is lapping from inside the house. Continue…

Raise taxes to reduce inequality

By Aaron Wherry - Monday, October 17, 2011 at 9:32 AM - 19 Comments

Mike Moffatt argues we aren’t prepared to do what’s necessary to reduce inequality.

The obvious place to start would be to borrow solutions from countries where after-tax income inequality is relatively low. Three countries that consistently score well on income inequality measures are Denmark, Finland and Sweden. These three Nordic countries share very similar tax structures, featuring moderate-to-low marginal corporate tax rates, moderate-to-high income tax rates and very high value added sales tax rates (VATs, similar to Ontario’s HST). The average VAT in these three countries is 25 per cent, a rate nearly twice that of the average Canadian federal GST plus provincial sales tax or HST. A one percentage point increase in the HST alone would raise $5 billion to $6 billion per year for the federal government, so increases by a few percentage points could adequately fund programs designed to reduce inequality. No country on Earth has been able to find a way to fund the kind of social programs and redistribution needed for “reasonable” levels of inequality without VAT rates significantly higher than Ontario’s HST.

Greg Fingas objects.

Idea alert

By Aaron Wherry - Wednesday, October 12, 2011 at 9:44 AM - 11 Comments

Scott Clark and Peter DeVries take on EI premiums.

Simply put, the EI premium rate is a bad tax – probably the worst tax that the government has available to raise revenues. It inhibits employment and economic growth; it is unfair in its impact on low-income workers; it is extremely complex to calculate and administer…

The best option would be to get rid of the EI premium rate altogether and replace it with an alternative source of revenue. One way this could be done is by replacing the lost revenues, about $20 billion, by increasing the GST and corporate income tax rates.  This would address the problem of the working poor by spreading the burden over much larger tax bases.  In addition, the GST low-income tax credit could be increased, sheltering these individuals altogether.

The Commons: All in favour of cutting taxes, say ‘yea’

By Aaron Wherry - Wednesday, October 5, 2011 at 6:51 PM - 34 Comments

The Scene. “I don’t believe,” the Prime Minister once declared, “that any taxes are good taxes.” Most everything Stephen Harper says is sure to be contested by at least a couple people, but on this point all parties now seem mostly to agree. Even if they do make a great show still of objecting to each other.

“Mr. Speaker,” the NDP’s Libby Davies began this afternoon, not bothering to pause for her colleagues’ applause and talking fast, “the Conservatives’ reckless policy of corporate tax cuts has helped gut our country’s manufacturing sector. The Conservatives do not mind helping profitable oil companies and the big banks just love the handouts that they get, but there has been no benefit for the manufacturing sector, and now we have lost hundreds of thousands of good jobs. Nowhere is this more evident than in Ontario, with even Mr. Hudak saying as much. Will the Prime Minister wake up, see the evidence and cancel his next round of pointless corporate tax giveaways?”

The Prime Minister stood to respond, but a rejoinder had already been tabled moments before by Conservative MP Eve Adams. ”The last thing Canada’s families need now,” she had warned the House, “is the NDP’s massive job-killing tax hikes that would cost jobs and hurt our economy.”

Continue…

Support the arts, tax the rich

By Aaron Wherry - Monday, October 3, 2011 at 12:45 PM - 12 Comments

Brian Topp continues to make use of his Globe pulpit: defending the Canadian arts community and explaining the case for taxing the rich.

Like all other industrial economies, Canada foolishly mirrored American tax policy and has paid many of the same prices. The Conference Board of Canada recently reported that the gap between low and high-income earners is every bit as striking in Canada as in the United States. In our modest Canadian way, we too run structural deficits to pay for annual tax giveaways to those among us who need help the least.

Mr. Reagan’s tax policies belong in his museum. If these times call for belt-tightening – a highly debatable proposition, to say the least – then let’s start among those with the largest belts. A good place would be with a new top-tier income tax bracket, and a careful look at loopholes and giveaways that embarrass even American billionaires – some of whom are now leading the growing chorus for change.

Cutting the right taxes

By Aaron Wherry - Friday, September 23, 2011 at 11:00 AM - 61 Comments

Scott Clark and Peter DeVries propose a new tax plan to fix the government’s structural deficit.

First, the current plan has only slightly reduced the high effective marginal tax rates imbedded in the personal income tax structure, which seriously inhibit labor force participation. Without getting into detail, what is required is a lowering of the marginal tax rates. This could be expensive. Lowering all rates by 1 percentage point could cost $5 billion annually. Getting rid of all the special tax preferences introduced over the past five years would be a start.

Second, the government should restore the two points to the GST bringing back the $13 billion that was lost. This would more than pay for the cut in tax rates for all Canadians but would also allow a larger reduction in the corporate tax rate than is currently planned.

The prosperity gap

By Aaron Wherry - Friday, September 23, 2011 at 9:00 AM - 5 Comments

Alex Himelfarb considers the ramifications of inequality.

When Warren Buffett argued that the rich should pay more than they do (heck, even Adam Smith believed in progressive taxation), across the U.S. media we were told what a dangerous idea this is. Why would we penalize productive folk only to give the money to the unproductive?  Why do we penalize success, they ask?  Here, in Canada, the language is softer.  Why would we tax so-called job-creators?  Of course there are important economic considerations in how much and whom we tax – but “job creators”? As though they  do not benefit from earlier generations more willing than us to sacrifice and pay taxes to build and defend a country of opportunity? As though the rest of us somehow do not contribute to the growth in the economy through our labour, consumption and creative ideas?

In praise of VAT

By Aaron Wherry - Friday, September 16, 2011 at 2:32 PM - 27 Comments

Stephen Gordon tries to reconcile progressives with sales taxes.

Outside Canada, it is generally accepted that high VAT rates are an essential component of social policy: see the accompanying graph. Of the 21 OECD countries that spend more on social programs than does Canada, 19 have higher VAT rates. There are no rich countries that have pulled off the trick of sustaining high levels of social spending with low VAT rates … One of the more convenient features of the GST/HST is that it has already set up the infrastructure for transferring income to low-income households. The GST/HST tax credit can be used as a basis for an even more ambitious system of transfers at almost no additional administrative cost. All that is required is the political will to use it.