How we got here

By Aaron Wherry - Thursday, March 29, 2012 at 1:41 PM - 0 Comments

Mike McNair, a former advisor to Stephane Dion and Michael Ignatieff, blames Conservative tax policy for the current deficit.

The federal deficit, this year estimated at $26 billion, would already have been wiped out had the Harper Conservatives not taken more than $30 billion per year out of the federal tax base.

The Conservatives used budgets and fiscal updates from 2006-2008 to introduce sweeping personal and corporate tax changes. Federal revenue in 2014-15, the last full year of the Conservative mandate, is estimated to be $285 billion, which means that Conservative actions have reduced the tax base by over 10 per cent since they took office. While many of these tax reductions were small, targeted tax credits (such as the fitness and public-transit tax credits), significant revenue was lost through a handful of much more consequential measures.

Idea alert

By Aaron Wherry - Thursday, March 22, 2012 at 12:35 PM - 0 Comments

Doctors for Fair Taxation want their taxes to be raised.

People who earn between $100,000 and $170,000 would pay an extra one per cent on the income between those two figures and income between $170,000 and $640,000 would be subject to an extra two per cent levy. Income over $640,000 and less than $1.85 million would be hit with an additional three per cent and income over $1.85 million would be subject to an additional surtax of six per cent. The group estimates that the federal government would earn an extra $3.5 billion a year and Ontario would raise an extra $1.7 billion.

One of the organizers of the campaign, Dr. Michael Rachlis, says more than 50 doctors have signed the petition so far. A website hosting the petition will go live Thursday afternoon. ”Our group considers higher taxes a small price to pay for a more civilized Canada,” says Rachlis, a public health physician and associate professor at the University of Toronto. ”We’re becoming a more economically unequal society and we feel this is bad for our country’s health.”

Where did Jack Layton stand?

By Aaron Wherry - Tuesday, March 20, 2012 at 1:11 PM - 0 Comments

In addition to a lack of specific policy debates with which to frame the discussion, the debate over the future direction of the NDP is complicated by the most recent point of reference: Jack Layton. What kind of party was the NDP under his leadership? Did he move the party to the centre? Or did he merely “modernize” the party’s rhetoric? Was he a pragmatist who leaned to the political left or was he a dedicated leftist who maintained at all times a pragmatic approach to politics?

Here’s something Megan Leslie argued to me recently.

I’m ticked at all the media commentary about Jack moving us to the centre. He never did that. He was radical. He just had a common-sense, folksy way of communicating that brought people to us. I trusted him, absolutely, to do this, and to keep us true to our values, even if (in moments) I was uneasy with a position. And he did it.

I hope that the next leader can be both a dynamic communicator, *and* stay true to our social democratic values. That’s the sweet spot that the new leader has to straddle.

Was Jack Layton a radical? Depending on your definition of the word, you could certainly make the case, pointing to his work on women’s rights, gay rights, the environment, homelessness and urban affairs. He was an early advocate in the fight against AIDS, he founded the white ribbon campaign, he championed same-sex marriage, he rode a bicycle everywhere and he turned his home into a model of renewable energy.

But then consider NDP policy on the environment. Continue…

Idea alert

By Aaron Wherry - Friday, February 24, 2012 at 1:54 PM - 0 Comments

Jack Mintz, an economist whose expertise the Harper government values very, very, very, very, very, very, very, very, very, very much, has co-authored a report calling for the elimination of various GST exemptions.

By eliminating the set-asides such as medicines, books, financial services and especially food, governments could reap an additional $39 billion in revenue annually — about 60 per cent higher than current levels. That cash bonanza could be used to cut income taxes, fund social services, or both, or even to cut almost in half the 12-to 15 per cent Canadians pay in harmonized sales taxes in most provinces,

“In reality, Canada’s VAT (value-added tax) is riddled with exemptions, rebates and reduced ratings that seriously damage its effectiveness,” Smart writes in an update of a paper he delivered to a conference in Calgary last fall …  ”This paper makes the case for an ideal VAT. Taxing consumer commodities at a single rate reduces opportunities for tax evasion, keeps revenues steady and drastically simplifies compliances for businesses.”

‘We need to finish the job of making ourselves a viable progressive alternative’

By Aaron Wherry - Wednesday, February 22, 2012 at 9:30 AM - 0 Comments

Brian Topp talks to the Toronto Star and challenges Thomas Mulcair.

He does not accept my point about restoring government revenues. That’s a pretty fundamental issue. If you don’t do that, you can’t follow through on your commitments. His proposal, to the extent that I can understand it, to divert revenues from our environment plan to general government revenues is wrong.

I haven’t heard him speak clearly on this issue of equality. Canadians are increasingly aware that the Conservatives have broken the government and there is much they can’t do together as a result. If Mitt Romney had filed that tax return that he released about three or four weeks ago in Canada, he would have paid lower tax than in the United States. That cannot stand. You cannot do what we need to do together as a society when the Conservatives have broken the government like that. It’s not about increasing taxes on “people”; it’s about reallocating money that is currently being spent on tax giveaways to people who don’t need help, in order to transfer the money to funds to people who do.

Mr. Topp also answers Mr. Mulcair’s proposal that the party needs to “renew.”

Taxing the rich, only different

By Aaron Wherry - Monday, February 20, 2012 at 8:30 AM - 0 Comments

Nathan Cullen has quibbled with Brian Topp’s tax proposals, but Mr. Cullen’s plan is rather similar.

Mr. Topp proposes to tax those earning more than $250,000 at a rate of 35%. Mr. Cullen proposes to tax those earning more than $300,000 at a rate in the “low 30s.”

Mr. Topp proposes to raise the corporate tax rate to 22.12%. Mr. Cullen proposes to raise the corporate tax rate to 20%, except for oil and gas companies, which would be taxed at a rate of 25%.

Mr. Topp adds two measures which apparently aren’t in Mr. Cullen’s plan: taxing capital gains (with two caveats) as ordinary income and taxing income from cashing in stock options at the full rate.

Saganash on taxes

By Aaron Wherry - Thursday, February 9, 2012 at 11:15 AM - 0 Comments

Romeo Saganash proposes tax code reform.

About $152 billion gets redistributed currently. Much of that goes to incentives for corporations, deductions for the privileged, boutique credits for market segments, and loopholes for those with the best accountants. These expenditures skew the system away from progressive taxation – meant to help redistribute wealth to the less advantaged – toward regressive taxation that only increases the growing gap between the rich and poor … 

But most importantly, we can reduce inequality by raising the minimum standard deduction for everyone to the level of a living wage. That minimum deduction – called the “basic personal amount” on the form – is $10,527 this year. No one can live on that … Under my approach, the minimum threshold before any individual pays taxes could be raised well above $20,000. Each Canadian could earn a moderate living before paying any tax. The system would never again drive a hard-working person into poverty.

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.

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.

Can we tax our way to equality?

By Erica Alini - Monday, October 31, 2011 at 12:02 PM - 62 Comments

Ken Teegardin/Flickr

With the Occupy protesters still camping out on city lawns across Canada, it’s worth investigating whether our tax and transfer system needs a tune-up if we’re going to tackle income inequality.

To be sure, we are a more unequal society than we were thirty years ago, even after one takes into account the redistributive effects of personal income taxes and things like the National Child Benefit and Employment Insurance programs. In 1989, the after-tax income of Canada’s richest 20 per cent was 7.2 times that of the poorest quintile of the population, according to the Conference Board of Canada. In 2009, the richest group made 9.1 times what the lowest income earners did. Continue…

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…