Tax breaks aren’t going to pay our pandemic debt
There is a lot of speculation about how we will pay for our pandemic response these days. Incredibly, there are still some who are trotting out the tired and predictable mantra of tax cuts as a method to stimulate and grow the economy. While the notion that more money in people’s pockets means more money spent in their community is reasonable, that hasn’t been the way tax cuts have usually worked. Instead, they have been offered to those at the very top of the pyramid, where the ‘extra money’ tends to freeze up. The upshot is that these tax cuts don’t perform and the wealthiest just become wealthier.
The government’s fiscal snapshot, released earlier in the summer, is a perfect example of people who really don’t pay attention to the outcomes of the policies they promote. Upon learning the scope of our debt, conservative (small c intended) politicians and talking heads immediately called for tax cuts. This is a hangover from the days of Ronald Reagan and the notion that tax cuts create jobs has been consistently disproven in the decades that follow. The idea became known first as Reaganomics and later as trickle-down economics, but the name is the only difference. What’s more important is that it hasn’t worked through recessions, in good times or bad. The problem is generally who receives the break and who is left to cover the gap in national revenues.
Even the modestly named Middle Class Tax Cut that was trotted out after the Liberals won the 2015 election didn’t help more people arrive in the middle class. It only cemented the status of those at the top with the lion’s share going to those who were in no danger of failing out of their status any time soon. When approached in that manner, tax cuts create pools of wealth that don’t perform, especially when compared to true performers like state-subsidized daycare programs, basic income initiatives, or even targeted tax breaks like those dependent upon businesses actually hiring people or ensuring their productivity by modernizing.
We hear a lot about institutional racism these days and people are beginning to understand the scope and breadth of that problem. Another institutional issue that requires attention is the manner in which our taxation practices disproportionately offers advantages to those who can afford them and isn’t truly engaged in helping more people arrive at that coveted status of middle class.
Tax cuts are one of the problems, but there are myriad of schemes available to help wealthy individuals retain that status. Whether that’s the lack of interest in rooting out off-shore tax cheats, or even reticence to re-introducing an estate tax—which could be set to a palatable level that avoids most households—it is clear there is little official interest in ensuring the wealthiest Canadians contribute to the finances of our country. Of course, these are generalities and there are wealthy individuals who go out of their way to ensure they play by the rules, but they need a lot more company from their financial peers.
That’s why we should pay some attention to recent analysis from the Parliamentary Budget Officer (PBO) on the subject. That report confirms the numbers in an NDP proposal that would raise new revenues from the ultra-wealthy, stimulate the economy and provide better services to Canadians. In addition to our call for a one percent tax on people who have more than $20 million in assets, the PBO estimates at least $25 billion is being hidden from Canadian taxation in offshore tax havens.
Most of us will never know the problems associated with hiding huge sums of money from tax officials, but there remains a lot of support for tax breaks that create those ‘headaches.’ We would all like to be financially independent, but the longer we support these false measures, the further away attaining that goal becomes. We are experiencing unparalleled stresses on our national purse and the tired old solutions won’t address the challenge. Perhaps it’s time to investigate the ideas that aren’t being supported by those who can afford to attend $1,000 a plate fundraisers for politicians who will always trot out tax breaks as the appropriate response to any fiscal issue.