Harper, king of the tax credits
NationalPost.com – Full Comment –
26/09/13. Tasha Kheiriddin
Stop the treadmill: Ottawa is thinking of spending your money, again. This week the Parliamentary Budget Office reported on the cost of an adult fitness tax credit: $286-million over five years. In the 2011 federal election campaign, the Conservatives promised to bring in the credit once the budget was balanced. They also pledged to double the existing children’s fitness tax break to $1,000, and allow income splitting for families on earnings of up to $50,000.
There are three reasons political parties conjure up targeted tax breaks. The first is to address a pressing social concern. The second is to implement changes consistent with their philosophy. The third is to buy votes. And in our democratic system, far too often, parties choose Door Number Three.
Since 2006, Conservative Prime Minister Stephen Harper has become the king of credits, aiming them squarely at key voting blocks: families, business and the elderly. Some do address important concerns and are consistent with small-c conservative philosophy, such as income splitting for families with children. The policy goal, to enable one parent to stay home with the kids either full or part-time, is in keeping with the conservative vision of the traditional family. It is also in line with parents’ preferences; even in Quebec, home of $7-a-day daycare, most parents believe it is better for children under six to be raised at home rather than by an external caregiver.
But children’s fitness credits? I don’t recall Edmund Burke opining on the government’s role in whittling kids’ waistlines. The credit is also so small that for those pinching pennies, it has not made a difference. A 2010 study showed that the credit benefits chiefly middle- to high-income Canadians, who would likely have enrolled their kids in dance or sports regardless. Less than 16% of parents surveyed said the credit had increased their child’s participation in fitness activities — a very low return for as program that has cost taxpayers over half a billion dollars since being introduced in 2007.
As for adults, the notion that a fitness credit will get you off the couch is laughable. Legions of Canadians already buy gym memberships they stop using after two weeks, or fitness equipment that now serves as a clothes hanger. Only now, they would get money back for doing so — at everyone else’s expense.
The Tories aren’t the only ones who play the tax credit card, of course. Had the Liberals formed government in 2011, they promised a permanent home-retrofit program. As for the NDP, it offered small businesses money back for job creation.
A more equitable — and conservative — vision of tax relief would simply be lower rates for all
But perhaps the crass use of credits just feels worse coming from the Tories, because they are supposed to stand for the direct opposite: freer markets and smaller government. Credits distort economic choices and produce unintended consequences. By making a good more “affordable” they increase demand, which can lead to shortages and higher prices. They also divert money from one use (consumption, investment) to another (accountants, tax lawyers), to navigate the increased complexity of the tax system. Credits require bureaucrats to administer them, which inevitably grows the size of government. And once a credit exists, it is all but impossible to roll back, as its newfound constituency fights ferociously for its continued existence.
A more equitable — and conservative — vision of tax relief would simply be lower rates for all, favouring no one and allowing freedom of choice in spending one’s money. But why be so pedestrian, when you can pay people to exercise?
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