Social Policy in Ontario

Even pro-spending politicians no longer dare to dream of raising taxes

Posted on March 26, 2014 in Governance Debates

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NationalPost.com – Full Comment
March 26, 2014.   Andrew Coyne

For fans of the expansionary state, these are the end times. Once, long ago, a candidate for public office could boast of his plans to “tax and tax, and spend and spend.” But now? It’s like no one dares to dream any more.

Oh sure, the spend and spend part is still there: on sewers, on transit, on pensions, you name it. It’s the tax and tax part that’s fallen out of fashion. Long the preserve of politicians on the right, opposition to raising taxes is today near universal, even on the left.

Justin Trudeau disavows tax increases of any kind — corporate, personal, value-added — claiming there’s “no reason” to do so. Thomas Mulcair has been even more definitive, ruling out any increase in personal income taxes, in the kind of categorical language (“period, full stop”) he used to reserve for ruling out coalitions. Kathleen Wynne, who had excited left-wing hopes with her talk of tapping unspecified new “revenue tools” to fund her transit ambitions, has since retreated. Even Olivia Chow — Olivia Chow! — says she’d only increase Toronto’s property taxes “in line with” inflation. Which hardly even counts, really.

All of which has the left in something of a quandary. To repair the damage after such a prolonged period of austerity — in some estimates, it has been going on since the 1970s — will take more than a one-time burst of spending. Rather, what is required is a permanent increase in the size of the state — to be financed by an equally permanent increase in taxation. But that will remain off limits, politically, so long as public attitudes remain implacably hostile to the idea.

So a number of left-leaning commentators have set out to rehabilitate the notion of raising taxes as something that can be discussed in polite company. Leading the way is Alex Himelfarb, the former clerk of the privy council, who together with his son, Jordan, opinion editor at the Toronto Star, has published a book of essays under the provocative title Tax Is Not a Four-Letter Word.

Writing in the current issue of the Walrus magazine (“Happy returns: Why you should look forward to tax time”) Timothy Taylor makes the case for “putting taxes back on the agenda” as part of a broader effort to “reconstruct the common good, such that citizens feel a genuine obligation to it.” The air is thick with quotes from Oliver Wendell Holmes (“taxes are the price we pay for civilization”) and complaints at the indignity of being treated “as taxpayers, instead of citizens.”

The underlying premise of the New Taxographers, that public services have been starved for revenues, is hard to square with the actual record

“The Canadian tax conversation has become dangerously distorted,” the Himelfarbs argue. “Any reasonable discussion of taxes must take into account the highly valued public services they buy. But in Canada, and throughout much of the Anglosphere, these inextricably linked concepts — taxes and public services — have somehow become divorced.”

“Some 35 years after Ronald Reagan and Margaret Thatcher first began demonizing taxes,” The Star’s Thomas Walkom observes, “politicians are still running scared.” At least the right believes its own rhetoric. But “parties on the centre-left take these positions in the face of evidence provided by any number of experts who point out that public services can work only if the public funds them.”

Well, now. It’s certainly possible people are such simpletons as not to realize that spending must be paid for in taxes. Perhaps they are unaware of the indispensable role of public services in their lives. Maybe years of right-wing indoctrination have made them hostile to the very notion of paying taxes.

But there’s also another possible explanation. Maybe people are quite conscious of the importance of public services, but suspect that much of what they pay in taxes is spent to rather less valuable effect. Perhaps they are not entirely immune to arguments for increasing spending for particular needs, but believe this could be funded by cutting back in other areas.

Oh sure, the spend and spend part is still there. It’s the tax and tax part that’s fallen out of fashion

The underlying premise of the New Taxographers, that public services have been starved for revenues, devastated by what the Himelfarbs refer to as “decades of cuts,” is hard to square with the actual record. Over the past five years the federal government spent an average of roughly $7,250 per citizen, in 2013 dollars, on services to the public. That’s more than it has ever spent in our history, and it’s not even close: at its previous peak, in the early 1990s, it was barely scraping above $6,000. Provincial spending is up even more.

And while taxes are lower than they were at their recent peaks, they’re a long way from starvation levels. Federally, revenues have declined since 2001 as a percentage of GDP — meaning they have not increased as fast as the economy — but have more than kept pace with increases in spending. The same is true at the provincial level. An editorial in the Star last week, arguing the case for higher taxes, complained that “Ontario’s tax levels are at historic lows.” But there’s simply no possible construction of the facts that can make this true, even by the percent-of-GDP yardstick.

In the current fiscal year the province will collect revenues equal to about 13.6% of GDP. Previous governments could only dream of such abundance. In the early 1990s, under the NDP, own-source revenues averaged 12.6% of GDP; under the tax-cutting Harris Tories, they averaged 13.4%. Meanwhile federal transfers add another 3.3% of GDP to provincial coffers. A decade ago they were half that much.

If, looking at all this, the public declines to cough up more, it may not be because they view taxes as a four-letter word. They may simply want more evidence they are getting value for their existing contributions. If that means “citizens” are thinking like “taxpayers,” maybe that’s not such a bad thing.

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Tags: budget, economy, ideology, tax

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