Extreme ideology won’t help Ontario

Posted on May 7, 2014 in Governance Debates

OttawaCitizen.com – Opinion/Op-ed
May 6, 2014.   By Hugh Segal, Ottawa Citizen

Ontario has gone from budget season to election season. While there will always be partisan excesses on all sides in an election, narrow ideology on tax policy is rarely helpful.

In fact, part of the federal government’s downward revision of the GST, the early fiscal equilibrium transfers to the provinces by the late Jim Flaherty, and the continuing reduction of tax rates for small business and middle income taxpayers have to be seen not only as macroeconomic levers to maximize take home pay and be fiscally responsible, but also as efforts to create the room and incentive for provincial governments to address their own fiscal exigencies. Tax and investment room was created by federal fiscal policy.

Hard left fiscal ideology can be as dangerous as hard right fiscal ideology. France’s huge increase in taxation on high earners will simply reduce the percentage of high earners in the population of France able to pay taxes at all. A modest increase in income tax on the two per cent of the population at the very top of Ontario’s earnings tree would do nothing of the kind. It also sends a message that all political parties might well reflect upon — namely that governments that do sustain the services like infrastructure, health, education, colleges and universities, municipalities, police and transportation cannot flatline or diminish their gross revenues when real costs in these areas face upward pressures. And while a growing economy broadens income flow to government and frugality and efficiency are constructive, failing public services or deep fiscal deficiency do not encourage investment or economic growth.

The recent report by the New York Times, based on the long-term research of the Luxembourg Income Study that found Canada’s middle class pulling ahead of all the others in the study, stressed the importance of universal health care, fair taxation and other societal strengths in facilitating our progress beyond even the compelling per capita numbers for the American middle class. While economies of scale, some selective re-profiling of spending and competing views of how that might best proceed should define our future debates in Ontario, governments that lack the funds to finance the “de-stressors” of the middle class are not the answer. A strong middle class is associated with opportunity, real economic prospects and a stabilizing influence in society. That has always been fundamental to both a democratic and civil society. Greater economic polarization and increased inequality of opportunity is never the answer. In fact, it leads to a polarization and public and private sector dysfunction that is bad for growth, stability and investment. A one per cent tax increase for the highest earners in any society cannot be seen as excessive in any jurisdiction.

Polemics, ideological pressures on the far right or far left, tea-party tendencies arrayed against big-government panaceas — these are the likely political nuances that Ontario voters will face.

But in the beginning and in the end, balance and fairness matter. Massive austerity and serious destabilization of vital public services is rarely the answer most likely to promote economic renewal. Leaving the poor behind, or disengaging from a competitive stance that attracts job-intense advanced industrial and technological investment in which government cannot be passive, sends a negative impression of any party’s sense of fairness and competence. These will be the dynamics of debate in Ontario and other pre-election jurisdictions in the coming months. Incumbent governments will be asked to defend spending choices and those in opposition who embrace slash and burn will also have answers to give when their choices are scrutinized.

It is the middle class that votes in the greatest numbers. And the same is true of senior citizens, who are sensitive to social services who look for the right balance and understand viscerally when ideology is imposed in place of sound and rational judgment.

Senator Hugh Segal is a former president of the Institute for Research on Public Policy and former associate cabinet secretary in Ontario under Premier William Davis.

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