Ottawa shouldn’t ignore hunger for tax fairness

Posted on May 25, 2017 in Governance Policy Context – Opinion/Editorials – The results of a recent survey hold a vital reminder for a finance minister who promised to make economic fairness his top priority, but has in important ways yet to deliver.
May 24, 2017.   By

As Bill Morneau delivered his budget speech in March, a group of 54 citizens recorded, at the government’s behest, their gut reactions in real time. The results, uncovered by CBC News this week through an access-to-information request, hold a vital reminder for a finance minister who promised to make economic fairness his top priority, but has in important ways yet to deliver.

Conducted by the marketing firm Nielsen, the survey used so-called dial-test technology, which allows respondents to rate what they’re hearing, as they hear it, from 0 to 100. As Morneau touted his government’s investments in Canada’s 150th birthday celebrations, self-driving cars, a new defence plan, and a range of other initiatives, the group – and their dials – remained largely unmoved. Depressingly, though perhaps unsurprisingly, when Morneau spoke of gender equality, women signaled their approval; men did not.

But there was one issue that excited the entire group. Whenever the finance minister mentioned taxing the rich, respondents registered complete and enthusiastic agreement, turning their dials to 100.

Of course, the government is well aware of the popular appeal of economic justice. The Liberals’ obsession with “the middle class and those who aspire to join it” defined their successful election campaign. Once in office, Morneau vowed to restore fairness to a tax system that has in many ways contributed to, rather than mitigated, deepening economic inequality.

In its first budget, the government raised income tax on the highest earners to fund investments in middle-class well-being, including a large middle-class tax cut. But it also promised to go further. Canada’s tax code has grown in recent decades to include a diverse array of tax loopholes that largely benefit the richest few, often with no evident contribution to the public good. Morneau said the government would conduct a comprehensive review.

It was the minister’s discussion of this initiative that lit up the Nielsen focus group earlier this year. In his budget speech, he alluded to the results of the review, reiterating his commitment to “close loopholes that result in unfair tax advantages for some at the expense of others” and “eliminate inefficient tax measures, especially those that disproportionately benefit the wealthy.”

These are steps the Star has long called for and for which there is an evident public appetite. Yet despite Morneau’s repeated mentions of tax fairness, the budget left intact all of the most egregious loopholes, offering only a few marginal reforms.

That the one part of Morneau’s budget speech that elicited the most favourable response referred to measures not actually in the budget should probably concern the government, not least because it seems to embody a persistent problem with this administration: a troubling gap between rhetoric and action.

On tax fairness, this is particularly worrying. In Canada, as in much of the Western world, the gap between the very richest and the rest is growing. Between 2005 and 2012, the top 10 per cent saw their median net worth grow by 42 per cent, while the bottom 10 per cent saw theirs shrink by 150 per cent. The wealthiest two citizens, Galen Weston Sr. and David Thomson, are together as rich as the poorest 30 per cent combined.

This is not only a moral issue. A cross-partisan consensus is emerging that rampant inequality may stunt economic growth. Just as concerning, political scientists warn that when people believe the system is unfair, they are more likely to act out, as they did, arguably, in the United States and Britain last year, or to drop out of democratic life entirely.

The enthusiasm the Nielsen respondents showed for economic justice is important, if predictable. Morneau should listen carefully. His welcome promise of tax fairness may turn into a poison pill if he fails to deliver.

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