Questions from the quiz
Wealthy people should pay higher taxes than working families.
A 2005 Statistics Canada study found that all Canadian residents – whether they earned $10 thousand, $100 thousand or $1 million – paid somewhere between 30 and 35 percent of their income in taxes.
You may wonder how this is possible when there are higher tax brackets if you earn more. One reason is that income taxes count for only about 40 percent of the taxes we pay. The rest comes from taxes like the GST, retail sales tax, property taxes, taxes on gas, liquor, tobacco and lottery tickets, and payroll taxes for Unemployment Insurance and the Canada Pension Plan.
In fact, because the really super-rich don’t have to count the large portion of their income coming from capital gains (stock market winnings) plus other loopholes they pay even less – only around 14.5 percent.
Tax cuts are a bad idea if they mean reduced public services.
Some tax cut promoters claim that we can have more government revenue at lower tax rates. That’s a neat idea if it worked – like a car that runs on air or a magic money machine – but grown-ups don’t believe in fairytales – at least not most of us.
This idea is sometimes called “supply-side” economics or as George Bush Sr. called it thirty years ago: “Voodoo Economics”. Well Ronald Reagan won the US presidential election in 1980 and introduced massive tax cuts, especially for the wealthy. What was the result? Not his fairytale prediction but huge budget deficits: from $2 trillion more than doubling to over $5 trillion.
Economists argue about whether lower taxes lead to greater economic activity. But think about this simple fact: if you cut taxes 10 percent then you can only afford the same public services if the economy grows 10 percent faster than it would have anyway. There is no evidence that this has ever been the case anywhere, at any time. Not in our neighbour to the south and not in British Columbia under the Liberals or in Canada as a whole since Stephen Harper became prime minister.
As your mother probably once told you, “You can’t have your cake and eat it too.”
Tax cuts are not the solution to the growing gap between the wealthy and the rest of us.
A Statistics Canada study (Income in Canada 2007) shows that since 1977 incomes for average Canadians rose by a grand total of just 13 percent after adjusting for inflation. This amounts to an annual increase of only four tenths of one percent. At the same time the overall economy has doubled in size.
Even after adjusting for population growth we are creating 38 percent more in real value per person. That is three times more than our purchasing power has grown. So where did the money go? Somebody is getting rich and it sure isn’t us.
A Statistics Canada report (Income Inequality and Redistribution in Canada: 1976 to 2004) sums up their findings this way: “Average income in the bottom 10 percent fell by 8 percent in this period, but rose by 8 percent at the median (half of families above this income level, half of families below) and by 24 percent in the top 10 percent. For the top 1 percent – the very well-off – the gain was even more.
As the old saying goes, “them’s whats got, gets”. In BC “the rich got the goldmine and the rest of us got the shaft”.
In BC ten years of tax cuts have benefited those at the highest income levels the most.
The last big tax cut by the Liberal government – in 2007 – reduced revenue available for healthcare, education, seniors care and other essential public services by another $1.5 billion. That is on top of the $2 billion in cuts back in 2002. Who got the benefit? Not us.
The Canadian Centre for Policy Alternatives took a look at the numbers and reported that people earning less than $15,000 got nothing; people earning $30,000 gained just $134 a year or $2.57 a week; middle-class earners of around $60,000 saw an extra $415. The real winners are people earning over $100,000.
The value an average family receives from public services like healthcare, education, roads, public water and sanitation, recreation and leisure activities is more than $40,000 a year. You lose a big chunk of that every time tax cuts lead to public sector cutbacks. You might have seen a few more dollars a week in your take home pay – maybe not.
That is not much of a bargain – not for most of us anyway.
Our taxes pay for vital public services like healthcare, education and other important public services.
No one says we shouldn’t always work to make government and public services work better. But those pushing for tax cuts use every little example of bad spending or poor service to attack the very idea of working together to create a better society.
The fact is that almost all of your taxes go directly to provide the services you and your family use every day. The provincial government’s Financial and Economic Review covering April 2009 to March 2010 gives these details:
- 39.5 percent of provincial government revenue pays for our public healthcare system;
- 28.1 percent goes to education, from kindergarten all the way to community colleges and universities;
- 8.6 percent is for social services and housing to help reduce poverty and homelessness;
- 3.9 percent goes to protection of persons and property, providing law enforcement and our court system that are essential to a civilized society;
- 3.8 percent builds transportation networks, so you can get to work (or wherever else you want to go) and goods can get to market;
- 5.1 percent supports natural resource and economic development;
- 3.7 is for other public services and just 1.9 percent for general government.
No one likes to hear that civil servants purchased too many paper clips or elected officials spent more on cab fares or business meals than sounds reasonable. But all of those stories you see in the headlines or hear on talk radio add up to just pennies per taxpayer. They are a reason to always push for good management of public funds – not to support tax cuts that only hurt ourselves.
Stronger public services – supported by fair taxes – makes more sense than an “everyone for themselves” approach.
Our health care system is just one example of how we get better outcomes for less money than countries like the United States that claim to have “consumer choice”. Our public education system is another area where we are all better off to pool our resources through the tax system.
The same is true for police services and food inspection and public water and sanitation – and so many others. These are what economists call “natural monopolies”. This is just another way of saying that trying to create competition through a bunch of private suppliers just doesn’t make any sense. You wind up paying more and getting worse results.
A public park is another good example of something that is best when kept part of what is called “the commons”: resources and services we hold and share in common as citizens.
We made the democratic “choice” to have our municipal, provincial and federal governments create and maintain parks that everyone can enjoy.
Let’s make the right choices – not let the tax cutters take away our right to act together as members of a community to make things better for ourselves, our children and our neighbours.
In countries like Sweden with higher taxes and more government spending people actually live better.
On the majority of social measures high-tax countries rank significantly above low-tax countries. The Nordic countries- Denmark, Norway, Iceland, Sweden and Finland – have much lower rates of poverty, the elderly have much higher pensions, income is distributed much more equally, there is greater equality between men and women, workers have significantly more job security and people live longer.
They also score much higher on other social measures: homicide rates are lower, there is less drug use and surveys consistently show higher levels of trust within the community and general feeling of happiness and life satisfaction.
Contrary to what you might believe reading the daily papers this is all done with no economic penalty. Of 33 economic indicators examined in a 2006 study (The Social Benefits and Economic Costs of Taxation by tax scholars Neil Brooks and Thaddeus Hwong) these high-tax countries do better on 19. Low-tax countries like the United States and Britain are slightly ahead on only 14.
So people in these countries live better now and are better prepared to meet the challenges of the future. What more could you ask for?
And that’s not in spite of paying higher taxes but because a larger role for government in a mixed economy actually improves both social and economic results. Isn’t that the kind of model we should follow?
Countries like the US may have slightly lower taxes than Canada but our quality of life is worth the price.
The United States has the highest rates of poverty in the industrialized world. In the low-taxed United States, over 17 percent of people are poor; almost one quarter of all American children live in poverty and a shocking 49 percent of children in single parent families live in poverty.
Living conditions in the United States are shockingly unfair. By any measure, income is distributed more unequally there than in any other developed country. In 2004 America’s richest 1 percent held more of the nation’s wealth than the bottom 90 percent.
It is well known that there are profound problems with the Unites States’ health and education systems where a large proportion of spending is done through the private sector. The United States spends over twice as much per person on health care than Finland (15 percent versus 7.4 percent) yet has worse outcomes. Canada’s spending for our public health care system – financed mostly through taxes – is closer to Finland’s and we have similar healthy outcomes.
Why would we listen to the tax cutters who want to make us more like the U.S. where people pay much more and get far worse results?
Corporate tax cuts are not the way to create more – and better – jobs.
There is no provable link between corporate tax cuts and job creation. “With these huge forces going on – globalization of supply chains, commodity booms and so on, how is one able to separate out the impact of small changes in the tax rate?” Philip Cross, Statscan’s top economic analyst, said in late January 2011. “You’re kidding.”
The non-financial sector of Corporate Canada is already sitting on $489 billion in idle cash, awaiting certainty that it’s not in danger of a double-dip downturn. In the U.S., that figure is more than $2 trillion (U.S.) What business needs is a recovery in consumer and export markets, not an additional taxpayer-financed windfall at the expense of other social priorities.
Anyway, most economists prefer infrastructure spending as a superior short-term job creator; which incidentally provides the schools, hospitals, roads and water systems that businesses rely on too. The Federation of Canadian Municipalities reports there is a $238 billion “infrastructure gap” to repair aging bridges and sewage systems and build more schools and hospitals to accommodate population growth.
I feel good about paying taxes. I just want to make sure everyone pays their fair share.
Here are ten big reasons why you should feel good about paying taxes.
- Oliver Wendell Holmes, Jr. said it best: “Taxes are the price we pay for civilization.” More specifically, taxes are the price we pay for the Canada we love.
- Taxes put out fires, keep our streets safe, provide our children with education, provide our families with health care, ensure our food and water are safe, create legal safeguards for businesses and employees, provide parks – in other words, provide us benefits every hour of the day, every day of the year.
- The average Canadian household receives about $41,000 in public services each year (with no mark-up for private profit), a tremendous bargain for the vast majority of Canadians.
- Past generations paid taxes for what we have today – schools, hospitals, courts of law, roads, public transit, parks. Our taxes today allow us to pass along those benefits to future generations – our children, grandchildren and great grandchildren.
- If we ignore, shortchange or postpone funding for social, economic and environmental problems today, the solutions become more expensive in the future.
- Public sector employees work hard, often in difficult circumstances, to keep government running and provide the public services we need. We need to attract and retain hard-working public employees and pay them fair compensation.
- Money begets power, which begets more money, and more power. Taxes provide a counter-balance, by softening extreme disparities in wealth, power and benefits.
- Taxes ensure that Canada can build and maintain the necessary infrastructure – education, health care and transportation systems – to attract investment and businesses, and thrive in a competitive global economy.
- Taxes make the marketplace work – by maintaining a regulated business environment to protect property rights, enforce fair practices and protect consumers and investors.
- Taxes allow citizens, residents and businesses to do things together that we could never do on our own. In other words, taxes allow us to be Canadian in the way we live, work and play.