|Ten Tax Myths|
Canada’s business élite and their influential academic and media allies have launched another campaign against social programs and democratic government. Earlier in the decade, government debts and deficits were misrepresented to convince Canadians they had no choice but to drastically scale back their hardwon social programs. Now, with the disappearance of the deficit in fiscal 1997-98, Canada’s élite have conjured up a new campaign to advance their cause: tax cuts.
Couched in terms of job creation and “relief” for ordinary citizens, this campaign is designed to permanently lower government revenues and thus further weaken the ability to deliver social programs, redistribute income, and manage the economy in a way that benefits all of us and not just a privileged few.
The tax cut campaign rests on one of the most enduring myths in our society: the notion that “everybody” hates paying taxes. In truth, the vast majority of Canadians recognize that, if we want good government and the services it provides, we must pay taxes. The idea that we “hate” paying taxes makes about as much sense as saying we “hate” having to pay for restaurant meals, a new television set, or a vacation. It isn’t a matter of liking it or disliking it. It is just a fact of life. If we want something, we have to pay for it, whether it’s a public service or a private good.
And, in poll after poll and in every province, Canadians say they do want the things that their taxes pay for. They are even prepared to pay more taxes if they have to. Even in Alberta, where conventional wisdom suggests people are most suspicious of government and hostile to taxes, the vast majority of citizens polled by the Klein government repeatedly said that Alberta’s government surplus should go back into the Medicare and education programs slashed by the government. Only a handful said they wanted more tax cuts.
Canadians say this because they know that, if we are to have a civilized society, one not determined exclusively by the dictates of the private marketplace, we must be willing to pay for it. And they say this in spite of the relentless attack on government by neo-liberal and neo-conservative media commentators, political parties, and business think-tanks. What is remarkable is that, in the face of the efforts of all these powerful and well-funded organizations, Canadians’ values have not fundamentally changed.
It is still necessary, however, for Canadians to know the facts about taxes so that they can counter the myths perpetuated by those who want to permanently downsize government. While Canadians generally understand that they must pay taxes, that the tax system is unfair, and that corporations don’t pay their fair share, information on these and other tax questions is rarely to be found in the mainstream media. The truth is out there. But it’s not always easy to find.
For over 15 years, Canada’s business élite have been attacking the very idea of government as a positive force in society, as a democratic counter-balance to the unequal marketplace. This attack has been relentless in its intensity, and multi-faceted.
First, we were pummeled for years by what many referred to as “debt terrorism” — the belief that government debt was so serious that it threatened our very survival as a country. Every other national objective and social value had to be sacrificed to deal with it. While the deficit was a problem and the debt remains an issue, much of what was said on this subject was either false or misleading (see the CCPA’s 10 Deficit Myths). The campaign was designed to lower Canadians’ expectations of government.
To some extent, it succeeded. Many Canadians, while they maintained their conviction that government was a force for good and that it should provide for its citizens, came to accept the proposition that we could “no longer afford” good government. This is despite the fact that between 1979 and 1997 the wealth created in Canada (i.e., Gross Domestic Product, or GDP, per capita) increased by 50% in real terms. This suggests that we could afford far better social programs than we had in the 1970s if we had the political will to implement them. Instead, we saw them slashed throughout the first half of the 1990s.
The attack on government continued on several other fronts. One persistent theme expressed in the editorials of the Conrad Black and Thomson newspapers — and on television — was that public services were inferior, too expensive, and controlled by lazy, overpaid “bureaucrats.” This attack, too, relied on deliberately misleading and often false declarations about Canadian social programs and educational standards (see the CCPA’s “In Defence of Public Services”).
The goal was transparent. If Canadians were led to believe that their social programs were no good, and that the public employees delivering them were somehow violating their public trust, they would no longer support those services.
Here the attack on government has been much less successful. While there has been a decrease in support for government in the most general sense, people have not been fooled. To the extent that the quality of Medicare and public education has been eroded, Canadians know that it is because the funding for these vital services has been cut to the bone. Support for those actually providing services, including teachers and nurses, remains high.
Now that the deficit problem has been successfully dealt with, those determined to reduce the role of government have been forced to take another tack. With the end of the deficit era, people’s expectations are again reflecting their values. They want the surpluses spent on social programs. The neo-liberal counterattack to this renewed support for social spending is the call for across-the-board tax cuts.
If they are successful in this campaign, we will see a dramatic reduction in government revenues. Once made, these tax cuts will be extremely difficult to reverse and the government’s capacity to fund programs and intervene in the economy could be permanently reduced. In effect, tax cuts are meant to bind the hands of any future government that wants to invest in Canada’s social infrastructure. Such a government might have a mandate from the people, but will be hamstrung by a tax system unable to provide the revenue to carry it out.
The tax cut advocates cast their proposals in terms of relief for ordinary citizens, as well as job creation. There is an enormous hypocrisy in this sales pitch, given that these same forces have for over a decade supported the government’s policy of keeping unemployment high to fight inflation. Even with inflation at or around 1%, the government still adheres to a policy determined by what it calls the Non-Accelerating Inflation Rate of Unemployment (NAIRU) — the so-called “natural rate” of unemployment.
In effect, this policy places low inflation (which primarily benefits the wealthy) ahead of low unemployment as a government priority. Currently, the Bank of Canada believes the NAIRU rate is between 8% and 8.5%. That means the economy and the money supply is controlled to keep unemployment from going below 8%. Business voices arguing that tax cuts are needed to create jobs, at the same time that they call for near-zero inflation/high unemployment, cannot be taken seriously. Tax cuts serve the same purpose as deficit-fighting: to reduce government revenues in order to reduce its social and economic role.
The debate over tax cuts versus reinvesting in our social programs promises to be the next big political fight in this country. The outcome of this battle will be determined by how many Canadian citizens are able to engage in the debate on the basis of strong, sound counter-arguments to the myths, distortions and outright falsehoods being used by the other side of the debate.
Ten Tax Myths is intended to equip citizens with the information and analysis needed to debunk the many myths about taxes being put forward by those determined to dismantle democratic government.
|Glossary of tax terms||
|Ten Tax Myths|