Brar and Raise the Rates managed to attract a fantastic amount of media attention, and sparked a much-needed and long-overdue public conversation about the inadequacy of welfare benefit rates. Simply put, the MLA on Welfare initiative was a huge success and fantastic public awareness exercise.

Such public awareness matters. Opinion polling we at CCPA commissioned a few years ago found, for example, that British Columbians, when asked cold, are generally split evenly on the question of whether welfare rates should be increased. But if the question is prefaced by simply telling people what rates are, support for an increase jumps to three-quarters. Meaning, when people move past the myths and learn the reality of how low benefit rates are, and how hard life on welfare actually is, they don’t like it. That’s good.

While most of the coverage of Brar’s month was sympathetic, a few negative voices were heard. In particular, the Minister responsible (Stephanie Cadieux) and the Fraser Institute made a number of media interventions in defense of BC’s abysmally low welfare benefit rates. Their comments indicate they truly need to get out of the office more — they simply have no understanding of what life on welfare is actually like.

Among the key points made by the Minister and Fraser economists was that we needn’t worry about the $610 basic rate, because a majority of welfare recipients receive more (either because they have children or a recognized disability), an amount they deem “adequate.” It’s true that most welfare recipients get more than the basic rate, but calling those rates “adequate” is way off the mark.

As the National Council of Welfare notes, those on welfare with children and those with a disability still live thousands of dollars below the poverty line. And extensive research conducted by the CCPA (a study I co-authored called Living on Welfare in BC, which followed real people on welfare over a two year period, rather than just pondering numbers as the Fraser folks have) found that even those in receipt of the higher (supposedly “adequate”) rates were still frequently reliant on food banks and other charities to meet basic needs.

Indeed, we found low rates often force people to make destructive choices – such as remaining in abusive relationships – that are harmful, and for which we are all paying.

Adequate? The family welfare incomes don’t even reach the Fraser Institute’s own thin-gruel poverty line – a line that is itself significantly lower than every other low-income measure produced in the country.

The government and Fraser Institute maintain they don’t want welfare to be “attractive.” Well, we are a long way from that. The reality is that life on welfare is a day-to-day struggle in which all one’s time and effort is spent merely meeting basic needs for food and shelter, which ironically makes it harder to find work.

If Brar’s month-long experiment teaches us anything, it is that rates need to be substantially higher, and that we need a better – more rational as well as compassionate – way to set welfare benefit rates. That’s just what Steve Kerstetter proposed in his 2006 CCPA-BC policy paper A Better Way to Set Welfare Rates. It is unconscionable that governments are content to hold welfare rates frozen year after year, as inflation eats away at the real value of a welfare cheque. And currently no clear rationale guides the setting of rates. Instead, rates should be tied to the actual costs of basic needs (ensuring that shelter, nutritious food, clothing, transportation, and other core needs are affordable) – something that is clearly not the case today. And then benefit rates should increase annually in line with inflation.

But don’t hold your breath that new progressive tax changes are in the offing.

First, a closer look at that expert panel: You can find the government’s announcement of the panel’s terms of reference and a list of the panel members here. Sadly, the panel is not mandated to examine the fairness of the overall tax system, nor is it to propose ideas to restore the BC tax system’s progressivity (something that is sorely needed, as we found in this CCPA study last summer).

Rather, the mandate is narrowly to advise on how to improve the “business competitiveness” of BC’s tax system, and to offer recommendations on “administrative improvements to streamline the Provincial Sales Tax.”

The membership of the “expert” panel is entirely made up of business representatives. Not a single person on the panel is an academic economist (the one person with an academic connection is Grace Wong, a former assistant dean with UBC’s Sauder School of Business). There are no representatives from labour or the community or non-profit sectors. The panel chair, Sarah Morgan-Silvester, is the current chancellor of UBC, but has spent most of her career as a senior banking executive.  In short, there is not a single person on the panel one might expect to offer a dissenting voice ­– a perspective that is interested in anything other than how to lower taxes for the corporate sector.

And how about that cool new online BC Budget simulation tool for the public? You can access the “My BC Budget” website here.

Now I love online tools, and I’m told I’m somewhat nerdy when it comes to the BC Budget, so I was all ready to geek-out on this.  And thus, my disappointment is deep.

The stated intent of the online tool is to:

“Let people see the effect of raising and lowering revenues and spending on the provincial budget, with the goal of eliminating the 2013-14 deficit, which was forecast in September to be $458 million. Once people have achieved a balanced budget, they can send their solutions to the finance minister with their comments. The website also includes informative facts about the budget and is one of several ways the government is consulting with British Columbians in the lead-up to Budget 2012.”

The government’s ill-advised (and much-amended) balanced budget legislation commits it to balance the 2013/14 budget (an entirely arbitrary deadline). And so, only when someone has used the online simulator to model a balanced budget does the tool allow you to submit your “solution”.

But the tool is much sillier (and nefarious) than that.

You can reduce any tax you want by as much as 100%, but you can’t increase any tax by more than 10% (which is certainly interesting, given the stated intent of trying to balance the budget).

When you start to fiddle with personal income tax levels, the “information” window kindly informs you that, “BC families generally have one of the lowest overall tax burdens in Canada, and BC currently has the lowest provincial personal income taxes in Canada for individuals earning up to $119,000 a year.”

What’s more, while you can adjust personal income taxes overall, the simulator does not allow you to adjust the income tax brackets (let alone propose one or more new upper-income ones, as I recently did here). Meaning, you cannot modify the progressivity of the tax system (the distribution of taxes by income) – Minister Falcon apparently isn’t interested in hearing about that.

And don’t go trying to propose increases in corporate taxes. If you do, the simulator responds with a finger-wagging note warning: “Raising corporate income tax would make the province less competitive compared to other provinces and countries, and would reduce long-term economic growth. Companies would decide to move to lower-tax jurisdictions, costing B.C. jobs and investment.”

This despite the fact that BC has among the lowest corporate tax rates in the country, and global accounting firm KMPG consistently finds BC to be one of the least expensive places to do business among major industrialized nations. Surely, we have room to move on this front.

Oddly, the one tax increase the simulator does not actively discourage is further increases to MSP premiums, the most regressive tax in the province.

Overall, the simulator is quick with warnings if you try to increase taxes to close the budget gap, but oddly silent when you try to lower spending. No bias there I guess.

(My thanks to both Shannon Daub and Iglika Ivanova for drawing some of these ridiculous features to my attention.)

We do indeed need a fulsome review of BC’s tax system, and the public certainly does deserve a chance to weigh in with our ideas for how to rethink the ways in which we raise and spend revenues. Sadly, neither this expert panel nor the online simulator will give is that chance. As I’ve said before, we need a full Fair Tax Commission, with an extensive public-engagement process that lets us genuinely deliberate on these matters.

Well then, I humbly submit the following Top 10 list of reasons for upper-income tax increases (in descending order).

#10: Ridiculous real estate.

Check out Vancouver’s 40 most expensive listings. West Vancouver currently has a property listed for just under $40 million. Indeed, the top six properties all list for over $20 million. The top property includes
a main house featuring “6 bedrooms, negative edge pool, hot tub, indoor and outdoor ponds, 3 waterfalls, billiards room, movie theatre, wine cellar, gym, massage room, and 15-car garage.” And then there is the “7,000 square feet guest house and 2,580 square feet combination maids’ quarters and office.”

#9: Canada’s top 100 CEOs pocketed an average $8.38 million in 2010.

That was a 27 percent increase over 2009, and 189 times more than Canadians earning the average wage. For more, see the CCPA report here.

#8: A “Super-Yacht” with a functioning volcano.

I kid you not. See here.

#7: A $2 million diamond handbag.

Really? Yup. See here

#6: Out-of-control weddings.

Weddings have always been big business. But clearly, some people need to be saved from themselves.

#5: Oh, just look at this.

LXRY Magazine (Luxury) is a Canadian online magazine focusing on comfort and extravagant living. Got 30,000 bucks for a pair of gold earrings or $200,000 for a car?

#4: The maximum RRSP deduction for 2011 is a whopping $22,450. 

That’s the ceiling for an annual contribution (for which people receive an extremely generous tax deduction — comes right off one’s taxable income) and does not include any unused room from previous years. Who the hell has $22K in extra income to tuck into this highly publicly-subsidized savings plan? A minimum-wage earner working full-time all year would have an entire annual income of only $19,798. The RRSP is one of the most expensive and inequitable social programs in Canada. The program costs the public treasury about $10 billion a year in foregone revenues. Yet, according to the CCPA’s Alternative Federal Budget, while more than two-thirds of those making over $100,000 a year contribute to RRSPs, less than a quarter of those making less than $50,000 find themselves able to contribute.

#3: The ultra rich are growing, according to Canada’s banks, so the 99% of us should follow the money. See here.

#2: Am I the only one who finds the “driving” section of almost any newspaper really annoying?

And the #1 reason for tax increases…

Weddings for dogs! Yes, it’s true.

“You can spend anything from $400 to $10,000,” says Doggie wedding planner Scott Rinehart. Doggie I Do’s, a Canadian company that coordinates “puptials” “for mutts in love,” offers basic wedding packages for 25 guests starting around $4000.

For more see here.

And you wanted proof that the free market rationally allocates scarce resources?

Clearly some people are under-taxed.  Couldn’t and shouldn’t some of that disposable income be put to better use?

Having a little of fun at the expense of the very rich is, well, fun. But on a more serious note, extensive research in a variety of fields (most comprehensively documented by epidemiologists Richard Wilkinson and Kate Pickett in their book, The Spirit Level) shows that out-of-control wealth and extreme inequality are actually bad for everyone — for our communities, our health, our democracy, our environment, and our personal wellbeing. Taxes are one of the ways we can reduce inequality, and create a more fair society for everyone. And that’s the real #1 reason we need tax increases for the wealthy.

Here’s what I just submitted:

Submission to the BC Legislature’s Select Standing Committee on Health

From: Seth Klein, BC Director, Canadian Centre for Policy Alternatives

Re. Sustainability of the Health Care System

Date: Jan 13, 2012

Thank you for this opportunity to offer this written submission to your committee’s deliberations.

Given the topic you are investigating, I want to make sure that you are familiar with some relevant peer-reviewed reports that have been published by our institute.

Of most direct relevance is a 2006 report by our senior economist Marc Lee entitled Is BC’s Health Care System Sustainable? A Closer look at the Costs of Aging and technology. The report can also be found here.

Like your committee’s mandate, this report estimated the financial implications of demographic trends on the health care system into the 2030s. Among the report’s key findings:

This paper finds that population aging, in and of itself, is but a small contributor to rising cost pressures in the health care system. Based on current projections there is little to suggest a demographic time-bomb about to go off. Instead, the real challenge for financing the health care system is advances in technological possibilities, broadly defined to include pharmaceutical drugs, new surgical techniques, new diagnostic and imaging technologies, and end-of-life care. These challenges can be addressed most efficiently and equitably in the context of a public system…

• Population aging has been a cost driver in the system, but a very small one compared to other sources. The impact of population aging was 0.9% per year over the 1995 to 2005 period. This is consistent with other studies of population aging.
• Inflation (as reflected in salary increases and higher cost of supplies) has been the biggest cost driver over the 1995 to 2005 period, with increases averaging 2.4% per year, followed by population growth at 1.2% per year.
• The expansion (or “enrichment”) of health care services over time (such as new technologies, long-term care, home care and pharmaceutical drugs) is also an important factor. The average British Columbian receives one and a half times more health care services as his or her equivalent 30 years ago.

I would also like to draw you attention to a number of other CCPA reports relevant to your work:

• Why Wait? Public Solutions to Cure Surgical Waitlists, by Alicia Priest, Michael Rachlis and Marcy Cohen (2007), available here.
• What’s in a Scan? How well are consumers informed about the benefits and harms related to screening technology (CT and PET scans) in Canada, by Alan Cassels et al (2009), looks at how unnecessary and sometimes harmful scans can drive up health care costs. It is available here.
• An Uncertain Future for Seniors: BC’s restructuring of home and community care, 2001-2008, by Marcy Cohen et al (2009), looks at how inadequate investment in community care is placing more pressure on the more expensive acute care system. It is available here.
• Innovations in Community Care: From Pilot Project to System Change, by Cohen et al (2009), is a companion paper that highlight successful innovations that, if scaled-up province-wide, could take pressure off the acute care system. It is available here.
• The Cost of Poverty in BC, by Iglika Ivanova (2011), looks at how poverty increases costs to the health care system. In particular, it finds that poverty in BC is adding an additional $1.2 billion per year to the province’s health care system. It is available here.

Thank you for this opportunity.

A few year-end reading recommendations: Victoria Times-Colonist editorial writer Paul Willcocks wrote a terrific piece on the subject (you can find it here); and similarly, a group of UBC economists (including CCPA research associate David Green) authored a series on inequality for the Vancouver Sun (which you can find here).

Now we need to have a serious conversation about what to do to reduce the gap. Tackling inequality means focusing on a poverty action plan for those with low incomes, strengthening the economic security of those with middle incomes, and redistributing more of the income of the wealthy.

For lower-income individuals and families, we need our governments to adopt comprehensive poverty reduction plans (provincially and federally). The BC Poverty Reduction Coalition has been actively promoting the former, while nationally a similar call has been spearheaded by Make Poverty History, Canada Without Poverty, Citizens for Public Justice, and Campaign 2000. For how to enhance economic security across the low and middle-income spectrum, look no further than the CCPA’s Alternative Federal Budget.

But rising inequality hasn’t been driven by low incomes. Rather, as the Occupy movement rightly highlighted, the growing gap has been driven by the runaway-rich; the wealthiest 10% of households, and especially the wealthiest 1%, have been breaking away from the rest of us (as outlined in this CCPA report a year ago).

So if we are going to reduce inequality, we need to revisit our top tax brackets.

Here in British Columbia, thus far, Premier Clark seems resistant to doing so. But in a year-end interview with the Globe’s Gary Mason (available here), BC NDP leader Adrian Dix indicates that he is prepared to look at the tax rate of BC’s highest income earners:

“I don’t think there is a massive amount of room on the income tax side to get more money,” Mr. Dix said. “I haven’t really landed on the high-income stuff. But I don’t think there is any room under $100,000 or even $150,000 for that matter.”

“So, in the short term in B.C., the rich are not going to have to pay more,” I say.

“I haven’t said that,” Mr. Dix replied. “These are the issues we have to review.”

Currently, BC has five income tax brackets, and the top rate kicks in at about $100K of income. So it would seem from the above that Mr. Dix is open to considering an upward adjustment to that top rate and/or a new tax bracket that kicks in at $150K or higher. That’s good – much needed and long overdue.

Most British Columbians would be unaffected by such changes. Only about 4% of British Columbians make over $100K a year, and only a little more than 1% make over $150K. A new bracket at $250K of income would impact only about 0.5% of BC taxpayers. Yet such increases could yield some much needed income to the public treasury (the amount would depend on the new rates, but, for example, a new 20% tax rate on incomes over $150K could generate about $400 million in new revenues – enough to build about 2,000 new units of social housing per year, to give but one comparison).

As we noted in a CCPA report last summer, BC’s wealthiest 1% have been doing extremely well in recent years. Most would be willing to pay somewhat more in taxes, particularly if we could demonstrate that such revenues would help to reduce poverty and homelessness.

I’d argue that the BC government should not restrict itself to adjustments to the top rate alone. I think there is room to modestly increase the 3^rd and 4^th brackets as well (which kick in at incomes of about $73K and $84K respectively; again only impacting a small minority of taxpayers). As I noted in a blog post a couple years ago, I find my personal income tax rate to be remarkably low, given what we receive in public services, and the scope of unmet social and environmental needs.

If you too think that our upper tax brackets should be increased, may I recommend that you let our political leaders know. Too often our leaders are overly cautious, and presume we will not abide such increases. If we really want action on inequality, we need to tell them otherwise.

Many of us found the explosion of the Occupy movement onto the local and North American scene particularly exciting. Notwithstanding some misgivings about some tactics, I feel immense gratitude towards what these mainly young activists have accomplished. We at the CCPA have been struggling to put the issues of inequality and corporate power into the spotlight for years. We first noted the phenomenon of the run-away rich in a report called The Rich and the Rest of Us a few years ago, and have been systematically highlighting the growing gap ever since. But the Occupy movement brought those issues to the forefront of public consciousness in just a few short weeks.

Occupy hit a nerve, and invigorated people. It broke through people’s isolation, and told us we are not alone in our distress about these trends. Creatively and peacefully, Occupy has fundamentally shifted the political discourse.

Now we need to regroup and build on that was accomplished last fall. We need to show people that there are known policy solutions to reduce inequality, restore economic security, rise to the challenge of climate change, and reign in the power of the corporate sector in our democracy. No clear demands? Nonsense. The alternatives abound. And we at the CCPA have been assembling them for years. Now the task of us all is to popularize and promote them, and to push our political parties to give these bold ideas political expression. Together, we need to Occupy the media, Occupy the public debate, creatively Occupy real sites that highlight solutions, on the one hand, and the untenable influence of corporations on the other. And Occupy the ballot box. And we should have fun doing so.

And consider this hopeful prediction (with a hat tip to US activist Van Jones): a remarkable demographic transition is underway, as the “Millennials” (the largest demographic group in history) come of age. This is a largely progressive cohort, managing more diversity with less strife than any before it. Many are non-plussed by the prevailing system. And many many have a strong environmental orientation. The point is this –– arguably the days of right-wing governments who refuse to act on climate change and inequality may well be numbered. Will this younger demographic (who we saw starting to flex their mussel in the Orange Wave during last spring’s federal election) really abide these guys? Or, over the next 10 years, will they come into their own politically just as the reality of climate change is unavoidable (a powerful alignment), and be ready for the new ideas groups like the CCPA must have at hand.

Our task is to prepare for those tipping points. To create political-cultural space. To lay the groundwork. To seed the public discourse with bold ideas, in anticipation of those moments – and they are coming – when the seemingly impossible is suddenly inescapable.

Best,

Seth Klein, CCPA-BC Director

First, over just over 100 candidates have responded to the Open Letter issued by the Living Wage for Families campaign, covering almost every Lower Mainland municipality. Almost all have expressed support for this proposal or at least indicated interest in exploring the implications for their city.

In Vancouver, COPE has said it is supportive of undertaking a city study to investigate the feasibility of passing a living wage policy. Vision Vancouver and the NPA are a little more cautious, saying they are interested, but want to find out more before deciding how to proceed.

In Burnaby, both main parties have expressed a clear interest in exploring the possibilities of a living wage policy. Both Richmond and Surrey have a number of candidates running on a living wage platform, while the City of North Vancouver has already unanimously agreed to study this issue.

In the outer suburbs of Maple Ridge, Pitt Meadows and Coquitlam a large number of candidates have expressed an interest in pursuing this issue.

You can see all the candidate responses here.

Second, today our friends at the Columbia Institute Centre for Civic Governance released some very interesting poll results related to the municipal elections. Among the results: 67.1% of respondents asked about a Living Wage said they would favour their municipality adopting a bylaw. You can read more results here.

Hopefully we will see new activity on this front after Saturday.

The Living Wage for Families Campaign, along with 54 organizations representing over 300,000 British Columbians, recently issued an Open Letter calling on all municipal election candidates to help low-income families in their cities by passing a Living Wage policy if they are elected (available here).

Many families are struggling to get by; they are working hard but just can’t keep up with ever rising living expenses. Despite the recent increase in the minimum wage, it is estimated that at least 25% of families with children in the Lower Mainland still earn less than a living wage income, that is, a wage that allows them to cover their basic living expenses (calculated at $18.81/hour in Metro Vancouver). Fifty percent of single parents with children don’t earn a living wage. This is especially true of the ‘hidden workers’ who support the work of our cities; the people who clean our buildings, who provide our security services, or who serve us our food.

Why should municipal governments care about this? Because it is municipal governments themselves that end up paying a large price for these low wages.   Families earning low wages mean there is less money circulating in the local economy, and parents (forced to take on more hours or a second job to make ends meet) have less time to spend with their children. Municipal governments and school boards consequently end up filling the gaps by paying for additional services and policing costs.

Some business leaders are concerned about the living wage. They claim that it will negatively affect the private sector. Yet leading businesses around the world are voluntarily agreeing to become living wage employers. Businesses like KPMG and LUSH in the UK, and now Vancity credit union here at home. These employers commit to pay the living wage, not only to their direct staff, but also to contracted staff in traditionally low-paying sectors. And here’s the big surprise – they have all determined that doing so is good business practice.

The call for a living wage has also been falsely labeled as a “union” demand. In fact, most people earning less than the living wage are not unionized. Moreover, the call for a living wage has come from a broad cross-section of organizations – faith groups, parents groups, immigrant groups and community organizations such as the United Way of the Lower Mainland and the Health Officers Council of BC. They understand that a living wage is key to ensuring healthy childhood development and community cohesion.

Opponents of the living wage have claimed that small businesses will go bankrupt, that cities will face huge cost increases, and that even your granny will be negatively affected. Yet these attacks conveniently forget to mention that countless studies have shown that the cost to cities of living wage policies are minimal – New Westminster’s Living Wage Policy is costing less than a quarter of one percent of their budget – or that families who earn living wages have more money in their pockets to spend in local businesses.

Wherever you stand on the political spectrum, nobody can deny the fact that many families are struggling to get by. The data indicates that child poverty in BC is mainly a low-wage story; the vast majority of the 100,000 children living in poverty have at least one parent in a low wage job, with a third working full time in the paid labour force.

This is an area where municipal governments can and should lead. In doing so, BC cities will be joining 140 US cities who already have living wage ordinances of some form.

Will living wage policies result in a slight increase in costs for municipal taxpayers. The short answer is “Yes, but only slightly.” But the real question is this: do we as municipal taxpayers want people employed –– on our dime –– at a wage rate that cannot ensure healthy childhood development or allow parents the time to be with their children and participate in the social and civic lives of our communities?

- 30 -

Michael McCarthy Flynn is an organizer with Metro Vancouver Living Wage for Families campaign. Seth Klein is BC Director of the Canadian Centre for Policy Alternatives and a co-author of Working for a Living Wage.

But that’s the U.S. right? Surely, our reality is different, eh? As the occupy movement comes to Canada in the coming week, we don’t really have reason to copy these American trouble-makers, do we?

Think again.

While inequality in Canada is not as great as in the U.S., in recent years it has been growing faster here (as noted in a recent report from the Conference Board of Canada).

As the CCPA documented in a report earlier this year on The Rise of Canada’s Richest 1%, “the 246,000 privileged few who rank among the country’s richest 1% took almost a third (32%) of all growth in incomes between 1997 and 2007.”

And here in British Columbia, the richest 1% have been doing remarkably well.

Last June, the CCPA-BC released a report on the erosion of tax fairness in BC. We found that BC’s personal tax system (including income tax, sales taxes, property taxes, carbon taxes and MSP premiums) has become out-and-out regressive –– amazingly, the richest 1% of BC households pay a lower overall tax rate than others. Meaning, in today’s BC, as a share of one’s income, the richer you are the lower your overall tax rate.

In fact, provincial income tax cuts introduced since 2001 delivered, on average, a whopping $41,000 to the top 1% of BC households.

How could the value of ten years of tax cuts be so great for the richest 1%? The answer: tax cuts are worth so much because the richest 1% have been making out so fantastically well. As of 2010, the average income of the richest 1% of BC households had reached a staggering $820,000 (that’s in one year!).

And the top 1% saw huge gains over ten years. Back in 2000, their average household income was $602,000. So in ten years, their income rose by a fantastic 36% (double the inflation rate of 18% during that time). With the market producing so much gains for the wealthiest among us, why on earth did the government feel compelled to pile on with tax cuts for those who need it least?

Quite a contrast with the rest of us: real median incomes were flat during that period.

If we are serious about addressing rising inequality, we need to increase taxes on the wealthiest British Columbians. BC’s upper income tax brackets need to be increased, and we should bring in a new high income tax bracket or two (hey, if even Warren Buffet can advocate for that in the US, we can and should be pursuing it here). Longer term, we need a Fair Tax Commission – a chance to have a full public conversation about how much money we need to pay for what we want to provide collectively, and how to raise that money in a fair and equitable manner.

The proposed Act also outlines how the strategy should be development, and the broad contents of what it should cover. (The proposed Act should be posted here shortly.)

During his leadership campaign, Adrian Dix committed to a poverty reduction plan. So it is gratifying to see how the Opposition would seek to make that commitment real. In other provinces, initiatives such as this have been supported by all parties, so it would be nice to see the Government support this Act.

Importantly, the proposed Act outlines how a government should be held accountable for progress. It commits to embed targets in legislation, to appoint a lead Minister, to have a cabinet committee to oversee the strategy co-chaired by the Premier, to have an outside advisory committee to hold the government to account, and to annual reporting to monitor progress. That all signals a strong commitment.

In the coming months, I hope to hear more from the Opposition about what their first steps would be, as initial needed actions are known and needn’t wait for the development of a full strategy.

In contrast, at the federal level, the Harper government (as it likes to be called), has only committed to reduce Canada’s GHG emissions by 17% by 2020 (below 2005 levels). And at the moment it remains entirely unclear how even this completely inadequate goal will be achieved.

But check out what another Conservative government is doing: across the pond, the UK Conservative coalition government has taken a very different approach to tackling climate change. The UK government recently committed to reduce its GHG emissions by 50% by 2025, below 1990 levels (see here for details), and that target will be embedded in legislation.

Note the different base years: 1990 for the UK vs. 2005 for Canada and 2007 for BC. Than means that if Canada did reduce its GHG emissions by 17% below 2005 levels by 2020, our emissions would still be well above our 1990 levels.

Nice to know how much more ambitious other industrialized countries with Conservative governments are prepared to be.

There are elements of the latest reform package I like (which I’ll get to below), but overall the government’s proposed “bold fix” is a classic case of politics trumping good policy.

What’s my beef with the “fix”?

In promising to lower the HST by two percentage points (from 10% to 12% over the next three years), and in sending families cheques this year of $175 per child under 18 regardless of household income, the government is proposing to spend a great deal of money on people who don’t need it.

True, a two percentage point reduction in the HST will benefit everyone, but the biggest dollar savings would go to the wealthiest households (as they spend the most on goods and services). Likewise, wealthy families with children under 18 will get cheques this year that they will hardly notice in their household budgets (even though, collectively, these cheques will cost the public treasury a lot), while low and modest income people without children get nothing. This is not a wise use of public funds –– it makes much more sense to target money to the individuals and households who really need the help. (Ironically, this is what the government is proposing to do for seniors –– offering additional rebates only to low and modest income seniors –– but for political reasons they’ve chosen a different approach for everyone else.)

The government is proposing to partially pay for this change by increasing the corporate income tax from 10% to 12% (meaning, returning the corporate tax rate to its 2008 level). Now I’m all for that. But Finance Minister Kevin Falcon has made a point of emphasizing he sees this change as “temporary.”

But here’s the bigger problem:  Cutting the HST by two percentage points is very expensive –– about $1.7 billion in lost revenue per year once fully implemented. In contrast, increasing the corporate income tax rate to 12% will only recoup about $400 million. That would leave a hole in the budget of about $1.3 billion. So this “fix” would mean the HST is no longer revenue neutral, but revenue negative, and would have to be paid for in either increased debt or (more likely) cuts to public services and programs.  (The government is also proposing to delay further reductions in the small business tax rate, which would save about another $300 million, but again, the Minister has emphasized that this delay is temporary.)

In short, Premier Clark has more or less done the same thing Premier Campbell tried just before announcing his resignation; namely, seeking to win the public over with a promise of more tax cuts, the budget consequences (and money for public services) be damned.

A much better (and cheaper) fix, as I recently wrote here, would have been to keep the HST, expand the low-income HST credit, and fully pay for this expansion with increases in corporate income taxes. But again, what we really need is a full Fair Tax Commission, in which we deliberate over the role of a value-added sales tax within the overall tax system (which would serve us so much better than a referendum on such a narrow question).

That said, embedded in the government’s proposed “fix” are some positive developments that need to be recognized.

The campaigners against the HST should take some satisfaction from the fact that they made the government say “uncle”. The government was forced to admit that the HST shifted too much onto consumers and too much off corporations.

More importantly, the government has now acknowledged that we can increase corporate income taxes and the sky will not fall. It is no small irony that when Adrian Dix proposed during the NDP leadership race that corporate income taxes be returned to their 2008 level, he was accused by government representatives and media pundits of being a “class warrior”. Yet now Christy Clark has proposed doing just that (and even gone a step further with a proposed delay to planned reductions in the small business tax rate).

And another rather delicious irony: those corporate income taxes reductions since 2008 were part of the carbon tax’s revenue recycling regime. Meaning, if the government did actually increase the corporate income tax, they would have to amend their carbon tax legislation, which requires that the tax be revenue neutral. Again, I’m all for that. The CCPA has long said that making the carbon tax revenue neutral (and giving big tax cuts to business) made little sense, and that the carbon tax income should be partially used to fund other climate initiatives. So nice to know the new Premier is now ready to break with revenue neutrality there.

The issue is receiving much less attention than it did in the last federal election (the Dion factor?).  Yet the science tells us that the situation is more urgent, not less.

Last weekend, Bill McKibben (founder of 350.org, and author most recently of Eaarth: Making a Life on a Tough New Planet) gave an outstanding talk in Vancouver (to a capacity crowd of 500). Twenty years ago, McKibben’s book The End of Nature was the first to introduce the coming reality of global warming to a general audience.

Today, McKibben reminds is that that future is now. Climate change is happening. In the last year alone we have seen temperature records shattered, terrible droughts and fires in Australia and New Zealand, and because warmer air holds more water vapor, disastrous flooding, most notably in Pakistan.

McKibben also highlights the cruel global irony that the poorest countries that have contributed least to global warming are experiencing the brunt of climate change. And he sadly noted Canada’s ignominious role in scuttling meaningful progress in global negotiations.

McKibben also had a little fun with the concept of “conservative”. A direct action he recently helped organize in Washington asked participants to come “in their Sunday best.” The point was to emphasize that the radicals in all this are those willing to recklessly dump ever-increasing amounts of CO2 into the atmosphere without consideration of the consequences (that’s crazy stuff), while the true conservatives are those who want our planetary systems to maintain some semblance of what we have hitherto known.

McKibben concluded with what should be an obvious observation: the governments we elect may get to re-write tax laws, the criminal code, or immigration laws – but they do not get to re-write the laws of nature. We need a government whose policies and global negotiating position are governed by science. Rising to the challenge of global warming is the defining issue of our generation. The climate cannot afford four more years of inaction.

Winning public support (particularly in tough economic times) also requires that our policies are structured equitably and are seen to be fair. That’s what the CCPA’s BC office is modeling in our Climate Justice Project (for more on that, see here).

My point: corporate tax cuts simply have not delivered on their promise, and thus continuing to cut the corporate income tax rate to 15% makes no sense. Already we’ve seen the corporate tax rate fall from 28% to 18% over the last 10 years, with no noticeable effect on investment. The non-financial corporate sector is sitting on half a trillion dollars in cash right now, so why should we reward them with more tax cuts? KPMG already ranks Canada as having the second lowest corporate taxes in the industrialized world after Mexico (and look how well it’s working for them).

At one point, the Fraser fellow was lauding the benefits of the corporate tax cuts between 1997 and 2007. So I’m thinking, hey, he should be happy if we return to the 2007 corporate tax rate. Coincidentally, that’s precisely what this year’s Alternative Federal Budget proposes. Doing so would raise an additional $11 billion a year in government revenues — that’s a lot of money that can be put to better use.

For more excellent analysis of the federal budget, go here.

In it, we praised Cristy Clark for her quick action on the minimum wage, announcing that it would move to $10.25/hour by May of next year. Of course, kudos should go to all those who have campaigned on this issue for a long time.  We did express concern about what happens after May 2012, emphasizing that ultimately, the minimum wage should be based on a a clear rationale, namely, tie it to the poverty line and index it, so that we can cease having this debate every couple years.

On a related point: some critics have said that increasing the minimum wage as Premier Clark has done won’t reduce poverty. Well, yes and no. If the minimum wage were now linked to the poverty line (such that a single person working full time, full year at the minimum wage would have an income at the Low Income Cut-Off), it would need to be about $11.50 in 2011. So if you are only increasing the minimum wage to $10.25 by next year, you are not going to see any noticeable reduction in the poverty rate (the breadth of poverty). However, this new increase will have an impact on the depth of poverty, bringing thousands of households and individuals closer to the poverty line. And that matters.

One other outstanding concern relates to the newly introduced lower minimum wage for people who serve liquor. Their minimum wage will only reach $9 in May 2012, based on the premise that they will make up the difference in tips. While there are certainly high-end bars where workers make great tips, there are also many lower-end and quiet ones where workers do not make $1/hour in tips. And personally, when I tip, I’d like to know that I’m paying someone extra (above a poverty wage).

BC Federation of Labour President Jim Sinclair also raises some important flags about this alcohol servers wage in another Vancouver Sun opinion piece (here).  Similar concerns were raised in a short report produced by the CCPA’s Manitoba office in 2001, available here. The CCPA report notes the following about a “tipping wage”:

The majority of those we interviewed do not believe a two-tiered tipping wage is a just or desirable policy. And many say that, based on their experience, such a policy would be almost unmanageable and very much open to abuse. A little less than half of our respondents receive an average of one dollar or more in tips each shift…

Many workers–both those who do and those who do not earn tips–feel that people deserve tips as a compliment to their wage…

Many workers do not have control of their tips even once the tips have been received. Many businesses divide tips evenly among the employees; often this is done after each shift by those who have worked the shift. But many workers receive their tips only every two weeks and must trust others, most commonly management, to fairly divide the money. To add to this, because of the variable nature of tips, there is no way of knowing how much one is entitled to over each bi-weekly period.

Minimally, having gone this route, this new policy will require careful enforcement and evaluation.