CCPA Policy Note

Canadians want higher taxes from the federal budget

March 29th, 2012 · · 5 Comments · Poverty, inequality & welfare, Privatization, P3s & public services, Taxes

The Globe and Mail released the results of a new poll they conducted on what Canadian priorities are for the upcoming budget. The findings seem to have stumped at least some of the journalists, judging by their account:

What stood out most was the across-the-board call for higher taxes. Yes, you read that right. Respondents said they want the deficit reduced and are willing to see the GST restored to 7 per cent, higher taxes for corporations and high-income Canadians and an end to what they called “boutique” tax credits, such as children’s arts and fitness credits.

This isn’t a surprise to me. The tax cut experiment that our federal government has been running since the 1990s has failed miserably and Canadians are starting to take notice.

Tax cuts were supposed to create more and better-paying jobs and pay for themselves, but instead they’ve opened up a gaping hole in the public purse and created what economists call a structural deficit. Corporate profits are edging back to their record high pre-recession levels, executive compensation is on the rise but the good jobs haven’t materialized. Instead of investing in the economy, corporations are sitting on billions of dollars in cash.

Taxes are a way for all of us to pool our resources so that we can provide better, more accessible services than we could buy individually. Education, health care, care for our children and for our seniors — these are things that we all need and if we don’t pay for them together through taxes we will pay for them individually through user fees and ration services based on ability to pay.

This is why the vast majority of Canadians aren’t better off after over a decade of tax cuts. Tax cuts were supposed to leave us with more money in our pockets, but that feeling only lasted until we found out how much our next prescription costs, what the fees are for our parents’ seniors care home, and that we now need to pay for our children’s school field trip or sports team.

Canadians don’t want to live in a low tax society with frayed public services. What they want is to share prosperity more broadly and ensure that everyone has access to the basic necessities to give them a good start in life.

It’s time for our governments to take note. It’s time to put an end to our corporate tax giveaways and ask those who are benefiting from the recovery to contribute a little more to the common pot so we can rebuild and strengthen our communities in the aftermath of the recession.

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    5 Comments so far ↓

    • Iglika Ivanova

      Thanks for the comments, Alison and Steve.

      On the Laffer Curve, the evidence is summarized in this excerpt from a very relevant recent blog post discussing corporate taxes in the UK:

      But the Laffer Curve (see what it looks like here) has been comprehensively (and repeatedly) debunked as a guide to policy, especially for a large economy like the U.K’s. President George H. W. Bush rightly called it “voodoo economics,” and Professor Gregory N. Mankiw, former head of George W. Bush’s Council of Economics Advisers, denounced its adherents as ‘charlatans and cranks.’

      Read the full post here.

      • Steve

        Thank you for your reply and I can see the logic in the articles you pointed out, but if corporations are sitting large cash reserves and if tax cuts simply adds money to their reserves, as Krugman is quoted as saying in his article, I think the question is how do we get corporations to invest their reserves to help the economy recover?

        Since we cannot force corporations to invest their reserves, as this is driven by the demand for their products, I guess the answer would be to tax corporations at a higher rate, government will use the extra revenue to increase competitiveness in other areas other than taxes to grow the economy, and invest what is leftover in our social services?

        So, then it becomes a question of who is more competent in their allocation of resources. If corporations who are driven by efficiency and productivity are not prepared to invest their reserves, why does conventional wisdom believe that our government is better equipped to do this.

        Yes, taxing corporations may provide the government with more revenue, but is the government more competent than corporations to use this extra revenue to grow our economy?

    • Alison

      Great post.

      As Jim Flaherty said yesterday in his budget presentation:

      “Our plan is founded on the understanding that keeping taxes low helps hard-working families and supports the businesses that create jobs for Canadians. ”

      This statement can’t be further from the truth. I think if Canadians really knew how many corporate tax cuts were being made they would be outraged.

      This type of tax policy weakens social programs, prevents families from getting out of poverty and endangers the lives of Canadians.

      • Steve

        It is a fallacy to believe that raising taxes will always lead to an increase in tax revenues. If you read any report regarding detainling the logice of lowering Britian’s top income tax bracket, or economic data from the 1980’s, or the “laffer” curve, there is an “optimum” level of tax rate that captures the highest amount of tax revenue.

        • Steve

          I am referring to the corporate taxes in the comments section, not the consumption taxes that was referred to in the article