Have Conservatives won the tax debate? - Macleans.ca

Have Conservatives won the tax debate?

Thomas Mulcair is criticized from the left


Nick Falvo quibbles with Thomas Mulcair’s take on taxes.

I have a different interpretation of recent tax trends. Consider the following:

-In the early 1980s, Canada’s top federal income tax rate was 43%. Today, it is 29%.
-In 2000, the federal government’s general corporate income tax rate was 29%. By 2012, it was 15%.
-In 2006, the marginal effective tax rate on new business investment across Canada was 33%. As of 2014, it will be 17% (the lowest of all G-7 countries).
-In 1999, total taxes as a percentage of Canada’s GDP (including all federal and provincial taxes) was 36%. By 2010, it was 31%.

… Mr. Mulcair and his officials might wish to consider articulating a more accurate depiction of tax trends in Canada. Doing so might allow voters to have a more informed debate about public policy.

In fairness to Mr. Mulcair, he has expressed opposition to the Harper government’s reductions in the corporate tax rate. But on the larger point, Greg Fingas wonders if Mr. Mulcair’s commitment to efficiency in government operations could also be applied to taxation. Greg also chides Mr. Mulcair’s rhetoric.

And the issue goes beyond the consistency of Mulcair’s own message. It seems fairly clear now that the NDP’s contrast against the Libs for 2015 will include a heavy dose of rightful concern over Justin Trudeau’s policy depth (or lack thereof). But the more Mulcair himself relies on sweeping oversimplifications which don’t stand up to scrutiny, the harder he’ll make it to criticize Trudeau for doing the same.

In sum, Tom Mulcair is smarter than he’s apparently willing to sound when it comes to tax policy. And the more he pretends otherwise, the more he’ll contribute to irresponsible government – no matter who’s Prime Minister after the 2015 election.

This particular point, of course, is less about the wisdom of a given policy and more about how Mr. Mulcair should be doing politics if the NDP wants to win and then to govern.

Back during the NDP leadership campaign, Brian Topp made four tax proposals: a higher marginal rate for those earning more than $250,000; taxing capital gains as regular income (with two caveats); taxing income from stock options; and a gradual increase to the corporate tax rate to 22.12%.

Here was Mr. Topp’s argument at the time.

My basic point is if you accept the decisions the Conservatives made about the tax system then you have essentially accepted their agenda. They have broken the government’s revenues and if you don’t restore them then everything else we talk about is just talk. We don’t have the resources to do them. That’s a lesson you learn the hard way when you’ve been in government. Making lists of things to spend money on is the easiest thing you can do in government. Finding the resources for it, that’s the tough part. And setting priorities, that’s the tough part. I think we’ve made some progress in our party in this debate. Nathan Cullen, for example, ended up putting out a set of tax proposals, which are not identical to mine, but that are heading into the same direction. And that take this point: that if you don’t have the guts to take the Tories on on what they’ve done to the tax system, very much contrary to the principles and values of most Canadians, then everything else we talk about is just talk. This point has been accepted to a greater or lesser degree by my colleagues in the race. But it’s an issue that’s not going to go away.

Mind you, the party platform for the most successful federal campaign in NDP history wasn’t nearly so bold—in 2011, New Democrats thought it sufficient to restore the corporate tax rate to 19.5%, end fossil fuel subsidies and target tax havens.

Here, again, is what Mr. Mulcair told the Star during that NDP leadership race.

“Canadians who are going to be making a choice in the next election … have to be reassured that the person who is asking them for their votes and says they want to form a government — that person has to look the Canadian voter in the eye and say … ‘The last thing that is going to be imposed on you as an individual is more taxation unless there is no other way,” he said.

Mulcair said even if the tax bracket was pegged at $1 million, “the only thing the voter will hear ‘is these guys want more taxes.’”

That, again, is a political argument.

The policy argument requires further discussion.

As a percentage of GDP, total tax revenue for all governments peaked in 1998 at 36.7%. As of 2010, it was 31.0%. At the federal level it peaked in 1999 at 17.0%. As of 2010, it was 12.8%. Tax revenue from individuals peaked at 13.8% in 1997. As of 2010, it was 10.8%. At the federal level, taxes of individuals peaked in 1991 at 9.2% and fell to 6.6% in 2010. (All figures courtesy of the OECD.)

Basically, the federal government has been receiving less and less revenue from taxes over the past 15 years. Is that a problem? Only if society is somehow suffering because the government does not have the revenue it needs to do certain things. That, ultimately, is the argument you need to make if you want to raise taxes.

Update 12:07pm. Of course, there might be a perfect cop-out on tax policy waiting to be championed. Last December, the finance committee proposed that a royal commission be convened to study the Income Tax Act.

21. That the federal government explore ways to simplify the Income Tax Act to reduce the complexity and inefficiency of its administration, including through the establishment of a royal commission to undertake a comprehensive review. Additionally, the government should ensure the timely assessment of income tax returns and explore the possibility of permitting consolidated reporting.

22. That the federal government undertake a comprehensive review of the tax system and ensure its fairness as well as neutrality by continuing to close tax loopholes that allow select taxpayers to avoid paying their fair share of tax.

23. That the federal government examine further ways to better equip the Canada Revenue Agency to combat tax evasion while working collaboratively with law enforcement agencies to prosecute tax evaders.

24. That the federal government examine tax provisions in relation to estate and succession planning and their impact on the transfer of family-owned businesses.

25. That the federal government remain vigilant in examining ways to improve Canada’s international tax competitiveness, including through the continued implementation of the recommendations of the Advisory Panel on Canada’s System of International Taxation.

Conservative MP James Rajotte, chair of the finance committee, explained the suggestion to Postmedia.

Conservative MP and committee chairman James Rajotte said a number of chambers of commerce, small business groups and tax watchdogs have complained about the tax system, and the need to streamline and modernize it to help reduce the tax burden on Canadians.

Improving the tax system could spur competitiveness, productivity and create jobs, while also helping determine which tax credits are useful and those that are no longer needed, he said. “They want an overall review of the entire system and to include discussion on everything,” Rajotte said of what the committee heard from various groups. “They argued, I think, convincingly that we need a group to really take a long hard look at the overall (tax) act itself and recommend some changes.”

Update 12:29pm. Via Greg Fingas’ blog, I see the Star’s editorial board has weighed in.

If the NDP leader is truly a progressive, it’s hard to see his “read my lips” moment as anything more than political pandering. That’s a shame. Especially because taxes are not the prohibitive political taboo they were before the 2008 financial meltdown. A recent Environics survey showed that 64 per cent of Canadians say they would pay a bit more to fund health care, pensions and higher education, while 83 per cent favour a tax hike on the very rich. Meanwhile, U.S. President Barack Obama and Ontario NDP Leader Andrea Horwath both pushed through new taxes last year without suffering any apparent political injuries.

Politicians across the spectrum typically view taxation as a last resort. And that’s probably a good thing. But Mulcair can’t be certain of what, in perpetuity, we will collectively be willing to pay for. By taking possible tax increases off the table, we blinker our vision of what’s possible. The leader of the New Democrats, of all people, should know that.


Have Conservatives won the tax debate?

  1. I believe it’s Mulcair’s strategy of Starve the bleats.

  2. have we Tories won the debate – YES! without a doubt … we have finally tunred the never ending cycle around and slowly but surely the rest of the plan will be implemented. Now I know this is causing no end of grief for those in opposition. This is confirmed every interview every time a microphone or camera is in front of an oppostions face all you are going to hear is the scandal of the day! This strategy is ineffective at best and downright counter productive as crying wolf only ends up helping the wolf! This is why Harper is smiling so much lately as long as his oppostion fall back position is to conform to their particular hard core base and reveals itself through the daily list of the partisan haters frustration it disregards and avoids any serious policy alternatives and eventually leads to the re-election of Harper should he decide to run again. You have to hand it to harper as long as the oppostion behaves as it has been since 2006 he doesn’t have to develop a strategy and can keep focusing on passing legislation. parliament is about one thing bums in seats pass bills – that’s it and if given no real alternative as we are at present it isn’t hard to guess whose bums willl be in what seats.

    • According to the most recent polls, roughly 30% of eligible voters agree with you…hardly a ringing endorsement, nor a harbinger of continuing Con hegemony. Harper may be smiling, as you claim, but you’d better hope he can whistle, too.

      Because that’s a (political) graveyard he’s passing.

      • Same core as he had last time. The party isn’t growing in popularity.

        • doiesn’t need to – never has – as long as we hard core Tories are happy then Lib’ and the Dips have to coalesce behind one or anotehr – why do you think Mulcair has been laying down zingers attacking Justin every chance he gets he knows this – the question is not what harper does or does not do the question is who are you going to choose to take his place – always has been thus and always wiill be –

          • And when Libs and Dips vote Lib….same as they’ve always done….Harper is gone.

          • yes indeed – except the issue won’t be just more votes but where the votes happen ! and they haven’t always done in fact they rarely have – if enough Dippers mass over to the Lib’s the Lib’s win indeed – however the real loser isn’t the Tories but the NDP if this happens – this is why the Mulcair is far more afraid of Justin than he is of harper and why harper is so happy of late – he doesn’t have to take the fight to to either of them he can focus on the Lib’s when their numbers are up and once the Dippers numbers go too low which they are he can focus back on them brininging their numbers up watch the debate this fall as every now and then he will focus on Mulcair if Tommy’s numbers go too low that way the camera goes back to Tommy and Tommy’s numbers go up – just like he did in the spring – so obvious

          • The NDP has been around for over 60 years….and this is the first time they’ve even made Official Opposition. They aren’t holding that position….they are slipping. So we are talking fluke.

            The NDP has always run a two front war…..anti-Lib and anti-Con….and it’s never worked. Even less likely to work with Justin there.

          • I agree

          • As it stands, what the Libs have to do to replace Harper is ABSOLUTELY NOTHING. They lead the Tories in poll after poll after poll. If things continue with no changes until 2013 Harper is going to get trounced come election time.

            And that is not my opinion. That is basic math.

      • are you serious? – you need tyo do a little historical research on polling numbers mid term for a majority – as his numbers look pretty good compared to past ones for other PM’s who ended up be re-elected with another majority – see Chretien and mulroney for first term and at mid-point. Secondly the querstion is not and will not be waht harper numbers are!! – that’s a fact – Harper doesn’t need want or has to suck up for your vote all he needs to do is sit back and watch the Dippers and the Lib’s duke it out!

        • I see you already know how to whistle past the graveyard. Carry on.

        • I hope you’re not so far in denial as to believe they will govern indefinitely. Canada is not Alberta.

        • Luckily Eric Grenier at 308.com already did the research, and according to those numbers, at mid-mandate, Chretien was 14 pts (1st term) and 13 pts (2nd term) higher than his election result. Mulroney in his first term had fallen almost twice as far as Harper has but still had slightly more support than Harper had at his mid-point, while his 2nd term fall was nearly three times Harper’s decline and was of course not recoverable.

          I don’t see much similarity to Harper with Chretien’s 50%+ mid-points, and even Chretien’s 3rd term support was 47%, but Mulroney’s first term is certainly an example of how a weak result at mid-mandate can be overcome.

          Harper’s fallen around 10 pts since his election result, which according to Eric is larger than normal and historically has pointed to a very uncertain result in the next election.

          I’d agree with Neuroticdog, Harper could well win again, but that outcome is by no means assured.


          • Agreed, but Harper’s never enjoyed widespread popularity. He’s the un-cool school president guy. Yet when it’s squeeze time, he keeps inching back into the game. He’s seen four Liberal leaders off (giving Rae a nod) since assuming the PM’s chair, side-stepped a coup attempt, axed a few annoying pieces of legislation, introduced others, resurrected pride in the military, all while shepharding the economy through a recession that continues to bedevil the States. What’s easy to forget are the campaign commercials reminding people of this. The Senate expenses ‘scandal’, ideal as it is, will show poorly by comparison come 2015, assuming the Tories fail to properly exploit it before then.

    • In no way shape or form have tax rates decreased for everyday Canadians. In fact because of inflation and stagnant incomes, we are paying more taxes than we were 6 years ago. Same income, more taxes. Figure it out, and stop this worshiping of Harper because he lowers corporate tax rates.

      • Nobody in Canada is paying more taxes now than they were in 2006, except for the ultra rich. The fact that you have to resort to blatant lies is indicative of your failed socialist ideology.

  3. Debate ? We had a debate ?

    Sorry I missed that … did Maclean’s have a panel ?
    Was Alexander of Khandahar on it ?
    Was it on CPAC ?

    • Cons tell themselves the most amazing stories in order to sleep at night.

  4. John G et al. must be napping, so I’ll fill in:

    Shriek! The Conservative-loving Wherry attacking Mulcair for promising no new taxes, while maintaining total silence on Pamela Wallin. Just imagine the coverage she’d be getting here if she was a Liberal! I guess the Media Party looks after it’s Conservative media buddies. Harper is probably just waiting for a Senate seat to open up so Wherry can sit with his Media Party buddies, Wallin and Duffy.

    Obama! Bengazi! Shriek! Shriek! Shriek!

    • I never thought of Wherry as a conservative. What makes you think he is?

  5. “I have a different interpretation of recent tax trends. Consider the following: …. ”

    wiki – In economics, the Laffer curve is a representation of the relationship between possible rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation.

    Fed Revenues:

    1997: $163 Billion

    2010: $228 Billion

    • How on Earth do you know enough to bring up the Laffer curve, but not factor inflation into your figures?!? And you used the Laffer curve when dealing with total revenue, not just tax revenue. So, let’s use tax revenue:

      Fed Revenues (in 2010 $):

      1997: $171 Billion

      2010: $192 Billion

      Even still, using only the Laffer curve to explain a difference in government tax revenue vs. tax rate over time is ridiculous. You can’t explain real-world macroeconomic outcomes using one section of an economics 101 textbook.

      • “You can’t explain real-world macroeconomic outcomes using one section of an economics 101 textbook.”

        Wall St Journal – Why Americans Hate Economics:

        How did modern economics fly off the rails? The answer is that the “invisible hand” of the free enterprise system, first explained in 1776 by Adam Smith, got tossed aside for the new “macroeconomics,” a witchcraft that began to flourish in the 1930s during the rise of Keynes. Macroeconomics simply took basic laws of economics we know to be true for the firm or family—i.e., that demand curves are downward sloping; that when you tax something, you get less of it; that debts have to be repaid—and turned them on their head as national policy.

        As Donald Boudreaux, professor of economics at George Mason University and author of the invaluable blog Cafe Hayek, puts it: “Macroeconomics was nothing more than a dismissal of the rules of economics.”


  6. I’m not one who thinks that Mulcair would ever actually win an election (Team Dauphin all the way), so his statement will hardly have to be upheld while in power, but I agree with those who would criticise it. I can of course understand his desire to not allow the Tories to attack the economic credibility of the NDP by affirming his intent to not raise taxes under any circumstances, but I think he could have been a bit more detailed without pandering or locking himself to a promise he may not be able to keep.

    Mulcair could have simply pointed out the Tories have riddled the tax code with loopholes and have been poor economic managers, wasting money on this [insert pertinent outrage here] and that [and another], and said that he will take the time and effort to repair the tax code so that Canadians can trust they are paying the lowest possible taxes while balancing the budget and ensuring our national priorities are fully funded. He could certainly, though carefully, also insert words about making the tax code more fair and more progressive, as well. Then Mulcair can finish off with an attack or two [F35s, missing $3.1B, etc] which confirm Canadian tax dollars have not been properly managed, and that he will never let such outrages to happen under his watch.

    Sure it might be more political, less forthright, but it serves the purpose of not making a promise he can’t keep, and shows he’s serious about governing, instead of just saying whatever he thinks it will take to win.

  7. Aaron says “Basically, the federal government has been receiving less and less revenue from taxes over the past 15 years. Is that a problem? Only if society is somehow suffering because the government does not have the revenue it needs to do certain things.”

    What about our current record-breaking public deficit and debt. Does that not count?

    The reality is that instead of paying for our bills (through taxation) we are just piling on debt.

    That is great for the current political party in question which is essentially not pissing off anyone by raising their taxes or cutting their programs, but it is a disaster for the future (and the future’s citizens cant vote today, hence no political fallout).

    The reality is we need:

    1. Tax increases (especially on high-bracket personal income earners and investment capital)

    2. Cutting of totally useless wasteful (at times harmful) spending, such as the War in Afghanistan, the war on drugs and other Tory pet-projects (online spying, private prison expansions, fashionable wars like in Libya, “anti-terrorism” aka biggest rip-off in history with $3 Billion in missing money, etc).

    3. Stop and reverse the trend of downloading federal programs down to the provinces (which reduce economy-of-scale efficiencies and increase public costs).

    That should bring our public finances and programs under some control. Unfortunately none of these absolutely needed changes are politically fashionable with today’s politically-lazy voter.

    • Our deficit is shrinking each year. The budget will be balanced by 2016. Thus, there is absolutely no reason to increase taxes, unless it’s because somebody wants to massively increase spending, as spending increases are already built into annual budgets.

      • Yeah. That’s what Flaherty told Ontario too.

        • And if McGuinty hadn’t come in and started taxing and spending like a drunken moron, Flaherty’s plan would have worked out.

          But continue suggesting that what Canada really needs is Liberal financial management like McGuinty’s Liberals. The Liberals raised every tax on the books, and still managed to increase spending at rates even higher than his tax increases. McGuinty and the Liberals turned Ontario from a “have” province into a “have not” province.

          Flaherty didn’t spend $600M on power plants that were never built, McGuinty and the Liberals did. Flaherty didn’t spend $1B on an “E-Health” program that was only successful in lining the pockets of wealthy Liberal donors, nope that was McGuinty. How many of his friends got rich from that scam? McGuinty was the one who hired his close friend Chris Mazza to run ORNGE, The same Chris Mazza who was then found to have given himself a $1.4M annual salary, and decided his family and friends were the best ones to manage the place (and why wouldn’t he, he learned it from the most crooked MP in Canada’s history…. Liberal Dalton McGuinty)!

          So ya, let’s talk about Flaherty’s record in Ontario compared to the Liberals. Could do this all day long!

          • Flaherty hid a massive deficit from the Ontario taxpayer. Only when the Tories were unseated did the people find out what the real financial situation was.

  8. Individual tax rates have gone up under Harper. Full stop.

    • That’s a bald faced lie. Full Stop.

    • the first thing Harper did as PM was lower federal income tax – that is a fact!