Why we should listen to angry taxpayers - Macleans.ca

Why we should listen to angry taxpayers

If we listen to the stories that people tell when they’re angry about high taxes, we can learn about more than merely taxes

Canada's Finance Minister Bill Morneau takes part in a news conference in Ottawa, Canada, December 7, 2015. (Chris Wattie/Reuters)

Canada’s Finance Minister Bill Morneau takes part in a news conference in Ottawa, Canada, December 7, 2015. (Chris Wattie/Reuters)

This post originally appeared at The Conversation.

Is it too much to expect people to talk calmly and reasonably about tax changes? Yes. Yes, it is too much.

As a historian of tax in 20th century Canada, I have read thousands of letters to ministers of finance, and they are often ferociously angry – similar to some of the outrage being expressed now by opponents of the Liberal government’s tax reform proposals.

It’s hard not to dismiss them as hysterical.

But we shouldn’t. The rocket-fuelled fury of the worried taxpayer is a constant feature of tax culture for good reasons.

MORE: ‘Changes are going to be required’ to tax reform plan, says Morneau

In the archives of finance ministers since 1942 (when Canada got its mass income tax), I’ve seen how tax debate draws in free-floating anger and focuses it. On the surface, tax rage is about money. But it’s also about deeply held personal identities and hard-to-reconcile views on government. Angry tax talk tells us about more than just tax policy.

In observing our current debate, I’ve been especially reminded of the furore over the Benson White Paper. Launched in November 1969, the Benson tax proposals formed the basis of the modern federal income tax act of 1971.

Finance Minister Bill Morneau makes an announcement on housing in Toronto Monday, October 3, 2016. The federal government has announced measures intended to stabilize the real estate sector amid concerns that pockets of risk have emerged in some housing markets, particularly those in Toronto and Vancouver. (Nathan Denette/CP)

Finance Minister Bill Morneau makes an announcement on housing in Toronto Monday, October 3, 2016. (Nathan Denette/CP)

What the government put on the table included full taxation of capital gains — a real challenge for high net worth Canadians, investment firms and pensioners. Another flashpoint was a proposal to eliminate the small business tax rate on annual business profits under $30,000 ($196,733 in 2017 dollars). Consultation took the small business rate off the table and modified the capital gains proposal.

The Benson changes also included tax relief for millions of very low income earners whose income tax payments truly cut into subsistence spending. In the end, abut 60 per cent of Canadians, many of them poor, saw their federal tax bill lowered, though less than originally proposed.

Vows to move to Mexico

In some quarters, this proposal inspired a furious response. Small business wanted to keep its lower tax rate (a sacred tradition since 1949). Middle-of-the-road Liberal Edgar Benson was called a radical and a socialist. Doomsayers predicted that the tax changes would kill the Canadian economy. Threats to move to Mexico were heard throughout the land.

Benson, who had been national revenue minister earlier in the 1960s, was accustomed to abuse, though it was usually pitched at a lower volume. Revenue ministers had been hearing since 1917 that income taxes were too high, tax compliance too complex, tax administration too inflexible.

MORE: Liberals hear fresh warnings on tax reform as consultations end

Mitchell Sharp, Benson’s predecessor in Finance, called the annual review of letters from the public during the budget process a mixture of “interest, amusement, and boredom.” I’ve read the same letters, and wrote about them in my book Give and Take:
The Citizen-Taxpayer and the Rise of Canadian Democracy,
and I know what Sharp meant.

The special pleading is snooze-makingly predictable. Colourful invective and crackpot remedies provide some comic relief.

But sometimes the letter writers went beyond the usual grinding of axes. Sometimes, and especially during the White Paper debate, they took a personal risk, and told the politicians something real about their lives and their communities.

‘Lack of respect’

One woman saw the big chain stores coming, and spoke for the local dress shops, independent gas stations and corner drug stores that added creativity and care, not just jobs, to their communities. Facing these threats in her business environment, she found the thought of an additional tax burden intolerable.

Others described how their business success was about more than money. A widow supporting her six children with modest investments in real estate was proud of how she had achieved independence through the exercise of her brains and energy. She saw in the tax changes a lack of respect for the effort that she had made.

Conservative Leader Andrew Scheer asks a question during question period in the House of Commons on Parliament Hill in Ottawa on Monday, June 5, 2017. THE CANADIAN PRESS/Adrian Wyld

Conservative Leader Andrew Scheer asks a question during question period in the House of Commons on Parliament Hill in Ottawa on Monday, June 5, 2017. THE CANADIAN PRESS/Adrian Wyld

And a father, stressed by having had to spend much of his disposable income on insurance premiums to protect his seven children and wife, worried that his father’s legacy to him, a trucking business, would not be passed on to his sons.

His concern about taxes cutting into his business’s income was about money, of course, but he and others who wrote that they were “frightened, angry, and frustrated” were also expressing their feelings as parents.

These types of letters made it clear that small business ownership was not just an economic interest but also an honourable personal identity, something that one tax reformer belatedly recognized was “as sacrosanct as motherhood.”

MORE: How the Liberals might be able to salvage their tax reform plan

Pensioners also brought something bigger than money into the conversation. Many of them, born within a few years of 1900, shared a strong generational identity. In letters to Benson, they wrote something like: “We lived through two World Wars, the Great Depression, and now … galloping inflation.”

Some of them were proud of having saved in spite of these obstacles. But in the 1960s, even the thrifty savers saw inflation turning their comfortable living into mere subsistence. People who hadn’t been able to save depended on the Old Age Security pension. Its value had been steadily shrinking in relation to prices.

Tax anger linked to personal identity

Most weren’t wealthy, but they lived on the income from small savings. Some lived close to the bone and were easily alarmed. The 20th-century generation had endured so much. They really did need to catch a break.

Small business people and pensioners were not the only Canadians who brought to tax reform a point of view that went beyond economic interest into the realm of personal identity.

Letters to Finance, both for and against the reforms, came from artists, amputees, the mentally ill and their families, students, people living in the North, foster parents, First Nations, female professionals, firefighters, ultra-Protestants, parents of young children and more.

MORE: A tax fight has Canadians on democratic autopilot. That’s a problem.

They saw in the federal income tax a tool that could help them or hurt them in any number of ways. They called for fair tax treatment, and they meant not just a financial break, but recognition and respect for their struggles.

Many fears find a focus in blistering tax talk. When that anger takes the form of mud-slinging and misrepresention, it’s unfortunate.

But if we look for the honourable sentiments in tax outrage, we can see where impersonal forces of change are making for personal stresses.

In 1969, a lot had changed since the introduction of the mass income tax in 1942. The age of easy money was ending, and it was time for Canadians to talk seriously about what the state should and could do and how it should be financed.

Today we should ponder the same questions.

Small businesses have suffered

The battering of credit markets in 2008 and the bumpy economic ride since then, including austerity programs and their failures, have landed hard on small business and savers.

It’s a good time to ask whether we can do better, as a community and through government, to collect revenue fairly and to spend it in ways that support security for all Canadians, including small business.

Tax reform, then and now, brings out deeply felt competing positions on these questions, and helpfully so. Rage at taxes can get in the way of good answers by making our objective too simple — lower taxes.

But if we listen to the stories that people tell when they’re angry about high taxes, we can learn about more than merely taxes. What we learn might lead to meaningful changes both inside and outside the tax system.

Shirley Tillotson, Professor of Canadian History (retired), Inglis Professor of University of King’s College, Dalhousie University

This post originally appeared at logo-6ed98023442246a1b432bd646eec8daf94dba5361825aeacd7d7ca488c268e96
The Conversation

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Why we should listen to angry taxpayers

  1. Taxpayers must always be made aware there is a cost involved in the goodies they get, so they should choose wisely. It doesn’t happen by magic.

  2. Case in point- I’ve been a blue collar, average Joe all my life. Less than four years into my working life, government was the single largest expense in my life, and has been ever since. The cost of government is greater than the cost of owning a home and raising children. Despite decades of being told by annual auditor’s reports telling us of rampant fraud and waste within government, we see little effort expended to deal with it. We never- NEVER- see large scale efforts towards economization, even when government revenues fall, often as a direct result of governmental mishandling of the economy.
    We see government payrolls galloping ahead of our abilities to meet them, and governmental pay increasing at rates greater than inflation. We see the size of government growing inorganically in good times and bad, always for contradictory reasons. Always.
    We see regulations and regulatory bodies rapidly, and consistently, evolving from overseers of activities to bodies that exist solely to prevent economic activity.
    Increasingly, we see governments whose sole guiding force is the perpetuation of the growth of government. The people who fund government are increasingly marginalized, their voices intentionally drowned out by the clamor within the public sector that yowls constantly for government of the government, by the government, and for the government. The governed be damned.

    • We will always pay taxes…….the question is on what?

      • We’re willing to pay taxes. Happy to, even. We’re not willing to pay taxes that are inflated dramatically by grossly over-generous public sector wage contracts.
        We’re not willing to pay taxes that are grossly inflated by malfeasance, corruption, and incompetence.
        We’re not willing to pay taxes that are inflated by blindingly obvious failures to impose cost control.
        We’re not willing to pay taxes to be preached at and scolded.
        We’re not willing to pay taxes to fund programs that fail to meet planned objectives, year and year out, or decade in and decade out (Case in point: We spend a billion dollars a year to get more Canadians to speak French. In the real world, this amounts to us having spent hundreds of thousands of dollars for every successful outcome of this program.)
        The bottom line is that most governments are minimally 30% too costly. With overall deficits running at 15-20% of overall spending, it’s not a huge leap to bring the costs of government in line with the expectations of those who fund it.
        Again, the demands for more funding must take into account the ability of the public to pay. The long term structural deficits we now see across all levels of government are indicative of an inability to pay, ergo it is a moral and ethical imperative of government leaders to reduce spending.

    • The problem is the government has no incentive to spend money efficiently. I mean imagine over $200k on artwork cover for the budget? $90k of given to the model? Over $200k expensed as moving expenses. In healthcare I see millions mismanaged on salaried dieticians/counselors/NPs who have no incentive to work harder because they get their cheque at the end of the day regardless if they see 1 patient or 10. And if that’s healthcare where people generally have a mindset of helping people, I can only imagine the lack of motivation that exists within government jobs.

  3. It’s safe to say that taxation is rarely a positive subject. But it is somewhat personal since one of the common suggestions is to increase someone else’s tax rate – perhaps also an acceptance that taxes are a necessary evil. It seems almost everyone persons and corporations and incorporated persons focus on their after tax income and few see any connection between taxes as an expense and goods and services provided … except when they have occasion to complain that ‘the government should do something’. Tax fairness is pretty much a matter of opinion rather than fact, along the lines of ‘soup for me, bones for the rest’; certainly, few consider sales tax and excise tax as a disproportionate imposition on the poorest segment of the population. At the same time, reaction is more a question of preserving the status quo: complaint about established taxation is muted compared to that for changes, even small ones. Interestingly, the general opinion of taxation is so low that tax cheating and creative accounting are regarded in a positive light and tax avoidance measures are often included as incentives in government policy; certain types of tax relief are even touted as good for business.