So, who wants to talk about higher taxes? - Macleans.ca

So, who wants to talk about higher taxes?

Brian Topp tells the NDP, and everyone else, taxes can also be raised

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Brian Topp wanted to talk about taxes. Paul Dewar wanted to stick to the issue he and the other leadership contenders were supposed to be discussing. “I thought we were talking about the environment,” Dewar said. A few seconds of crosstalk ensued and then the moment—a rare point of conflict in the first NDP leadership debate—passed.

Afterwards, Topp stressed his larger point. “If we want to win a government mandate, we need to go after a government mandate,” he told reporters. “And the way to do that is not only to issue your list of spending proposals, but to show how you’re going to fund them.” It was suggested that perhaps his fellow candidates weren’t ready to have that discussion. “I intend to fix that,” he said.

The early going of the race to become the next leader of Her Majesty’s loyal Opposition has been so polite that this had the feeling of a rude guest interrupting afternoon tea. But figuring out how to get candidates within the NDP talking about this may be the easy part. The real challenge would seem to be changing the entire national political debate to include taxes as anything other than that which must be cut.

Topp’s proposals are fourfold. He would create a new 35 per cent rate on incomes over $250,000 and gradually increase the corporate tax rate, currently scheduled to fall to 15 per cent in the new year, to 22.12 per cent, the rate that applied before the Harper government took office. With the exception of profits made from the sale of homes, small business and farms, he would tax capital gains as ordinary income and he would also fully tax income made from cashing in stock options. And in making the case for a robust discussion about taxation—“Taxation has become the third rail in Canadian politics,” he lamented—Topp has stressed not only the need to fund important public services, but also the need to fight rising inequality. “Market forces tend to distribute income unequally,” he wrote in a memo outlining his proposals. “One of the roles of the tax system is to recognize differences in Canadian families’ ability to pay: higher taxes are levied on people with more, and lower taxes on people with less.”

The response from the Conservative party was perhaps predictable. “From Topp to bottom,” party officials quipped in a memo sent to MPs, supporters and TV pundits, “this plan would take money out of the pockets of hard-working Canadians, kill jobs, and threaten Canada’s fragile recovery from the global economic downturn.” The Conservatives have won three consecutive elections on a mantra of lower taxes, from cutting the GST to offering a plethora of tax credits. Earlier this year they won a majority while arguing for further reductions to the corporate income tax rate.

Since that election, the Occupy movement has made economic equality part of the political discussion. In the United States, where the protests have been large and widespread, President Barack Obama has made taxing the rich a key part of his plans to reduce government debt. And he has found a vocal proponent in Warren Buffett, the multi-billionaire investor and magnate. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” he wrote in a New York Times op-ed. “It’s time for our government to get serious about shared sacrifice.”

The recession did not hit Canada as hard and the resentment toward the financial sector is, consequently, not as high. But income inequality has been shown to be increasing here, and equality, as a theme, has become a more prominent idea—various NDP leadership candidates seizing on it and interim NDP leader Nycole Turmel even putting the Occupy movement’s concerns directly to the Prime Minister during question period. That may compel, or at least segue to, a debate about how we tax and who we tax. And that debate may be more likely when the government and official Opposition are as diametrically opposed as the Conservatives and New Democrats are.

Also looming is a discussion about what we want to pay for and how we want to pay for it. “The issue of raising taxes eventually drives from the question of what you perceive or would like the role and size of government to be,” says Scott Clark, the former deputy minister of finance and senior adviser to prime minister Jean Chrétien. As various voices have warned, shifting demographics and an aging population will only increase the strain on government, most notably in terms of health care. Various other areas, from education to infrastructure, could be better funded. “Everyone says, ‘Health care is unsustainable,’ ” Clark notes. “Nothing is unsustainable if you’re willing to pay for it.”

Clark and Peter DeVries, another former senior official in the Finance Department, are among those who say part of the federal deficit is structural, and they have called for sweeping tax reform in pursuit of efficiency: simplifying the tax code, eliminating special preferences, lowering personal income taxes and restoring two percentage points to the GST. That—especially when it comes to raising the GST—may not be politically possible, but some kind of discussion about taxes may be unavoidable. “The problem is the debate has to have a context and in the last election there was no context,” he says. “The context in the next election, on health and all the other things, will be a different context for a discussion of what do Canadians want and are they willing to pay for them.”