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.”
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.