The most interesting thing about this story is not that Ed Clark, the CEO of TD Bank, is calling for tax increases to fight the federal budget deficit, although that’s pretty interesting. It’s not even that the Prime Minister’s Office lashed out at Clark’s perfectly reasonable position as though he’d said something plainly offensive, although the PMO’s response made quite a spectacle.
No, the most intriguing part is the little glimpse Clark offers of the mindset of Canadian corporate heavyweights, when he apparently revealed how at a recent meeting of the Council of Chief Executives—the club of the country’s 150 top CEOs—”almost every single person said raise my taxes.”
This might sound odd, but it actually makes a lot of sense. Business generally likes lower taxes. But in the current international climate, it’s becoming increasingly obvious that a country with its fiscal house in order—even if that means higher taxation—is going to gain a clear advantage over less resolute economic rivals.
This is the message from Europe, where Greece’s deficit and debt crisis has already made markets jittery of other countries deep in the red, like Spain, Portugal, Ireland, and perhaps Britain. Higher taxes seem inevitable if those countries are going to restore their reputations as sound places to invest.
And the huge deficits for years to come projected by the recent Barack Obama budget makes it look obvious that Americans will have to get over their phobia about tax hikes. Sooner or later. One way or the other. This stray sentence from a recent New York Times story popped out at me: “The assumption is that somehow, for example, Medicare costs will have to be controlled, or that new taxes will help pay for them.”
Ed Clark and all those other CEOs know the folly that’s unfolding in Washington and parts of Europe. Canada isn’t facing anything like those deficit pressures. Keeping it that way is the challenge. The debate is over how to do it: by spending cuts alone, which looks extremely hard, or by modest tax increases or at least postponing tax cuts, which looks a lot more manageable.
It’s fascinating if Clark is right that Canada’s business elite already sees it that way. It would be useful if some of them would go public with that perspective. Politicians who at least recognize the need for an honest debate about taxation might follow the lead of Gerard Kennedy, who surely deserves credit for speaking openly about what a lot of other MPs only muse about in private.