Outlaw the taxes, not the tax escalators

I hardly ever disagree with the Canadian Taxpayers Federation, which in its 27-year existence has been a clarion for fiscal sanity. But every once in a while my economist’s training makes me take issue with their single-minded dedication to cutting, cutting, cutting—even though I’m a big fan of cutting.

An emailed article this week from CTF Ontario director Christine Van Geyn is an example. It marks the new year by enumerating all the automatic increases in fees, charges and excise taxes the Ontario government began 2018 with—a similar CTF article published in the Calgary Sun does the same for Alberta.

Ms. Van Geyn’s argument is that legislatures should have to explicitly authorize any and every increase in any levy at all that citizens are asked to pay. Increases shouldn’t be executed by bureaucrats under cover of darkness, as it were, on January 1st while those self-same citizens are preoccupied with World Junior Hockey, Bowl games and hangovers.

I get that. I do. And if we didn’t have inflation as a kind of background hum of the universe in our lives, I’d certainly agree.

But if some of these increases in charges are merely to make up for changes in the price level between last January and this, I’m not so sure the will of the people is being suborned.

Quite the reverse, in fact.

When legislatures set charges they’re making a decision that a certain amount of people’s real purchasing power should be required in order to procure whatever privilege the charge is for. An escalator that adjusts for the effects of inflation is merely maintaining the real purchasing power involved in the charge. You might even say it’s maintaining the sovereignty of the legislature in the face of predations by the Bank of Canada, which, operating jointly with the Department of Finance and, ultimately, the federal government as a whole, establishes the inflation rate.  

If the government of Ontario or Alberta decides a hunting or car licence should cost $X in purchasing power, should the federal government have the right to undermine that decision by eroding the real value of $X? I don’t think so. If Ottawa does erode the real value of $X, is it so bad to have a CPI escalator restore that value to what the provincial government wanted? Again, I don’t think so.

Let me add right away that I wholeheartedly agree with what I assume is the CTF view that we have far too many such charges and that most of them are too high. My most stressful experience last year, apart from worrying about my kids (the background hum of every parent’s life), was trying to get a permit from my town council to change my front door from the current pre-war model to something designed after humankind discovered the virtues of insulation. Where I live, you pay $50 to apply for approval and then there’s a $100 minimum if the “project” is approved, which turns into a percentage if your cost is greater than a certain amount.

In the end, my “project” was approved, though only because there was a municipal election last fall and I got verbal commitments from a majority of the would-be councillors who knocked on the very front door in question to solicit my vote that they would indeed approve my application. (I keep using quotation marks for “project” because I really can’t regard changing a front door as a genuine project, though the red tape has turned it into one. I happily concede all this is very much a first-world problem.)

I don’t think I should have to pay any charges to change my front door, but if $150 is the amount my councillors, in their wisdom, have decided is right, maintaining the real value of that sacrifice by means of an escalator is probably the right thing to do.

By contrast, eroding the value of that sacrifice be letting inflation eat away at it seems an unsatisfactory backdoor expedient, if you’ll forgive the pun, for revising an unwise front-door policy. I obviously won’t refuse the benefit to me, if eroding this policy away rather than eliminating it directly is the outcome our local democracy produces. (The CTF is implicitly taking the same view regarding most charges.) But I’d prefer a policy and town council that explicitly and enthusiastically accepted the principle that we should have as few such charges as possible. In other words, batter it down!