Fraser Forum

William Watson: It’s not clear Canadians want to soak the rich to pay for bigger government

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Another week, another interview about my new book, The Inequality Trap: Fighting Capitalism Instead of Poverty, and another couple of hours spent thinking how I could have answered the questions better. It must be nice to be a politician and come to an interview fully equipped with polished answers you use no matter what the questions. The obligations of genuine human conversation are more demanding.

This week’s interview was with the always immaculately prepared Steve Paikin of TVOntario’s evening public affairs show, The Agenda. It will be shown after the holidays. I’ll post the air date when I have it.

The question I wish I’d handled better was one to the effect that didn’t there seem to be growing support for the related ideas that we may need more tax revenues to pay for all the things we want from government and that the people with the very top incomes should pay a larger share? (Or at least that’s my memory of the question; as any detective will tell you, eyewitness accounts are often unreliable.)

In my answer I fumbled around with the idea that although it was true that at the federal level almost 40 per cent of Canadians had voted for a party that planned to raise the top marginal federal rate from 29 to 33 per cent, that party’s platform had in fact made 324 other promises—I know, I counted them—so it wasn’t clear just how many Canadians were attracted to the Liberals because of the hike in top rates and how many for any of 324 other reasons, not to mention their leader’s personal characteristics.

What I should have said was the following:

The tax cut the tax hike will finance—or partly finance, since the Department of Finance’s estimates of revenue haul are lower than the Liberal platform’s—will benefit everyone with more than $45,282 of taxable income. That’s nine million people in total, not including any of the poorest Canadians. By contrast, only 317,000 people will pay more. Cut taxes for 28 people and raise them for just one and, sure, you’ll get a lot of support for that. (In the interest of full disclosure, I should indicate that I am one of those lucky Canadians who will get maximum benefit from the tax cut but not pay any tax increase—though, like everyone else, I’ll lose out if the higher top rate screws up the economy, as it will do at least somewhat.)

But I don’t accept the question’s premise, namely, that we need more taxes because we need more public services. In general, we should pay for our public services with taxes, except when what we buy will have a very long life and benefit future taxpayers, too, with whom we can share the cost by borrowing to pay for these investments.

But do we really need more public services?

Name something our governments aren’t already doing, I should have said to Steve Paikin. Now name something our governments are doing spectacularly well. As well as Apple, say. It’s not a long list. If we want new things from government, why not ditch some of these old things government isn’t doing well.

Re-jigging the tax system to satisfy popular, maybe even faddish, notions of fairness, is one thing. But do we really need to raise taxes overall? Is a third of GDP not enough for our governments? Do Canadians really want them to get more?
The Liberal plan was sold as being revenue-neutral, which means Canadians who bought it bought it on the understanding the overall tax burden wouldn’t go up. By contrast, the party that offered non-revenue-neutral increases in corporate taxes lost almost 60 seats (though the NDP may have lost for many reasons).

As we end 2015, there are reasonable grounds for supposing that, despite the hyperactive first few weeks of the second Trudeau era, Canadians haven’t really made a Great Shift Leftward and are now all in favour of aggressive redistribution. The fact that much of the dissatisfaction with the Conservative government seemed to be about its leader’s personality rather than its policy of gradually declining tax burdens suggests free-market policies, but with a sunnier face, may still appeal to lots of Canadians.

All the best for Christmas and the New Year, everyone! May the market forces be with you.


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