Monday, November 26, 2007

Bigger swimming pools and faster private jets

The Cons want to give tax cuts to the rich. Yes, you read that correctly. Conservative finance minister Jim Flaherty wants to give the wealthy and richest amongst us a tax break. Kind of a reverse Robin Hood I guess. The benefits will trickle down eventually to us poor, unwashed masses, I'm sure.

At least he's being honest this time in saying he wants to give the wealthy a break. Unlike with his GST cut which, while sold as being great for Joe and Jane Canadian, was really a much greater benefit to Todd and Buffy Canadian with the money to drop on a new BMW, while average folks saved nickels and dimes.

Anyway, this time Jim is beating the brain drain/competitiveness drum, saying we're losing our wealthy to other countries with lower taxes.

"We need to do more on the personal income-tax side because we still have marginal rates that are disproportionately high when I look at our competition," Mr. Flaherty told reporters in Oshawa. "And one of the things that politically is more difficult to do but it still needs to be done and that is in the higher earning categories between $100,000 and $200,000 a year in income."

Yes, pity those poor folks making $200,000. But in all seriousness, it would be nice to see Jim give us some stats to bolster his case. For example, where does Canada rank in the G7 on tax rates in these income brackets? And, more importantly, is there some large outmigration of people in this bracket, and if so, are they citing taxation as a concern?

But there's another element here in this whole debate that's always overlooked. Certainly by the Conservatives anyway, who want to make government small enough to drown in the bath tub. And that's the fact taxes pay for things.

Does Canada have a higher tax rate than the US? I don't doubt it. We also have universal Medicare. Put medical costs on top of their tax rate and then make the comparison again. Our taxes also pay for many other things that contribute to making Canada a more livable country. Like generous social programs. Our wealthy also don't need to live in big gated communities to "protect" themselves. It's too simplistic to just say our taxes are X higher than this competing jurisdictions, so we need to lower them. Taxes are only one thing to consider.

More importantly though, should tax cuts for the rich really be a high priority for the government? If you're concerned about economic competitiveness, why not broad-based across the board cuts, with larger cuts for the low and middle income brackets? They're much more likely to pump their savings back into the economy and stimulate economic growth. Plus, they need it more.

The politics of this thing too are highly dubious. But I'd love to see the Cons run a campaign on tax cuts for the wealthy. Particularly with the questionable cuts they've made in other areas, despite the surplus. It may not be easy to set priorities, but this is a little much.

And speaking of priorities, Flaherty's truly are out of whack. At the same time he's telling us we need to give tax breaks to Richie Rich, he's turning a blind eye to crumbling infrastructure:
In response to a national report saying the crumbling infrastructure in Canadian cities would cost $123 billion to fix, Jim Flaherty said municipal leaders upset at the lack of funding should stop "whining . . . and do their job." Mr. Flaherty also said the federal government was "not in the pothole business."

So, according to Conservative priorities, instead of fixing roads and bridges and investing in public transit, we should cut taxes for the rich. We'll just squeeze tighter onto the Go-Train so Mr. CEO can buy a third Lexus. Totally makes sense to me Jim.

Last word to an actual economist (I know Harper is supposedly one too, but this guy actually knows a little bit about economics):
Don Drummond, chief economist of Toronto-Dominion Bank, joked that he "would never want to dissuade anyone from providing tax relief to bankers. That is a great idea that should be supported by all Canadians."

But, he said, "if it's marginal personal income tax rates one is concerned about, the gaze should fall at lower income levels. There we truly have impaired the incentives to work, save and invest, because once various benefits are clawed back, individuals and particularly families keep very little from that last dollar earned."

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ALW said...

If the wealthiest citizens pay the lion's share of the taxes that help pay for services for the rest of us, isn't it important that we keep those citizens in Canada so we can tax them?

If there was evidence to suggest that higher tax rates chased out the wealthy, undercutting our revenue base, would that convince you that cutting taxes for the rich was an acceptable idea?

Anonymous said...

Are we seeing the beginning of Flat Tax Flaherty?

Gayle said...

Canada's taxes are higher than the US, but are in the same ballpark as many EU countries, and are much lower than places like Australia.

Add to that the fact we are a physically large country, with areas like the Arctic and other northern regions that require more expensive infrastructure. Then remember that we have a small population - one tenth that of the US - and therefore have a small tax base. We simply cannot afford to have the same tax rate as the US and also maintain our current standards of living.

Harper plans on spending hundreds of billions of dollars to jail criminals, even though there will be no lower crime rate as a result. He wants to keep the military in Afghanistan for several more years. The money to pay for all this has to come from somewhere.

But hey, if I am getting a tax cut I can afford to fly to the US for medical care, and I can afford to live in a gated community, so why should I care about all you peons who make less than 100 thousand a year... ;)

Kyle said...

too bad the trickle down effect has no credibility really. And doesn't Flaherty's salary somewhere in the 200K range?

Jay said...

Somebody needs to put together a commercial like the cons did with Dion and raising the GST.

Mr. Harper wants you to pay more tax so that the rich get to keep more of their money.

That'll go over pretty well, no?

burlivespipe said...

I just saw on the CBC that about one in four families in Toronto lives in poverty. Natch, Flim-flam and Magilla Gorilla don't care about the peons in the inner city but at least they get to save that shilling off their next bucket of gruel mix.
Yes, lets invest in all these northern ports, wars in faraway places, and tax cuts to the rich; we can always claw it back from our fighting men and women and axe a few more social services!
Ahhh, Reaganomics redux!

Bailey said...

But raising the basic personal amount retroactively to $9,600 and increasing it next year did help out those in the top bracket. It helps out everyone, which is why it's a good move.