Columns

The Marie Antoinette of taxes

Ross Laver June 21 1999
Columns

The Marie Antoinette of taxes

Ross Laver June 21 1999

The Marie Antoinette of taxes

Ross Laver

Even after his landslide victory in New Brunswick’s election last week, The Canadian Press wire service was still referring to Conservative Leader Bernard Lord, 33, as a “scrawny kid in a suit,” as though his elevation to the premier’s office was some sort of fluke. It wasn’t, but in politics it never hurts to be underestimated by one’s opponents and the media. If Lord and his supporters want proof, they need only look to Ontario, where Tory leader Mike Harris, re-elected this month after trailing the Liberals in the polls for most of his first term, has made a career out of defying the pundits and the political establishment.

Harris and Lord have something else in common: a belief that Canadians are too highly taxed. Over the past three years, Harris slashed the provincial portion of personal income taxes by 30 per cent.

In his second term, he has promised a further 20-per-cent cut, as well as a similar reduction to the provincial portion of property taxes. Lord isn’t ready to go that far, but like Harris he’s a supplysider who believes tax cuts can lead to more, not less, revenue as more people work and the economy grows. His campaign platform held out the promise of a 10-per-cent personal tax break, plus a 25-per-cent cut to corporate income taxes on small business.

Lord also wants to bring in a Taxpayer’s Protection Act that will require future governments to seek voter approval for certain tax increases.

Only a few years ago, politicians who espoused such views tended to be dismissed as wild-eyed radicals. But Harris’s success in Ontario has transformed the political landscape, forcing governments in other provinces to respond in kind—if not to the same degree—or accept the electoral consequences. Manitoba Premier Gary Filmon, facing an election in the fall, has promised a six-per-cent tax cut; tax rates have also fallen recendy in British Columbia, Alberta, Saskatchewan and Nova Scotia. In New Brunswick, outgoing Premier Camille Theriault cancelled a scheduled 2.5-per-cent tax cut last winter, a decision that almost certainly contributed to his defeat. In mid-campaign, he began preaching the merits of lower taxes, but the flip-flop only served to erode his credibility.

Is there a tax revolt brewing across the land? So far, there’s no evidence of one—and besides, most Canadians, outside of the West, don’t go in for populist uprisings. There is, however, a growing consensus that our current tax rates penalize innovation and success, and thus lower Canadians’ collective stan-

dard of living. Critics charge that people who advocate lower taxes are motivated by greed. There’s undoubtedly some truth to that, but it’s not the whole story. Cutting taxes creates jobs and promotes economic growth, which Canada must do if it is to provide opportunities for young people and ensure that the best and brightest do not leave for more favourable surroundings.

It’s simple, really, which is why it’s so disheartening that Prime Minister Jean Chretien appears to think lower taxes are un-Canadian. Last week, he told an interviewer that the pressure for tax cuts comes from business leaders who secretly want to destroy the country’s social safety net and remake Canada in the American mould. Chretien also denied that Canada faces a brain drain and insisted that Ontarians who voted for Harris don’t necessarily want lower taxes: “They voted to keep the same government, that’s all.”

Sorry, Prime Minister, but on this issue Main Street and Bay Street intersect. Not only is it possible to cut taxes without eviscerating health care and other social programs, it’s essential. As the Information Technology Association of Canada pointed out last week, there are now as many as 30,000 vacant high-tech jobs across the country, in part because U.S.-based companies find Canada a convenient hunting ground for new employees. Cutting taxes won’t eliminate the problem, but it will help. Like trade liberalization and deregulation—two other policies that Chrétiens government supports—tax cuts can help make Canada a stronger and more prosperous country.

ITAC, of course, is an industry lobby group, so Chrétiens instinctive reaction may be to dismiss its views out of hand. In that case, perhaps he will listen to some of his own backbenchers—the nine Liberal MPs who form a majority on the House of Commons finance committee. In a report tabled last week, the committee called on the government to eliminate the high-income surtax, reduce the middle tax rate of 26 per cent and increase the income level at which the highest rate of 29 per cent takes effect, currently $65,000. All of those measures, it says, will enhance productivity and reduce the gap in living standards between Canada and the United States—a gap that Chrétien doesn’t seem to think matters.

When Liberal MPs are pushing for tax cuts, you know something fundamental has changed. Too bad their leader doesn’t get it.