CANADA

A hollow tax revolt

Grumbling about high taxes is as Canadian as grumbling about the weather

Anthony Wilson-Smith February 27 1995
CANADA

A hollow tax revolt

Grumbling about high taxes is as Canadian as grumbling about the weather

Anthony Wilson-Smith February 27 1995

A hollow tax revolt

BACKSTAGE OTTAWA

ANTHONY WILSON-SMITH

Grumbling about high taxes is as Canadian as grumbling about the weather

Taxes, Franklin Delano Roosevelt once said, “are the dues that we pay for the privileges of membership in an organized society.”

If that is the case, most Canadians would sourly agree, then we deserve to be platinum card members of one of the most organized societies in the world. And, in fact, we are—although few Canadians seem to take pleasure in acknowledging that. Grumbling about high taxes, after all, is as quintessentially Canadian as grumbling about the weather—or just about anything else.

The nice thing about annual pre-budget tax protests, such as those now taking place, is that they make everyone other than members of the government feel united in a common cause. It may be the one time and topic that every year motivates millions of Canadians to speak warmly in favor of the status quo. On these two things, every cabbie, university professor, waiter,

Opposition politician and barroom philosopher can agree: government does little for the lives of everyday working people, and Canadians are more heavily taxed than members of any other industrialized country.

The trouble is that both notions are wrong. It is true, for example, that Canadians pay far more in overall taxes than people in the United States, and far more in personal income tax than Americans and most Europeans. But, as a recent study by David Perry of the Canadian Tax Foundation indicates, Canada’s overall tax load ranks in about the middle—14th of 24 countries—in a survey of the members of the Organization for Economic Co-operation and Development. Perry’s study is reached by using a favorite yardstick of economists, measuring tax burdens as the ratio of tax collections to gross domestic product. By that measure, Canada’s total tax collection in 1992—the most recent year for which data is available—represented 36.5 per cent of our GDP. That compares favorably with three other Group of Seven countries: Italy (42.4 per cent), France (43.6 per cent) and Germany (39.6). Even New Zealand, after a series of draconian spending cuts that brought warm shivers of delight to bond

analysts everywhere, ranks barely ahead of Canada with a rate of 35.9 per cent of taxes to GDP.

The other reality, less easy to support statistically but also true, is that there is likely only a tiny percentage of Canadians whose livelihood is not either provided or enhanced by government tax breaks or programs. Suppose, for example, you are the owner of a motel—an occupation which likely sounds as ruggedly self-reliant and market-driven as any small business. Over the years, you have probably benefited from incentives that include subsidized construction of tourist properties, subsidized training programs for staff, the assurance of standby labor because of seasonal unemployment insurance benefits, federal regional development incentives for tourism, federal and provincial job creation incentives, benefits from federal and provincial tourism advertising, and small business loans. Perhaps, as well, the motel is located near one of the federal parks that the government spent $348 million on last year. Not to mention the tourists who may have travelled to the motel through either a municipal airport ($32 million in federal expenditures last year), by ferry or coastal service ($29 million), by Via Rail ($331 million in subsidies) or along refurbished highways ($63 million).

Or choose another profession—perhaps a journalist whose university education is partly paid for by government subsidies, who meets sources at 59-per-cent tax subsidized lunches, who has used capital-depreciation benefits to help finance the purchase of a computer, and whose Canadian-owned publication flourishes partly through advertisements encouraged by tax writeoffs.

Should Finance Minister Paul Martin cut wasteful spending, close tax loopholes and make the tax system more fair? All Canadians can agree on that. But the real question is what constitutes “wasteful” spending, tax “loopholes,” and a “fairer” tax structure? The search for answers will divide Canadians more than unite them. Once the budget is released, that effort will likely be enough to shatter the shallow, artificial consensus that has existed until now.