Another View

The myth of Canada's 'tax hell'

While government spending does contribute to high taxation, it also Days for a way of life that most Canadians value

Charles Gordon April 26 1999
Another View

The myth of Canada's 'tax hell'

While government spending does contribute to high taxation, it also Days for a way of life that most Canadians value

Charles Gordon April 26 1999

The myth of Canada's 'tax hell'

Another View

While government spending does contribute to high taxation, it also Days for a way of life that most Canadians value

Charles Gordon

It was big news when Marlen Cowpland wore her million-dollar get-up to the annual Corel gala. However, other items were big news at the same time, among them the plight of refugees fleeing across the borders from Kosovo, and people were quick to make the connection. They fired off letters to the editor, condemning the wife of high-tech multi-millionaire Michael Cowpland for being insensitive to the plight of the world’s less fortunate. The best letter, printed in the Ottawa Citizen, wistfully described the vain hope that the million-dollar dress would have been fashioned out of $900,000 worth of hand-woven fabric replicas of cheques payable to local social service agencies.

Despite their support for local charities, the Cowplands made an easy target. What could be easier than a lambskin cat suit with a 24karat gold breastplate, featuring a 15-carat diamond nipple? It is by no means a typical illustration of the expression “poverty in the midst of plenty”—perhaps “plenty in the midst of poverty” is a more appropriate phrase, but it comes at a time when the concepts of poverty and plenty are undergoing a major redefinition.

Whether Canadians see their glass as halffull or half-empty depends on where they stand, and where they look. Many middleclass Canadians, probably the majority, view themselves as well-off, compared with most peoples of the world, and fortunate to be living here. Others, who seem to have greater access to the media at the moment, look to the lower-taxed Americans and declare themselves hard done by. What makes them hard done by, according to them, is the Canadian tax system. ‘Taxed to death,” screamed the cover of February’s Financial Post Magazine.

The story that followed said that “the Canadian tax burden has grown so dramatically over the years that, after paying our total tax bill, we are having a hard time making ends meet.” The National Post began a three-part series last week with the frontpage headline “85 per cent of Canadians ‘upset’ by tax bite.” The story added that about half of Canadians described themselves as “very upset” or “extremely upset” with their tax burden compared with the value of government services. At the same time, conservative commentators and editorialists stepped up their attacks, with what seem like daily tales of woe about talented Canadian entrepreneurs, potential millionaires, forced to take their talents south of the border because of the crushing tax burden in Canada. Two issues ago, this magazine published several pages headlined “The tax trap.”

Since the attack on taxes is at least in part an attack on the social programs supported by taxes, it is time to ask if taxes really crush the land or whether they only crush conservative commentators and editorialists. In that context, it is helpful to be able to point to the Cowpland family, who have clearly demonstrated that not all wealth in Canada has been confiscated. It is also worth noting that

the necessities of life for people in one income bracket are not necessarily the necessities of life for people in another. Not every middle-class Canadian feels hard done by, and somewhere in Canada people may be, for all we know, surviving quite nicely with breastplates made only of brass.

The federal finance minister, Paul Martin, does not seem to fear retribution from crushed Canadians. He told Maclean’s that he thinks Canadians wouldn’t want tax cuts at the expense of the health-care system, into which the government is putting back some of the money it had been taking out. This point of view was supported by a pollster, Donna Dasko, senior vice-president of Environics Research Group, who said: “There is no tax revolt out there now because we do think governments should be there to keep social programs strong.”

Such thoughts do not square with the visions of tax hell we have been hearing lately. There is no doubt that some Canadians are crossing the border to stay. The statistics don’t lie. But can we, as a society, ever do enough to keep in Canada every person who values take-home pay above all else. Some of the government spending that contributes to high taxation also contributes to a way of life that most Canadians seem to value, a way of life that has been ranked at or near the top in surveys by international institutions and that has attracted a high rate of immigration. Clearly, we are not doing everything wrong.

One of the arguments made against our tax system is that it saps incentive. Writes The Financial Post Magazine editor Wayne Gooding: “Why strive for excellence at work when you know that a good percentage of what you earn will end up in public-sector coffers to be used for who knows what?”

Most would argue that you strive for excellence because it is human nature to do so, and also more fun than striving for mediocrity. Leaving that aside, it can just as easily be argued that at least some of the much-lamented brain drain is related in quite a different way to the pursuit of excellence, caused not by high taxes but by the very government cutbacks that the enemies of high taxes have supported. While some Canadians have left the country because they don’t want to pay Canadian rates of taxation, others have gone south because the funds that supported their research were eliminated by governments intent on saving a buck. Deprived of the opportunity to develop their craft, scientists, medical researchers, and other scholars and innovators have sought more favourable funding climates.

Lower taxes won’t bring them back. What will bring them back is higher levels of public investment in pursuit of excellence. To get these people back in Canada at the expense of a few would-be millionaires might be a pretty good trade.