The Liberals were long criticized for padding their budget forecasts, to disguise the true extent of Ottawa's surpluses. But, with an election then in the offing, Finance Minister Ralph Goodale's Nov. 14 fiscal update was the most honest in years, acknowledging some $50-billion in cumulative surpluses over the next five budget cycles. That's the good news.
The bad news is that all this money has sparked a Pavlovian flow of saliva amongst tax-cutting politicians, trying to buy their way into office with the electorate's own money. None of the parties has yet released a full costing of tax promises (which are still being unrolled), but we know enough from announcements to date to get a good sense of the general direction.
Predictably, the Tories are most aggressively exploiting the tax-cut mantra. They promised at least 11 different tax cuts in the first two weeks of campaigning (almost one a day): big ones (such as the two-point cut in the GST, ultimately worth $12-billion a year), and little ones (a slew of targeted credits and deductions, for everyone from apprentices to soccer moms). If past experience is any guide, the Tories will exhaust the full $50-billion with tax cuts, and then some -- requiring offsetting cuts in program spending (below status quo projections) to foot the bill. They haven't yet clarified that all this is on top of tax cuts already announced by the Liberals, in which case they will really need fiscal alchemy to make it all add up.
So far, the Liberals seem content to run on what they promised before the election. In November, Mr. Goodale allocated two-thirds of forecast surpluses to tax cuts (personal and corporate). The NDP will make the strongest commitments to new social programs. But even they are tapping the tax-cut vein: firmly promising no new taxes of any kind, while inheriting the two most expensive Liberal tax promises (raising the personal exemption and reducing the lowest personal rate -- worth more than $4-billion a year between them).
The bottom line: Tories will spend more than 100 per cent of available surpluses on tax cuts, Liberals will spend two-thirds, and the NDP could spend a third (with the rest going to new programs). There are clear choices between the parties. But they've all accepted, to varying degrees, the notion that Canadian taxes are somehow "too high."
By international standards, however, Canada is a low-tax jurisdiction, and increasingly so. In 2004, according to the Organization for Economic Co-operation and Development, tax collections by all levels of government absorbed one-third of our GDP. That ranked us 21st out of 30 industrialized nations, and fifth among the seven largest. Moreover, we have already engineered among the deepest tax cuts of any country since 1999 (when our deficits were vanquished): a decline in the aggregate tax burden that's worth $40-billion a year, and growing. We place firmly in the lowest-tax third of the industrialized world, and are slipping quickly down the list.
So we pay less taxes than most -- and we have less to show for it, too. Our education programs (including postsecondary) are underfunded compared to other jurisdictions. Our poverty is worse, and increasingly ghettoized. Our health system is stressed. Our public housing is abominable. Even our basic infrastructure (roads, bridges, and other mundane facilities) is tattered.
Most Canadians would have trouble even noticing the incremental cash from another tax cut. Indeed, the poorest 30 per cent of Canadian tax filers would get no value at all from the "low income" tax cuts trumpeted by the Liberals, and echoed by the NDP -- precisely because they pay no federal income tax in the first place. Yet, they will feel most acutely the continuing failure of government to deal with daily problems.
So far, this election campaign has not debated whether Canadians need, or even deeply want, another tax cut. Ask Canadians whether they want a little more money in their pocket, and 99.9 per cent will shout, "Yes!"
But that's not the question, and Canadians know it. The real choice is this: Should government use available resources to do its job better? Or should government downsize itself and just get out of the way? That's a very different, and genuine, debate. And I'd like to see it start.
Jim Stanford is an economist with the Canadian Auto Workers union and a CCPA Research Associate, and always pays his taxes.