Taxes too low? Feel free to pay more
Pat Sajak, of Wheel of Fortune fame, has a ready response for his wealthy left-liberal friends who say they don’t pay enough tax: “You know, the tax rates are just legal minimums ... You can write a cheque to the Treasury tomorrow and just send all your money to them.” But while his friends say they should give more money to government, Sajak says, “I’m guessing they’re not doing that.”
Sajak’s advice could benefit the authors of a Toronto Star article last week who, praising the capital gains tax hike proposed in the federal budget, wrote: “As Canadians with wealth- and class-privilege, we wish Canada was taxing the rich more — we’d also like to see a ‘super wealth tax,’ an inheritance tax, and progressive property taxes — but we support this step. Let us pay our fair share.” But if they really do think their “fair share” of taxes includes a super wealth tax, inheritance tax and higher property taxes, who is stopping them from paying it? As Sajak says, the tax rates are just the legal minimums. They can pay more if they want.
In fact, Torontonians can very easily pay more property tax than they are assessed. In 2011, Toronto city council implemented a “voluntary contribution” program. Despite the declared desire of many rich liberals to pay more, the voluntary property tax didn’t raise much money: only about $77,000 in total in its first three years, though from several hundred contributors per year. The city’s population was over 2.6 million at the time, so what came in works out to less than a penny per person a year. True, there is more substantial giving to certain public institutions (the Toronto Public Library, for example), but the city’s experience with voluntary property taxes suggests people aren’t really interested in paying more tax, whatever Star op-eds may say.
A possible rejoinder from high-tax enthusiasts is they do want to pay more tax, but only if the higher tax applies to everyone else, too. That would make sense if the point of the tax were to fund a truly public resource. Suppose that at a cost of $100 a road could be built to make travel easier for 100 people. If the value of the road to each user were, say, $1.50, no person or handful of people would pay for the road through voluntary contributions. On the other hand, forcing everyone into the arrangement at a cost of $1 each could make sense: $100 is raised, the road is built and every user clears $0.50. (It might be even better, of course, to let a private road-builder build the road, charge a toll and keep government and its unions out of it entirely.)
But the capital gains tax enthusiasts writing in the Toronto Star don’t have this sort of “public” or “collective” good in mind. Instead, they suggest the government use the higher taxes to pay for Old Age Security, clean energy, health care, child care and housing. But the benefits of government spending on all these activities — with the possible exception of clean energy — go to individuals. People consume their OAS cheque, health care, child care and housing individually. The road example doesn’t apply.
Most of all, it seems, the wealthy Toronto Star op-ed writers want the higher taxes to “level out” wealth inequality. But again, this is the opposite of a public resource such as a road where it would only make more sense for them to pay more tax if the tax is forced on everyone. People who want to pay more tax to help fund government transfers to the elderly, government subsidies for electric vehicles, public health care, national $10-per-day child care and so on, should do so: their desires and decisions to reduce wealth inequality by paying more tax should have nothing to do with whether their fellow wealthy Canadians pay more, too — that is, if they are sincere in their insistence they should pay higher taxes.
Far from achieving a better society with wonderful government services, what is the capital gains tax most likely to achieve? Investors and economists predict capital flight and decreased economic growth; the Canadian Medical Association warns “the risk of already over-stretched physicians leaving the profession or reducing their hours in response to heightened taxation is real” (which the federal minister of small business conceded in a CBC interview); and even former NDP leader Tom Mulcair pointed out the tax “is going to clobber” many Canadians who are not wealthy.
Instead of calling for higher taxes, we should, to use the slogan recently adopted by the Conservatives, “_xe the t_x.” You probably don’t need to buy a vowel to solve that one.
AS SAJAK SAYS, THE TAX RATES ARE JUST THE LEGAL MINIMUMS.