Still lacking conversation about taxes
In 2009, I wrote an article for these pages asking if we could have an adult conversation about taxes.
In that article, I made two related points that would be obvious to a 4-year-old: that tax cuts reduce fiscal capacity, driving reductions in public services and that if you want better public services, you need to increase the government’s fiscal capacity to generate revenue.
The alternative, from a 4-year-old’s perspective: if you go to the corner store with less money, you are going to come home with less candy.
Nine years later, I’m still waiting for politicians to have that adult conversation.
The closest we came in Ontario was the debate fostered by former premier Kathleen Wynne over how to pay for the massive investments in public transit infrastructure required in the Greater Toronto and Hamilton Area.
That got as far as a backgrounder prepared by Toronto’s city manager in 2012, followed by a formal options paper released by the transit agency Metrolinx in May 2013, which analyzed the revenue potential and impacts of a short list of options to raise money for transit funding.
It did not go well right out of the gate. Everybody wanted better transit. But everybody wanted someone else to pay for it.
And then the provincial government threw in the towel. The provincial government called a byelection in Scarborough and, all of a sudden, transit planning went out the window: the promise was promising Scarborough a threestop subway, instead of light rail, at double the cost. And all of it for free.
The disconnect between public services and the taxes we pay to provide them that has dominated the Canadian political narrative for the past quarter-century isn’t just quirk of politics that we can just file under the heading “lies our politicians keep telling us.” That disconnect matters.
It invites us to vote for a property tax freeze, a sales tax cut, an income-tax cut — even if it doesn’t benefit us much. It invites us to disregard the reality that governments have a re- sponsibility to ensure the ability to pay for the public services that we depend on.
None of the tax cutters ever has the guts to be honest with people about the impact of reduced revenue on public services. But the pattern has been repeated over and over again across Canada.
Municipal tax freezes and cuts slowly starve the services that are closest and most visible to us.
Provincial tax cuts are coupled with growing provincial fiscal deficits, followed by crisisdriven cuts in public services.
Massive tax cuts were introduced by Paul Martin’s Liberals in the early-2000s coupled with a retreat by the federal government from public services in areas of jurisdiction shared with the provinces.
A cut in the GST rate by the Stephen Harper’s Conservatives led directly to the current federal deficit.
The aggregate impact has been stunning. In 1992, the five-year average of total government expenditures as a share of GDP was 48.6 per cent. In 2016, the five-year average was 40.1 per cent — in the context of today’s $2 trillion economy, that’s worth $170 billion in lost spending on public services.
We see clear crisis indicators of decline everywhere we look: Crumbling public infrastructure. An elementary and secondary education system whose funding cannot meet the needs of today’s students.
Post-secondary tuition that is now more than triple what it was 25 years ago.
The lack of affordable housing and the rise in homelessness.
A public health insurance system that excludes the fastest growing component of health care costs (pharmaceutical drugs) and that is straining to meet the needs of an aging population.
And now, in Ontario, here we go again, with a clear denial of the link between taxes and public services “no dollar is better spent — than the dollar that is left in the pockets of the taxpayer” elevated from meaningless political rhetoric to a line in the official Throne Speech of the new provincial government.
Nine years on, the report card on the adult conversation we need to have about taxes and public services can be summed up in two phrases: missing in action; and still badly needed.