Alberta opens way for others to follow
If you can’t control spending, just raise taxes
There was a time in Canada, and not that long ago, when you couldn’t breathe the words “tax hike.” It was just too fearsome a concept.
Starting in the early 1990s, when the first George Bush vowed “no new taxes,” then broke his word and got turfed from the White House, politicians across the continent have been too worried about their own survival to risk openly advocating taxes. The fear infested Canadian politicians as much as American: when Paul Martin finally moved to slay the federal deficit he did so with spending cuts rather than new taxes. When Stéphane Dion defied convention by advocating sweeping environmental charges, he lost the campaign and his job. Rob Ford was elected Toronto mayor almost solely on his promise not to spend money. (He didn’t mention the drugs and alcohol thing).
It’s an era that appears to be at an end. The fear is gone.
Consider the case of Alberta, for decades Canada’s least taxed, and most anti-tax, jurisdiction. Successive Alberta premiers opted for almost any alternative to tax hikes to fund their spending binges. Premier Jim Prentice swore off corporate hikes or the adoption of a sales tax when he began looking for ways to fill the $7-billion gap caused by collapsing oil prices. But in the end he threw up his hands and turned to taxpayers for “new revenue”: higher income taxes, higher sin taxes, higher user fees, a new health tax — you name it, he raised it. By 2016 the average family will fork over more than $500 a year extra. “We are asking people who can pay a little more to pay a little more,” said Finance Minister Robin Campbell. Which is to say: everyone.
You can bet the other premiers were paying attention. If Alberta can hike taxes, anyone can.
New Brunswick, say. On Tuesday, that province’s Finance Minister, Roger Melanson, unveiled a budget that increased the gas tax by 1.9 cents per litre and also hiked taxes for the richest 1%, creating two new tax brackets for those earning more than $150,000.
It won’t end there. A Bank of Montreal analysis calculated that provincial assessments will snatch back 75% of $4.5-billion in tax breaks promised by Ottawa. Ontario, which carries by far Canada’s biggest deficit at $10.9-billion this year, will be particularly watchful.
Ontario’s Liberals have raised taxes regularly since gaining power in 2003, but have always scrupulously denied doing so. Admitting the truth, even in chronically apathetic Ontario, would have been too dangerous. But the alternative — getting a control on spending — has proved beyond their ability. Every spending measure has ballooned: spending has doubled, the debt has doubled, the deficit at one point had tripled. Moody’s Investment Services noted recently that the debt has worsened every year since 2009, a period during which the government was most fervently vowing to bring it under control. Since 2005-06 compensation costs for government employees have risen at triple the rate of inflation.
The return of tax increases can be blamed on the failure of governments to control their spending urges. Since George H.W. Bush made his pledge, the U.S. has added $15-trillion to its debt because it couldn’t match tax cuts with spending cuts. The biggest increase, 101%, belongs to Mr. Bush’s son, George W., who introduced a big drug plan and two wars he couldn’t pay for. On Monday the Wall Street Journal reported the Republican-controlled Senate Finance Committee is giving serious thought to a consumption tax in a desperate bid to bring order to the chaotic and counter-productive U.S. tax system. The levy they’re looking at is similar to the GST introduced in Canada by Brian Mulroney almost 25 years ago. Sen. Ben Cardin told the Journal the idea “is getting a great deal more respect, and it is in the discussions.”
Stephen Harper is the biggest-spending prime minister in Canadian history. Only since gaining a majority has he sought to curb costs, by slicing the size of the civil service back to the level it was when he took office. Liberal leader Justin Trudeau says the provinces should be responsible for carbon pricing, but has left little doubt he would look favourably on a carbon tax.
Politicians recognize there is safety in numbers, and the more jurisdictions that embrace tax hikes, the safer it becomes for the rest. It’s likely that few anticipated it would be Alberta that opened the gates, but now they’re open it will that much easier for the rest to push their way through.
If a 43-year-old Tory monopoly can’t find any other way to pay its bills, who can expects others to do so?
You can bet the other premiers were paying attention