National Post

Trudeau tax plan a big gamble

Tax the rich to give middle class a break

- JOHN IVI SON

Justin Trudeau is gambling that he can get away with a tax hike on wealthy Canadians to fund a middle-class tax cut for those who get “an ever-shrinking piece of the pie.”

The Liberal leader, long criticized for speaking in generaliti­es, revealed the core theme of his election platform — Fairness for the Middle Class — at a folksy event in an Aylmer, Que., diner on Monday.

Specifical­ly, he committed to a $670 tax cut for every Canadian who earns between $44,701 and $89,401 — a pledge that will cost $3 billion.

It will be paid for by creating a new tax bracket of 33 per cent for those who earn more than $200,000, he said. The Liberals project this change will bring in $3 billion, making the move revenue neutral to the federal government.

The second platform commitment was a new, $22-billion income-tested child benefit plan to replace the existing muddle of policies — including the Universal Child Care Benefit the Harper government recently enhanced.

The Liberals claim they will spend an extra $4 billion on a child benefit that will increase payouts for all families below household income of $150,000, at which point the benefit will be cut off.

They offered the example of a one-parent family with one child, earning $30,000 a year, who would get $533 every month under the Liberal benefit, nearly $100 more than under the Conservati­ve plan.

Trudeau admitted his childbenef­it plan is under-funded by $2 billion at the moment but said that by making “different choices” the books will balance by the time the party releases its fully costed platform.

There may be revenue issues elsewhere too.

The reduction in the middle-class bracket to 20.5% from 22% will cost $3 billion. The hope is that the tax on the wealthy will make it revenue neutral.

However, the experience of other jurisdicti­ons is that major tax hikes at the top rate do not produce the bounty that politician­s eager to spend the cash would hope. The British chancellor reduced the top rate to 45% from 50% in 2013 after a move in the opposite direction had yielded only one-third of the forecast revenue.

“I’d be surprised if they got a lot of revenue by raising rates by four percentage points. Taxpayers will respond and find ways to reduce their tax bill by working less, moving to other jurisdicti­ons or whatever,” said Alexandre Laurin, director of research at the CD Howe Institute.

The Liberal tax hike would mean that those earning $200,000 in Ontario, Quebec, Manitoba, New Brunswick, Nova Scotia and Prince Edward Island would have to hand over more than 50% of every additional dollar in income to federal and provincial government­s.

You don’t need to be earning Trudeau’s annual wedge of $211,000 to think that at some point this might prove to be a disincenti­ve to compliance, productivi­ty, growth and investment.

This is the most unsavoury aspect of the Trudeau plan — the tax grab under the cover of class envy.

The Harper income-splitting plan and the doubling of the Tax Free Savings Account limit favour “the wealthy,” he said.

“The Canadian dream has been taken from too many, for the benefit of too few, for too long,” he said at the policy launch.

This from the man who told us in his recent “liberty” speech that leading the country should mean you bring Canadians together.

“You do not divide them against one another,” he said at the time.

No doubt resentment lingers from the financial crisis, when bankers in the U.S. and Britain were bailed out while ordinary people lost their jobs.

But in Canada, income inequality is not an existentia­l threat to social cohesion.

People don’ t wake up threatenin­g revolution because the nation’s top earners have increased their share of national income — at least, not as long as their own incomes are rising.

And the Statistics Canada data suggests that they have been — every income quintile has seen gains in the period 1996-2011.

Trudeau has staked his future on playing Robin Hood.

But there is a very real risk that the tax increase will validate some of the wilder Conservati­ve claims about the Liberal plan.

Pierre Poilievre, who often finds truth duller than fiction when it comes to the Liberals, railed against a plan “that will take money out of family pockets.”

He pointed out that the Liberal leader will scrap the Conservati­ves’ Family Tax and Universal Child Care Benefit

Income inequality

is not an existentia­l threat to social cohesion

but neglected to point out the $22-billion means-tested replacemen­t program that will leave most families with children better off.

He griped about the move to roll back the expansion of the Tax Free Savings Account but failed to point out the across-the-board tax cut for anyone earning more than $44,701.

The Liberal attempt to squeeze the rich has now given the Conservati­ve agitation and propaganda crew ammunition it will use to dub the whole redistribu­tive plan the “Trudeau tax.”

In the old Yes Minister sitcom, a “brave” decision was one that could lose the government of the day votes, while a “courageous” move could lose the election.

Trudeau has just made an extremely courageous decision.

 ?? Adrian Wyld / The Canadian
Pres ?? The most unsavoury aspect of the Justin Trudeau plan is the tax grab under the cloak of class envy, writes Post columnist John Ivison.
Adrian Wyld / The Canadian Pres The most unsavoury aspect of the Justin Trudeau plan is the tax grab under the cloak of class envy, writes Post columnist John Ivison.

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