Provincial tax review: time to create a better province

The Newfoundland and Labrador government has launched its review of the provincial tax system. This fall, the independent tax review committee will provide recommendations for reform to the government.

Tax systems raise revenues needed to provide essential public goods and services, roads, health care, education, environmental protection, safety, support for seniors, etc. Obviously, we couldn’t all buy these things as individuals, taxes and government are the way we costshare. As U.S. Supreme Court Justice, Oliver Wendell Holmes said: “Taxes are the price we pay for civilization.”

The tax system needs to bring in adequate revenues to support public goods and services. Massive, unsustainable tax cuts of the previous government, threw away surpluses, and brought the province into deficit, even when oil was priced at over $100 per barrel. Those tax cuts created several billions of dollars of provincial debt.

N.L. is still running a deficit, and although it is declining, the era of massive tax cuts is over. We need a strong tax system that raises the revenues we need, now and into the future.

In addition to raising needed revenues, the tax system also influences decisions of individuals and corporations. For instance, tobacco taxes reduce smoking rates.

A Georgetown University study for Health Canada concluded that, of regulations, public information campaigns, and other smoking reduction strategies, “taxes had the largest effect.” Youth smoking rates in this province have declined by more than half since 1999, and thousands of premature deaths have been prevented.

RRSP deductions and other tax breaks encourage Canadians to save for retirement. Tens of billions of dollars are saved every year, and over half a trillion dollars are now held in RRSPS.

Clearly the tax system can have a big influence outside of raising revenues. What sorts of things should our provincial tax system aim to achieve?

The N.L. Federation of Labour (NLFL) has spent more than two years engaging with its members, along with Common Front NL, with workers, the unemployed, parents, grandparents, students, business owners, and social assistance recipients — to understand what people want, and to help them express those to the government.

What we learned is that N.L. needs an economy that creates good jobs, is fair, and is environmentally sustainable. Reforms to the tax system can help us move toward all three of these goals.

After global oil prices crashed in 2015, government and big business were threatening austerity measures, deep public spending cuts that would hurt residents, throw public and private sector workers out of work, and send the economy into a tailspin. The people of N.L. told government to roll back the regressive deficit reduction levy, repeal the book tax, and have the rich and large corporations pay a larger fair share of taxes, among other things. There were some notable successes in those areas, like when government backed down on massive, harmful spending cuts.

However, building a fair, jobs rich, and sustainable economy will require much more. A system-wide tax review provides an excellent opportunity.

What could tax reform do to help build an economy rich in good jobs, that support families and communities, in diverse sectors that can withstand resource sector price swings?

What could tax reform do to make a fairer economy, where nobody was forced into poverty, and all children had a reasonable shot at a good life?

What could tax reform do to help the province steward its resources, and achieve its climate change emissions goals?

A system-wide tax review is a huge opportunity to get it right. We need to think big, and envision a better life in N.L., with its good people and its enormous wealth — among the highest per-capita GDP in Canada.

We need to ignore big business advocates, who always want dollars to be flowing up to corporations and their wealthy owners. We need to ignore curmudgeons who insist that things will only be good, if others have plenty of misery and suffering.

We need to tell government that the tax system can, indeed must, be reformed to move our economy in the direction of more and better jobs, more fairness, and more sustainability.

Mary Shortall, President, Newfoundland and Labrador Federation of Labour