Saying no to the conjuror’s trick of tax cuts

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Tax is Not a Four Letter Word is a collection of essays, published by WLU Press, I co-edited with my son, Jordan, Opinion Editor of The Toronto Star.  The CCPA Ontario’s Jennifer Story recently interviewed me about the book, and our desire to get Canadians thinking differently about taxes.  (The interview first appeared on the CCPA Ontario website on December 17, 2013.)


Jennifer Story (JS): The sub-head of the book is “A different Take on Taxes in Canada”… different from what?

Alex Himelfarb (AH): Different from the predominant negative view of taxes as simply a burden from which we must be relieved. For decades now that’s precisely how our leaders have talked about taxes. Our tax conversation has become profoundly distorted. What’s missing in this conversation is what we get for the taxes we pay. We are more than just consumers and taxpayers. We are citizens with responsibilities for one another; we undertake to do some things together, things that we could never do alone or that we can do much better collectively. Taxes are the way we pay for those things. They’re the price of living in Canada and the opportunities that provides.  Indeed, those opportunities exist because of the sacrifices and taxes of previous generations to build the Canada we inherited.

It’s become a political truism that politicians would have to be nuts to talk about taxes unless they’re promising more cuts.  But that fear of taxes is limiting, dangerous. We need to shift the conversation, to recognize that the public services and goods we value have to be paid for and that tax cuts are not free.  We cannot have Swedish levels of service and American levels of taxation.

We demand of our leaders to explain how they are going to pay for new services but, equally, we need to demand that they explain the COSTS of their promised tax cuts ­–­­­ to our quality of life, to our democracy, to our economy.  Would we be so pleased with the next tax cuts if we knew they came with worsening traffic congestion, increased risks to food safety, longer wait times for health care, less help for the jobless and needy, rising inequality and environmental degradation? We seem only to talk about what government costs and not about what it gives.

Too much is at stake to let our identities as “consumers” and “taxpayers” supplant our citizenship and commitment to the common good.

(JS): You already knew more than your average citizen about taxes and the public good. What, if anything, were you surprised to learn during the editing of this book?

(AH): We worked with people who have much greater tax expertise.  We learned a lot about the technical aspects, new kinds of taxes. But the biggest thing we learned is how profoundly this anti-tax conversation now dominates.

Of course, a minority will never be convinced, and we will always have legitimate disputes about the right amount and mix of taxes. But the majority does value what their taxes buy. Nonetheless, they worry about how government spends, inevitably  circling back to the problem of waste. Why would I want to pay taxes when so much is wasted?

Let’s be clear, I have never known a political leader who promoted more waste, less efficiency.  Politicians are always reluctant to raise taxes and they all want to get as much bang for their revenue as possible.  Some governments are better at this than others, but over the past few decades, all governments have sought to get the best results at the lowest costs. Yet perceptions of wasteful spending persist.

In part, concern about government waste is a proxy for differences in values.  What we call waste is often spending we don’t much like  (say, the arts from the right, or military spending from the left).  That’s the stuff of elections as we try to choose a government that reflects our priorities.

But here’s the thing: we can’t pick and choose a personalized, made-to-order government profile in the way we personalize our latest mobile device. We cannot unbundle government the way we are proposing to unbundle cable services.  No political party, no government will be a perfect reflection of our personal preferences. In a pluralistic society, sometimes we pay for things we don’t like. For a democracy to work we must get beyond our personal desires, engage on what the country needs now and for the future, sometimes even set aside our private desires for a larger purpose. There will always be some spending we just can’t fathom, but much of that isn’t waste, simply disagreement on what the country needs and on the role of government. Sometimes we are part of the minority. Those tensions are built into any democracy. It will always be so.

Yes, waste, pure and simple, happens.  All of us have shaken our heads at some example of inexplicable spending. All governments do, and ought to, work at reducing waste and increasing efficiency.  But no organization, public, private or in-between, is or ever will be perfectly efficient, nor does the evidence support that private is necessarily more efficient than public.  We are talking about imperfect systems made up of perfectly imperfect people. Those desperate to prove government is useless will always find some example. While it is certainly the job of leaders to ensure that waste is minimized, our fixation on government waste is vastly exaggerated, and undermines even the minimal amounts of trust we need to find collective solutions to problems we can’t address on our own.

Former Parliamentary Budget Officer Kevin Page reminded us regularly that any promises that tax cuts would be paid for by reducing waste are bogus – the numbers never add up.  The screaming headlines about waste mislead us. Studies in the U.S., even before the major downsizing of the ’90s, found big numbers but which added up to a very small percentage of spending.  Same here in Canada. The vast majority of tax dollars are spent on things the majority of us care about: infrastructure, environment, health and safety, health care, education, social assistance, child development. The gravy just isn’t there.

Tax cuts inevitably affect public services. The evil twin of tax cuts is austerity, ongoing and seemingly endless. In Canada, austerity has been implemented in the slowest of motion and so the consequences are less visible than, say, in parts of Europe.  But they are real nonetheless,  felt first by women and youth, and the most vulnerable. Austerity, it seems, makes us meaner. Next in line are the politically easy targets – civil service, teachers, unions. It seems that bashing bureaucrats is always good politics whatever the consequences.

But of course in the end we all pay the price in rising inequality and the erosion of essential institutions, infrastructure and the environment. This erosion happens so slowly it’s hard to attribute to the tax cuts.  Government just slowly gets worse.  Ironically this is used to justify further tax cuts.  Witness recent proposals to eliminate EI because it now serves so few people so badly. The Post Office. What next?  When we lose trust we can’t solve problems together. We look at traffic gridlock and instead of saying, ‘let’s build transit solutions’, we conclude, ‘government doesn’t work’.

Extreme inequality further undermines trust – those at the very top become increasingly effective at convincing us of the dangers of taxes – after all they don’t need many of the public services the rest depend on – and those at the bottom won’t want to pay if they think the game is rigged. Extreme inequality erodes our ability to come to a common view, to build a shared sense of the common good.

Perhaps the most enduring consequence of austerity is that it stunts the political imagination. Previous generations could imagine universal public health care, public pensions, the National Child Benefit.  But now our first response to the dreamers is ‘ya, but how would we ever pay for it?’  This breeds a kind of fatalism, declinism –growing doubt that we could make things better together, that we could ever hope to solve the big problems, inequality or climate change.

If I track the last fifteen years, all the tax cuts, federal taxes as percentage of GDP are four points lower, each point worth about $20 billion. Imagine what we could do with that, or even a portion. The two cents of GST that the Conservative government cut in its first couple of years cost about $14 billion per year, slightly more than the surplus they inherited. Think about how much more resilient we would have been without those cuts when the recession hit, how much more we could have helped those hardest hit, without so much added debt and without turning to austerity as though it were inevitable. We chose the path we are on.  We can choose something better.  

(JS): You are fundamentally an optimist … what evidence do you see to be optimistic about the future as it relates to taxes?

(AH): To some degree, optimism is a matter of disposition. But it’s also a philosophical choice. If we have a choice between hope and despair, why would we choose despair? If we believe nothing is possible, then we don’t act. When we think nothing is possible, well, nothing’s possible.

But in practical terms, I see some signs – perhaps I want to see them – that people are ready to turn a corner. Municipal leaders in Vancouver, Edmonton, Calgary, Halifax – just to cite a few – seem ready to discuss more ambitious visions for their cities and grapple with the revenue tools they’ll need. Maybe it’s easier to build trust locally.

Bill de Blasio, the Mayor-elect in New York City, won on four priorities: addressing inequality, taxing the rich, raising the incomes of the lowest public sector earners, and limiting police powers. Various jurisdictions are raising the minimum wage. When the State of Missouri’s Republican legislature recently passed a tax cut, the Democratic governor vetoed it, and he seems to be winning the debate. We simply can’t keep squeezing and let inequality go unchecked. We will turn this around. The question is how much pain will we endure before we do that.

(JS): You said at the Toronto book launch that not all the authors would agree about some things. What are those areas of tension you found and how were they resolved?

(AH): Who gets taxed, what’s the best mix – all debatable. But they agree 100% that we have a distorted conversation and that’s doing damage. They agree we need to transform how we govern and tax reform must be an essential part of that transformation. And they agree that there’s no free lunch; we all must pay our fair share.

We will have to be smart in how we tax and, to be fair, progressive. By progressive I mean three things: those who benefit most should pay the greatest share; those who do most damage to the commons should pay most for its repair; and when we have broad-based and seemingly regressive tax measures, as we will, we should mitigate the harm to those least able to pay.

(JS):Imagine you’re sitting in Stephen Harper’s chair. What do you think the number one agenda item should be to improve our tax system for the common good?

(AH): I wouldn’t necessarily lead with taxes. But I wouldn’t avoid the discussion. There’s no way to get to where we need to go without considering taxes. The number one agenda item for me would be to address poverty and inequality. We can’t achieve the trust necessary to move forward together without tackling inequality. We won’t find the collective will to tackle climate change if we don’t tackle inequality.

Here in Toronto, the tale of two cities, the rich and poor, that is the problem. The resilience of our cities demands that we address this. The focus on waste, the gravy train, bloated bureaucracies, this is a conjurer’s trick. Focusing on those ‘problems’ ensures we don’t focus on the real problems. Don’t look there, look over here. Don’t look at that, look at this.

We need leaders to say no to these conjurers’ tricks, to focus on building the cities, the provinces, the country we need.  It is time to change the conversation.  We don’t need to choose decline. We will get the future we are willing to pay for.

Edited for clarity (12/22/13)

Comments
35 Responses to “Saying no to the conjuror’s trick of tax cuts”
  1. Matt Fodor says:

    Good interview. Obviously progressives can’t campaign on taxes alone – we have to articulate a progressive agenda that builds quality public services for the future, works toward a green and sustainable economy, and counters inequality in all its dimensions. But we can’t avoid this conversation. Otherwise we can’t have a progressive government worthy of the name.

    • Carlos Danger says:

      I agree but only insofar as it gets “progressives” or “median voters” to the polls. There’s a hard 20, 30 maybe even 40% of the population who will never vote for anything “progressive.” I can hear it now. Social assistance? Why should we reward people for being lazy, incompetent, having unrealistic expectations or making the wrong educational choices? Child development? Why aren’t parents taking responsibility for their own children?

      Progressives shoot themselves in the foot too. Over promising and under delivering is a recipe for breeding alienation. Yes, perhaps over promising is necessary in politics given the political system and human psychological predilections, but it’s very dangerous.

      I view over promising like “consultation.” In the case of consultation, if you raise the expectations of people too high in relation to the extent to which their views are going to be incorporated into policy for example, they’re going to be mighty ticked if they see that their views weren’t strongly regarded in some way. They’ll think the consultation was nothing more than an attempt at public legitimation. You know like many aboriginal consultations appear to seem like to aboriginals. It’s the psychology of the expected outcome measured against the outcome.

      If promises are made that don’t deliver in some significant way it’ll play right into the hands of the politics of envy.

      • Carlos Danger says:

        on second thought 40% might be a bit too high to “never” vote for anything progressive

      • himelfarb says:

        My guess is it is way too high. But it’s also the kind of thing that right wingers used to say about “conservative” policies just a couple of decades back.

      • Mark Hammer says:

        You’re correct in equating “consultation” with over-promising. You’ve described what I believe to be one of the inherent risks of so-called “open government”. Not to suggest for one minute that a government ought NOT to consult, but few people will ever have a realistic sense of just how many opinions had to be sifted through during any consultation. The end result is the frequent perception that the consultation was deliberately disingenuous, because “they could’ve listened to what I told them, but NOOOOOOOOO!” (insert Belushi image here). Nobody needs to either foster that perception in citizens, or create that impression about them as policy-developers. The recommended path is to temper expectations prior to consultations, such that disappointment is kept to a blessed minimum.

        On Star Trek, Scottie’s strategy was to under-promise and over-deliver. Probably a more harmonious path. Och aye.

      • Carlos Danger says:

        Mark: Yeah, “open government,” depending on what is meant by it, is another one of those political/public policy conundrums. I share your skepticism.

        –> [insert somewhat related but largely unrelated rant] <–

        I just did an internship in a comms branch. On that side there seems to be a fair degree of enthusiasm for social media as a tool of open government.

        To me social media as a tool for open government makes sense as an information dissemination tool (as another communications channel to "push out" policy publicity, public safety warnings, consultation info, interesting factoids/infographics, service announcements, etc.). Social media is also useful as a media monitoring/issues management tool.

        The problem lies in the fact that many people expect government social media to be "social." The entire idea behind social media (at least as originally conceived) is that it's a two way exchange. That's a problem. The inherent nature of the "medium" sets up, like you were saying in relation to consultation, unrealistic expectations.

        I read assorted political and ministry social media channels regularly. I can't tell you how many times I've read comments to the effect of 'if you can't comment/engage with me why do you even have Twitter/Facebook/etc.?' Then you see the comms people or service staff hastily trying to redirect people to private complaints channels.

        I see things like social media, consultation or more broadly open government as necessary in government, but they definitely create a parallel set of problems. I'm not convinced that when you cost/benefit it the benefits are greater in a lot of cases. That being said, like you said in relation to consultation, they're necessary. In this day and age you have to have a social media presence, even if only as a passive observer, and consult, regardless of how it's perceived.

  2. himelfarb says:

    And we can’t feed the anti-tax message that so dominates.

  3. Dave Hughes says:

    Always an insightful and balanced presentation, Mr. Himelfarb. Thank you. I follow your blog, so my approval means little. I think a lot of Canadians basically agree with your views but find it hard to press distracted and self-centered peers to consider change. We really need people like you to eloquently champion the idea that change can and will be in everyone’s best interest.

  4. Mark Hammer says:

    The personification of taxes is a curious beast. Now, of course, taxes *are* something one pays as an individual. But discourse about waste and cuts turns everything from the communal into the personal. I am reminded of a disgruntled Oscar Leroy on Corner Gas angrily cornering a CRA employee and proclaiming “My taxes pay your salary!”, as if to imply that any perceived overspending on that person’s salary (a near necessary inference anytime that person’s role constitutes an inconvenience) has a direct and noticeable impact on one’s own bank account and spending money. The shouting about eliminating Senate is elicited by the perception that it is just “wasteful spending”, which in turn is the personification of cost. “My taxes pay for that bum’s salary!”.

    Taxes are collected and spent in the *national* interest, where tax cuts are delivered in the *personal* interest. In that sense, they are socially undermining, not only because, as you ruightly note, they give the nation less to work with, but because they shift attention away from the public interest towards the personal interest. It is fundamentally an exercise in civic disengagement.

    • himelfarb says:

      Extremely well said Mark. Very insightful.

      • Mark Hammer says:

        Interesting op-ed piece from Peter Loewen at U of T in the Ottawa Citizen the other day, citing some work by U of T poli-sci researchers Zach Spicer and MIchael McGregor. The central thesis revolves around their observation that home ownership is a seeming driver of political attitudes, most notably a tendency by homeowners to:

        a) participate more in politics at all levels,
        b) vote Conservative,
        c) be concerned about the value of their assets
        Hard to tell whether it is Spicer & McGregor’s view or Loewen’s, but he makes the point that age differences in home ownership rates (and what he describes as an ever-widening gap in that regard) are part of what drives the political gulf between older and younger Canadians, as well as the extent to which different age groups are persuaded that the current government are “good managers”.

        I suppose one way to view this is that the value of such a critical personal asset tends to focus one’s priorities towards personal interests, rather than towards the communal. For example, home ownership makes one a “rate-payer”, where provincial and municipal policies, and assorted changes to tax law, can have a seemingly more direct impact on one’s finances than having all such costs embedded in the rent one might pay as an apartment-dweller. Whether that is a narrowing, or simply a shifting, of perspective, is a value judgment, I suppose.

        Loewen views shifts in the housing market, and economic swings that can impact on the cost and acquisition of a home, as shaping future trends in voter trends and public policy. A quote of Loewen’s, that is not compelled by the research, but certainly worthy of pondering. is ” Having climbed the mortgage ladder, homeowners are not keen on government helping those farther down.”

        So perhaps the challenge is one of thinking up, and engineering, ways for homeowners to be as concerned about their communities and nation as they are about their valued personal assets. It would be nice if appealing to their more noble motives were part of that strategy, but I imagine that for many, the wedge to move them to think beyond the value of their home and cost of their taxes IS the value of their home and cost of their taxes. In other words, if the bottom line is what now matters to them, then appeal to their bottom-line sensibilities and reframe that bottom line. So, if they care less about environmental issues than their assessed property value and tax cuts, then maybe they need to be propositioned about the eventual cost *to them, as ratepayers* of sensible public transit vs the cost of building yet more roads to accommodate more vehicles belching more greenhouse gases.

      • himelfarb says:

        No doubt one of the reasons that Bush the younger pushed so many buttons to encourage home ownership – and the bursting if that bubble ought to be a reminder that the pursuit of self interest can undermine collective interest

  5. Beijing York says:

    Excellent interview, Alex. We most certainly need to change the dialogue on taxes and we need to encourage some honest brokering on the issues with current politicians. When even Tom Mulcair shies away from increasing taxes to the highest income earners (not even the middle or upper-middle tiers), we have the toxic situation that you have described so well.

    Another part of the problem, as I’ve mentioned before, is the role the media plays in drumming this misleading message. Of course there are degrees, and there are some thoughtful columnists here and there, but chains like Sun Media and Corus Entertainment (string of talk radio stations) are very good at leading the charge against taxes and stoking the “unionized workers are on the gravy train” envy spiral. I can’t speak to every city but in Winnipeg, The Sun is everywhere and free for the taking – at the A&Ws, Tim Hortons, MacDonalds, public buses and office lobbies. Their readership (as opposed to circulation) numbers must be sky high, making such mass and free distribution possible. For many people, this constitutes their major source of news and that is kind of frightening.

    Trying to convince the 1-10% top tier earners to buy into high taxation is a mugs game – they can afford to forgo universal services that taxes pay for plus they get better returns through direct philanthropy and the resultant tax breaks. But the working, under-employed and unemployed are the ones who need to be appealed to and educated on the realities at play. The boutique tax credits that Harper boasts about at every election mean squat if you can barely afford to feed your family (and recent reports indicate that many working people are relying on food banks, which is absolutely shameful on the part of our society) let alone send their kids to hockey camp or music lessons. Yet that target audience is hearing the same anti-taxation and cut the gravy train mantras over and over again. I think I’ve already mentioned before how I want to tear my hair out every time I overhear the spoon fed Sun News talking points on the bus, in a sandwich line up or in the reception area of where I get my hair cut.

  6. himelfarb says:

    Well said. “Gravy train envy spiral” captures it, sadly. The test will be the next round of tax cuts the government will make the basis of their next platform, featuring income splitting which will be popular with many working families. It’s a costly and inequitable tax cut. It’ll be interesting to see how hard any party will fight it and how voters respond. Always delighted to hear from you. Happy holidays and all the best for 2014.

  7. Ian says:

    The Chretien/Martin folks and the Harperites have been decreasing both corporate taxes and the equality of personal taxes. If we take steps to change those regressive inequalities, then maybe we can begin to fix equality in Canadian society at large.

  8. Ian says:

    Joy to the World:

  9. Ian says:

    How long can this go on?

  10. Ian says:

    The conjuror’s trick seems to have been successful since nobody wants to talk about it. In the meantime, we have no choice but to live lives.

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