Ironically, it is in the anti-tax United States that a conversation has erupted on taxes. Warren Buffett and a few other billionaires helped to open the door, if only a crack, and President Barack Obama made taxing the rich a key means of funding his jobs plan (though it was ultimately ill-fated). In the context of all that is happening right now on Wall Street and beyond, these now seem like small and belated steps. Bigger things are in the air. But the conversation on taxes is now engaged and, judging from the reaction – accusations of class warfare, “no-tax” pledges – tax is a proxy for these bigger things.
In Canada, there is no such conversation – only a few brave voices. We continue to reward politicians who avoid the issues or promise more cuts. But without an honest conversation about tax, we won't be able to face up to our challenges and we will sleepwalk toward a smaller, meaner Canada.
Canadians have traditionally had a more benign view of taxes than have our anti-tax neighbours. We have understood that taxes are the price we pay for civilization and for a better future. While there are legitimate disputes regarding how much tax and of what sort, we have generally accepted higher taxes as a way of funding public goods and services, redistributing income to avoid the worst excesses of inequality and shaping the future to the extent we can.
But lately another story has been unfolding. In the last federal election, all the parties seemed to be competing for the austerity and low-tax crown. Apart from a skirmish on corporate taxes, nobody wanted to be seen as a tax-and-spender. In Toronto, the mayor won on the promise of tax cuts and an end to the gravy train (if it can ever be found). In the recent Ontario election, we were hearing our own version of “no-tax” pledges. The Conservatives promised deep tax cuts. The Liberals promised no tax increases. And the NDP promised tax breaks for families and small businesses, with some increases for corporations. Shortly before that, B.C. said no to the harmonized sales tax in a referendum that itself is a worrying precedent. Federally, the government is continuing a decade of reduced taxes – even though we are still running deficits and the gap between the very rich and the rest is growing.
It has become a political truism that any politician would have to be nuts to propose tax increases.
So how did “taxes” become a bad word?
In the late 1970s and throughout the eighties, neo-liberalism – free-market ideology – took full bloom in the aftermath of the serious economic stagnation of the time.
The solution, according to neo-liberals, was to let the market do its work and get government out of the way. The best way to do that: cut taxes. As Milton Friedman, chief architect of the neo-liberal counter-revolution, liked to put it, when governments try to solve a problem, they almost invariably make it worse. Progress would come not from our collective efforts to build a better society but from the pursuit of our individual interests in the market. So began three decades of an unrelenting assault on government.
The sales pitch was simple and it was perfect politics: Tax cuts would be so good for the economy they would pay for themselves. Tax cuts are free, the last free lunch. Marketers and hucksters all know how irresistible the word “free” is, but there are always strings.
The notion that taxes are somehow separate from the services and goods they buy is now part of political culture and it has distorted the conversation in Canada as well. One way that this idea is maintained is through the false promise that only waste and inefficiency will be cut. But tax cuts on the promise of ending the gravy train almost never find enough gravy.
The constant assault on government waste and the parliamentary time spent on the scandal of the day have enduring costs; they erode the public's trust in one of our most powerful tools for managing change and shaping the future: our government.