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The U.S. reported impressive jobs creation numbers for April, but there's a long way to go to make up for the 8 million positions lost in the financial crisis. (Mark Lennihan/Associated Press)
The U.S. reported impressive jobs creation numbers for April, but there's a long way to go to make up for the 8 million positions lost in the financial crisis. (Mark Lennihan/Associated Press)

The Economists

Alternative budget: Tax rich, roll back corporate cuts Add to ...

For 18 years I've been part of a national project in participatory budgeting called the Alternative Federal Budget.

Each year dozens of national and community organizations representing millions of Canadians convene over a six-month period, debating and costing out measures that reflect the priorities and values of most Canadians, if polls are any indication.

More related to this story

This year two vastly different economic realities have emerged out of a context of fragile recovery and economic uncertainty. Yesterday, Statistics Canada reported that household wealth is again on the rise. But so, too, is household debt.

The cost of almost everything is climbing: energy, prescription drugs, tuition fees, and food.

Retirees worry about the vulnerability of their pensions and benefits. Near-retirees worry that they can't afford to retire.

People thrown out of work during the Great Recession worry that they will never again find jobs at their old wages and benefits. Young workers wonder when they will get a job at all.

Parents fret about what more they have to do to make ends meet, now that it takes two to get into and stay in the middle. Everyone wonders if the health care system will be there when they need it.

This year's federal budget is unlikely to address any of these financial insecurities. But this year's Alternative Federal Budget takes them on, one by one.

It also proposes taking advantage of the lowest interest rates in economic history and high unemployment rates to address the $200-billion infrastructure deficit across the country, creating jobs and building a platform for future prosperity.

And it outlines a focused and future-looking green strategy for the nation's homes and businesses.

If you think this sounds expensive, consider what is being spent on fighter jets and jails, or corporate tax cuts with dubious job-creating benefits.

The Alternative Federal Budget uses the same pot of money, but allocates it differently. In fact, we may come in under budget. As the Parliamentary Budget Officer has noted, it's not clear how much money the military and prison security shopping spree will cost us over the next 30 years. Even the official estimates of the revenues lost by the tax cut agenda are in question.

The truth is Canadians can afford more of just about anything we want. Canada is the ninth-largest economy in the world, with a fraction of the population of other large economies. But the distribution of our economic power and strength has grown increasingly lopsided.

Not since the 1920s have so few Canadians captured so much of the gains of economic growth. Not since the 1920s have so few Canadians controlled so much of our wealth. Not since the 1920s have Canadian millionaires paid such low taxes.

Today, the Alternative Federal Budget proposes a legacy tax on incomes over a quarter of a million dollars. In fact we propose two new tax brackets, one on incomes over $250,000 and one on incomes over $750,000. Currently all incomes above $129,000 are taxed at the same rate, 29 per cent. The proposed rates are slightly higher than the current highest tax rate, but are below the top federal rates in the U.S. (33 per cent on incomes over $171,851 and 35 per cent on incomes over $373,651).

The legacy tax would affect less than 1 per cent of Canadians. Some say it's not worth going after such a small group, but modest increases in the top tax rate raise enough additional revenue to create a universal $10-a-day child care program or kick-start a pharmacare program that could save Canadians $10-billion a year when fully implemented.

The Alternative Federal Budget not only proposes cancelling future corporate tax cuts; it suggests rolling them back to their level in 2007.

That's because the corporate tax cut agenda is a high-cost, low-benefit bargain. The stated goal is more investment and more jobs, but across-the-board corporate tax cuts reward companies whether they create or kill jobs, whether they invest in Canada or elsewhere.

By 2013 the new corporate tax rate will have stripped $13.7-billion a year from the public purse, enough to fully eradicate poverty in Canada and return tuitions for post-secondary back to 1992 levels. Both measures have long-term investment and job creation impacts that are comparable to tax cuts.

Canada already has the lowest corporate tax rates in the G7. Our major competitor, the U.S., has the highest in the OECD nations. We can afford to ask corporate Canada to contribute to our collective economic recovery.

Are these measures controversial? You bet they are. Do we need an honest discussion about the trade-offs between spending and taxes that lie ahead? Without question.

We are calling on profitable corporations and Canada's richest citizens to play their part in securing Canada's economic future.

We can't be successful without them. And they can't be successful without us.

Armine Yalnizyan is a senior economist with the Canadian Centre for Policy Alternatives

 

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