Canadian Plastics

The double (and triple) whammy of our too-high taxes

It has taken 30 years of continuous, gradual and not-so-gradual tax increases to push Canadians to the point where they're ready to push back. A poll conducted by Compass Inc. for the National Post sh...

March 1, 1999   By Michael LeGault, editor

It has taken 30 years of continuous, gradual and not-so-gradual tax increases to push Canadians to the point where they’re ready to push back. A poll conducted by Compass Inc. for the National Post shows that nine out of 10 Canadians want taxes cut. Over 70% of Canadians, the poll indicates, agree the country’s tax level is discouraging investment.

Is this Canada? Are these Canadians? Apparently so. Like those TV-watching sheep in the 1970s movie Network, we have woken one day and realized “we’re mad as hell, and we’re not going to take it anymore”.

The sentiment has sufficient cause. The total amount of federal and provincial income taxes, CPP, employment insurance, property taxes and sales taxes as a percentage of GDP paid by Canadians is now one of the highest in the developed world.

This is not a merely a “high-income” issue. A Canadian homeowner with $70,000 of household income pays roughly double the amount of tax paid by an American making the same amount in US dollars, even before Americans reduce their taxes using generous deductions such as the mortgage interest. In today’s typical two-income family, this is two wage-earners with average incomes of $35,000 each.

Neither is the high-tax hot button merely about greed, (God forbid we would simply want to keep more of the money we earn), as some would like to taint it. Economists believe Canadian high tax rates tie directly into a number of other issues — low productivity, brain-drain and lack of domestically-sustained economic growth–that pose a threat to this country’s collective standard of living, and perhaps to the long-term development of Canadian business and markets, such as the plastics industry.

Opponents to tax reduction have argued that relatively high taxes are required to maintain both social order and programs Canadians have come to expect. There are two apparent flaws with this argument. The first is that government spending, and high levels of taxation required to subsidize it, is needed to maintain social order. In fact it is law, such as gun-control, health and safety and anti-discrimination statutes, not government spending, that is main preserver of healthy, civilized society.

The second flaw in this argument is the assumption there is any rational or reasonable connection between the amount of money spent and the proficiency of the government service provided. If anything, soaring Canadian tax rates prove just the opposite–more and more money is required to maintain government services at stationary, or below, levels.

Operating in a non-competitive, non-market environment, government is a notoriously inefficient and poor provider of services. One has only to look at the present poor condition of government health services to grasp this point. While the problem has been attributed to lack of funding, it’s fundamental cause is more likely a lack of health care profit centres with real responsibility or incentive for investing in the business of health care in order to attract and keep paying customers.

The obvious, and perhaps only, way to reverse the trend of skyrocketing taxes, is the continued privatization of services and downsizing of government. To those who wail that taking this course of action is the end of the Canadian way, I argue just the opposite. Staying the course with economic conditions that create a disincentive to work, invest, innovate and live in Canada is the death of the Canadian way. Choice is a condition of strength, not weakness.


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