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Tuesday, March 6, 2012

Tax relief and the austerity agenda.

One has to hand it to the neo-liberal ideologues and the neoconservative political movement in Canada; they have managed to get all political parties, the mainstream media and most of the population on board the "tax relief" train. To one degree or another, they all kneel at the alter of this ultimate false god.

And in the wake of round-after-round of federal and provincial income, sales and corporate tax cuts, the threat of severe austerity measures grows as each year passes.

While this story has played itself out across the country, right now it is doing so most dramatically in the province of Ontario, where citizens are faced with an austerity agenda that will be one-degree-or-another of the disgraceful Drummond Report

The massive income tax cuts of the 90's and the past decade in Ontario are the chickens that have come home to roost and they are directly why our governments claim they cannot "afford" to fully fund the programmes that citizens depend on, and why they are increasingly rattling the sabres by giving us the entirely false and unnecessary choice between supposed impending economic collapse and massive service cuts and user fees.

To put this in perspective, we have to begin by looking at what potential revenue was lost by Ontario's two decades of tax cuts. By 2003 the Harris era personal income tax cuts alone were removing $11.6 billion per year from the Ontario treasury. (1) These tax cuts, which were never reversed, (and which no one is proposing to reverse) have meant that Ontario has lost a minimum of $90-100 billion in revenue since 2003, not including the further tax cuts of the McGuinty era and not including the revenue lost during the Harris era itself. They also were of far greater benefit to the upper income brackets than the lower.

The reversal of these specific tax cuts would have reduced Ontario's overall debt from in excess of $236 billion to under $140 billion. This is very significant, given that Ontario paid out more in interest on this debt in 2010-2011 than it spent on post secondary education. The interest the province is handing to global financial concerns would have been around half the nearly $10 billion it was. That pays for a lot of programmes. It would also have meant that instead of facing an approximately $16 billion deficit this year we would be facing at most a deficit of $4.5 billion.

And this does NOT include all the other tax cuts; the cuts to corporate taxes, to small business taxes, to personal taxes since 2003 under McGuinty, etc. It only includes cuts to personal taxes that occurred under Mike Harris.

In fact, McGuinty's government has bragged that it is cutting income taxes even further. In Ontario's Tax Plan for Jobs and Growth the Ontario government is openly proud about how their personal income tax "relief" will benefit 93% of Ontarians (which means many very well-off people) and take another $11.8 billion in revenue out of the coffers over three years. That's almost $4 billion a year. And that means that, without these additional tax cuts, had there not been the "tax relief" since 1995, there would have basically been no deficit and their would be no need for the austerity agenda at all.

If the corporate and small business tax cuts of the 1995-2011 period had not happened, combined with the restored revenues from personal income taxes mentioned above, we would be running a surplus now and we would have an overall debt well under the $100 billion mark.

And yet no one, in any of the mainstream political parties, is advocating for reversing the vast bulk of these taxation policies. Not even close.

It is very important to understand that for the majority of citizens the money that they have received through this "relief" does not even remotely compare to the services, social cohesion and opportunity that they have lost as a result of it.

Unless you are in one of the small tax brackets at the pinnacle of our very steep income pyramid, tax relief is no relief at all. 100 per cent the opposite in fact. Tax relief is the key reason we can't "afford" and do not have programmes like universal day care. It is the reason that "economists" like Don Drummond can claim a fiscal crisis where none need exist and advocate to cut your programmes to the bone in the name of "fiscal responsibility". It is the reason our social programmes are not as good as they were in the '80's and early '90's. The reason our social and even physical infrastructure is falling apart. The reason why all those kid's programmes that used to be free or at very low cost are now either gone or charge often high user fees. The reason why public transit exists at levels way below what is required. The reason why if you lose your job you can't count on any real long-term government help, why health care is in "crisis", why tuition fees are way up, and so much more. It is a large part of why it seems, despite unprecedented economic "growth" over the last 25 years, that we are asked over-and-over again to make sacrifices to keep the wealthy wealthy and big business afloat. And it is the primary reason we have been utterly unable to really confront the stain of child poverty and it is a root cause of the massive growth in social inequality.

The results of the theory and practice of "tax relief".

Tax relief is the greatest snake oil salesperson political trick of all promised to deliver financial aid and social stability but, for the bulk of the population, it delivered the exact opposite.

After the 2008 crisis of capitalism and the massive funds that were found to bailout major corporations in both Canada and the USA, it is also very clear that the idea that all this "tax relief" would result in eternal prosperity, corporate investment and trickle-down wealth has now obviously been shown to be the total nonsense that it always was. Most of the population has less job security, less access to programmes and less of a share of overall social wealth than they did when it all began. So, one has to ask, what was the point if not simply to benefit companies and those with higher incomes?

But there is no real political counter-offensive against the basic idea of personal tax cuts.

As shown the McGuinty Liberals have carried the Harris tax cuts further, and have pledged repeatedly that any tax hikes are off the table. The Tories advocate for even deeper tax cuts, and have implied that they would, if they could, implement Drummond's report in its entirety: a recipe for Greek-style social collapse.

The Ontario NDP has called for a raise in the corporate tax rate back to 14%, but the money that this would put back into government coffers would be offset in large part by what the government would lose by the NDP's promises to cut the HST on home heating and gasoline, and by tax breaks to small business. They outline this themselves in their Plan for Affordable Change. Nowhere does this platform call for any personal tax increases, not even on the highest income earners. (2)

The plan's constant refrain of "Rewarding Job Creators", "Living Within our Means", and "Making Life Affordable" expose the central idiocy of the tax relief idea. These targeted tax cuts of the NDP are bad environmental policy, as many have pointed out, most notably the David Suzuki Foundation. But also, would life not be made considerably more affordable for the pocketbooks of "working families" if we reversed personal income tax cuts and used the money to create a provincial system of, for example, free daycare or free pharmacare?

These are programmes that cannot really happen in any other way. Sometimes one can't help but feel that Social Democrats in Canada think that one day they will deliver Scandinavian Social Democracy and social programmes with US level tax rates. They won't.

These are just two examples of the programmes that could have, and could yet exist, if we turned back the near twenty years of personal and corporate tax cuts. Instead we will likely see more service cuts, and we will see a yet greater burden on the province's poor, its workers and its middle-class.

In fact, of course, without personal tax increases on, at the very least, the top income brackets, all the rhetoric of the "shared pain" that is flowing from Queen's Park is unbelievably and contemptibly hollow.

Now, more than ever, we need to fight for real, fair, steeply graded progressive income taxes and to understand that only with these taxes can we build the kind of society that we want and can we fight the inequality that is the hallmark of our times.

(2) The platform, I would note, also envisions savings from the kind of fictional government "gravy" that Rob Ford said was being wasted in Toronto. And yet increasing income taxes marginally on even the top 25% of incomes in Ontario, which it does not advocate, would generate far more government revenue than all these "savings" combined, and many times over.