Inventors of 'Tax Rage'

They’re baaaaaaack. Like zombies from the grave, the parade of economists, corporate executives, and right-wing media pundits have returned, bringing with them a “library” of “evidence” in support of their never-ending call for tax cuts. For instance, just two days after the American election, Jonathan Chevreau, writing in the National Post, suggested that the re-election of George W. Bush creates “renewed pressure on Ottawa to put tax cuts near the top of its agenda.” Another article in the Post on the same day by David Stewart-Patterson of the Canadian Council of Chief Executives was titled “CEOs call for tax cuts.”

This push for lower taxes is having a profound effect on finance minister Ralph Goodale. An article in the Globe and Mail on November 8 (“Goodale signals hefty tax cuts may be in the wings”) noted that the finance minister has been emphasizing “the importance of tax cuts and other measures to boost economic growth” and improve our rate of productivity. Citing unnamed economists, this article also claimed that the federal government has engaged in a “spending spree” over the last five years and that the “bulk of that spending has been on health care and other social issues that do not make the economy more competitive.”

The Globe article contained two assertions that are taken for granted by politicians and media analysts: (1) that tax cuts are beneficial to the economy, and (2) that social spending and higher taxes are detrimental to the economy.

‘Who cares about evidence?’

But is this true? In my book Inventing Tax Rage, I argue that the case made for tax cuts in the National Post during its first year of publication (from late 1998 to late 1999) contained a litany of factual and logical errors. Their case was based on misleading statistics, phony “facts,” exaggeration, anecdotal evidence, appeals to popularity, appeals to authority, false analogies, and bogus cause-effect relationships.

The Post claimed that high taxes produce low economic growth, low productivity, low living standards, low incomes, low savings rates, high unemployment, high deficits and debt, more government waste, more cheating by taxpayers, increased child poverty, and a growing brain drain. This is why taxes, in their view, had to be lowered, especially for high income earners (“our best and brightest”).

Yet these claims, all of which were incessantly repeated in the Post, were seriously flawed or simply wrong. To give only one example among hundreds, Post columnist Sherry Cooper baldly stated that “countries with low tax rates are the countries with low unemployment rates.” On the contrary, many high tax countries have unemployment rates lower than Canada’s, in some cases significantly lower, including Austria, Denmark, the Netherlands, Norway, and Sweden. As well, some low tax countries have high rates of unemployment, including Spain, which has the highest rate among the major capitalist countries (18.6 percent in 1998). When it comes to taxes, writers in the Post ignored the significant evidence that went against their claims, a philosophy summed up well by columnist Diane Francis when she declared: “My point is who cares about ‘evidence’ anyway?”.

The weary ‘oppressed’

In manufacturing its case, the Post presented its own tax-cutting view as the “agenda of the people.” It asserted that a form of “tax rage” had developed among Canada’s “oppressed” middle class. There was, apparently, a near universal call for “relief” from a “tax weary” public. However, most Canadians had not called for tax cuts. The Liberal government’s own poll conducted in October 1999 showed that the vast majority of taxpayers, given a choice, preferred improvements to government services over a tax cut. But the Liberals ignored this, caving in to “tax rage,” a clever invention of the editors and columnists at the National Post.

The timing of the Post’s assault on Canada’s fiscal policy was perfect. Just as the paper began publishing, it was clear that the federal government was entering an era of multi-billion dollar surpluses. What should be done with this money? The response of the Liberal Party was to develop a “50-50” promise, whereby 50 percent of the surplus would go to social reinvestment and 50 percent would go to a combination of tax cuts and paying down the debt.

In late 1998 and early 1999, the Liberals, especially then prime minister Jean Chrétien, tried to portray their “50-50” policy as a “balanced approach,” in contrast to the agenda of the Post. But during 1999, then finance minister Paul Martin underwent an “about-face” on what to do with the surplus. He concluded that the extra money had to go to tax cuts “for the middle class.” In November 1999, the government abandoned its “50-50” promise. One month later, the Liberal majority on the House of Commons Finance Committee presented a report that called for massive tax cuts. In their February 2000 budget and their October 2000 mini-budget, the Liberals initiated the largest income tax cut in Canadian history, one that gave enormous benefits to wealthy people, extremely limited benefits to the near-mythic middle class, and next to nothing to the poor.

Goodale’s betrayal?

The stifling amount of misinformation churned out by the Post was used to convince people of the moral legitimacy of an economic system and a tax system that makes a handful of individuals fabulously wealthy. This is how a public policy, one involving hundreds of billions of dollars over a number of years, get implemented, even though it gives a trifling amount of money to the vast majority of citizens. The result, as I put it in my book, was that the “most fundamental alteration in the federal government’s fiscal policy in more than a half century was engineered on the basis of unwarranted assumptions, incomplete evidence, hysterical rhetoric and outright falsehoods.”

Despite all this, the tax-cut crowd is back. Like pigs at the trough, they can never get enough. And Ralph Goodale apparently believes that tax cuts automatically produce economic growth (on this score, he should check out the recent economic record of our neighbours to the south). Goodale’s unquestioned acceptance of the “tax cuts can produce economic prosperity” lie shows just how far the Liberal Party has strayed from the influence of leaders like Lester Pearson and Pierre Trudeau. On economic matters, the Liberals are now indistinguishable from the Conservatives.  

The federal budget that will be presented in February 2005 could be used to greatly expand social services such as child care. This would create jobs and allow more mothers to enter the paid labour force (all of which, again contrary to the tax-cut perspective, would increase our economic growth). However, given that our finance minister seems to be under a spell induced by the tax cut zombies, we should expect the same thing from Ralph Goodale that we received from Paul Martin when he was finance minister: tax cuts for the rich, more debt repayment, with only niggling amounts for social welfare.

Larry Patriquin teaches in the Social Welfare program at Nipissing University, North Bay, Ontario. He is the author of Inventing Tax Rage: Misinformation in the National Post, available from local bookstores and at www.fernwoodbooks.ca.