Would someone please forward me a copy of the memo? You know, the one that banishes the term "tax cuts" in favour of "tax relief". In the lead-up to the 2006 federal budget, its seems like all of the tax cutters - from the dozens of groups representing business interests to the mainstream media to the government itself - were all on message about the need for "relief" from the horrible "burden" known as taxes.
Check out the full federal budget document. The term "tax cut" appears but four times in 300-plus pages, and three of the four come in a single figure comparing Canadian corporate tax rates before and after US tax cuts. How that remaining one got through the search-and-replace function, one can only speculate, but buried on page 167, most people will never see it anyway.
Yet, "tax relief" and "relief" appear 70 times in the budget document. Discipline, indeed, masked in deceptive language. Don't get me started on "fiscal imbalance" (I'll have more to say on that in a future column).
This usage of "tax relief" is an import from the United States, right out of the Republican party playbook. As Berkeley's George Lakoff describes the implied narrative "taxes, in this phrase, are the affliction (the crime), proponents of taxes are the causes of affliction (the villains), the taxpayer is the afflicted victim, and the proponents of "tax relief" are the heroes who deserve the taxpayers' gratitude."
The 50 percent myth
To pump up the tax rage, Finance Minister Jim Flaherty resorted to some serious distortion. He claimed that Canadians pay half their income in taxes, a piece of Fraser Institute misinformation that has, unfortunately, propagated its way through the media like the avian flu through a henhouse.
In fact, taxes amounted to one-third of Canada's income (GDP) in 2004, down about three percentage points since the late 1990s.
Personally, I do not feel overtaxed. When I finished my 2005 tax forms, I calculated my total federal and provincial income taxes as a percentage of my (decent, but not outrageous) income. At just 14 cents on the dollar in combined income taxes, I feel like I got a great deal. True, that is just income tax, but even when all other taxes are factored in, I am paying nowhere near half my income in taxes.
The deception of this budget does not stop at language. With the change of power, the Liberals handed the Conservatives $15 billion of federal surplus to buy their way to a majority in the next election. The budget contains the headline GST cut we all knew was coming, but then descends into the surreal with more than two dozen tax cuts sprinkled throughout, at a total cost of about $10 billion per year.
Then there is the new family allowance - dubbed a "universal child care benefit," it will do nothing to expand child care - at a cost of $2 billion per year. Income support for families is a good thing, but the $1,200 per year in new benefits will be much less after it is taxed and after interactions with other existing public benefit plans. The Caledon Institute calculates that a low-income family may only get 25 cents on the dollar from this new benefit.
As for the other tax cuts, they are designed to be highly visible to evoke the most gratitude. Even then, tax credits - for transit passes, children's sports and so on - will only save you a fraction of what you might think.
Say you spend the full $500 amount on soccer for your child. Multiply this by the rate of the bottom bracket (15.5 percent) and your tax savings are all of $77.50. Winning over soccer moms for the cost of a pair of soccer balls - these guys are clever.
You only get this benefit if you qualify and you get less if you spend less than the maximum. For a $300 sports program, you'll get a mere $46.50 in lower taxes.
There is no reason to believe all of these small moves are going to do much to change behaviour. Perhaps a few more kids will play soccer, but perhaps soccer programs now have a good reason to increase their fees. A tax cut for transit passes is not going to add more public transit capacity. Nor will a new family allowance increase the number of spaces of high quality child care.
Throwing it in reverse
If you need a bridge, you do not give the money to drivers - you need to go out and build a bridge. After a couple decades of relative neglect, Canada needs to reinvest in its social infrastructure. But tax cuts cannot substitute for collective action.
This budget is about shrinking the size of government. It had to serve the political expediency of a minority parliament, so it kept some of the new spending passed by the last parliament, continued funding for cities and health care, then gave some one-time money to the provinces out of last year's surplus.
But more importantly, this budget walks away from some major social gains that took years of pressure to win, namely the child care deal and the First Nations accord.
For all of its faults, this is a more moderate budget than the Conservatives would really like to deliver. Can you imagine these guys with a majority?
Marc Lee lives and works in Vancouver, where he is a Senior Economist with the BC Office of the Canadian Centre for Policy Alternatives.