What will be the theme of this election? One week into the campaign, the answer remains unclear. The Conservatives clearly want this election to be about tax cuts. We shouldn’t let them succeed.
In the past few days, Andrew Scheer has announced a “universal tax cut” that will overwhelmingly benefit the top half of the income distribution and reintroduced a number of tax credits from the Harper era, including for transit and children’s fitness programs. These are also essentially tax cuts.
Shifting the conversation
Canadians face many very real problems — unaffordable housing, high drug prices and childcare fees, rising inequality, and an accelerating climate emergency are top of mind. Tax cuts are not the answer to any of these problems. We need collective solutions and big thinking, not individual giveaways that favour the rich and diminish our capacity to deal with the growing gap between rich and poor or a dangerously warming planet. The Conservatives hope that big tax cut announcements can redirect the conversation away from the big issues to which they don’t have answers. We shouldn’t let them.
Take the public transit tax credit. Funding for public transit — whether for expanding service, reducing fares, or both — would be much more effective in increasing transit use, cutting congestion and reducing carbon emissions than this misguided policy proposal from Scheer. Without good transit options, many people, especially in areas already underserved by transit, will not switch out of their cars. Individual choices will not do the work without the presence of real alternatives like plentiful and cheap public transit. And that is an alternative that we can only create collectively.
The same story applies to children’s fitness programs. The federal government should be directly supporting school- and community-based activity programs for children and youth rather than handing out tax credits, which are far more likely to be used by the well-off. Even the right-wing Frontier Centre was forced to admit that the last time we had tax credits for both children’s fitness programs and public transit, they disproportionately benefited the rich and didn’t achieve their stated aims: children were not doing more physical activity and emissions were not falling because of them.
The Conservatives' policy ideas obscure how change happens and what it means to have meaningful access to good things like transit or sports programs. The policies Scheer’s proposing would end up subsidizing small sections of the well-off for doing what they already do, rather than creating accessible services for everyone.
Rich benefit most from Scheer’s cuts
Almost as if to preempt these critiques of hyper-specific tax credits in all the wrong ways, the Conservatives have also introduced a “universal tax cut” that cuts the lowest marginal tax rate by 1.25 per cent over several years. It is, however, anything but “universal,” missing the poorest third of Canadians who pay no tax and once again bestowing the biggest benefits on the richest.
Andrew Scheer has said that this tax cut will be “targeted specifically at taxpayers in the lowest-income tax bracket,” that “every Canadian will see their income taxes go down” and that “those in the lowest tax bracket see the biggest benefit of all.”
All three claims are inaccurate.
First, only people in higher tax brackets — currently making more than $47,630 per year — will see the full benefit of this tax cut. Those in the lowest tax bracket will on average see a benefit much smaller than the potential maximum of over $400 per year; this is not a cut “targeted” at them. That is simply how tax brackets work.
Second, as the Canadian Centre for Policy Alternatives has shown and other economists have pointed out, about a third of Canadians earn so little that they do not pay federal income tax and will see no benefit. The next third will see less than the full benefit of the tax cut. That leaves about the top 30 per cent who will see the biggest gains in terms of dollars. Scheer’s second and third claims are therefore also false.
The “universal” moniker Scheer has slapped on his tax cut is an attempt to square the reality that even the most broad-based tax cuts disproportionately benefit the rich with the right’s myth-making about the average person being overtaxed. It is also an attempt to distinguish the Conservative proposal from the Liberals’ also dramatically mislabeled “middle class tax cut” implemented after the last election. The Liberal tax cut saw the biggest benefits go to the second-highest top 5 per cent of the population. Doing better than that tax giveaway to the wealthy is a very low bar. Scheer’s proposed tax is simply targeted at a broader swathe of the upper half of the income distribution. (Side note: compare how quickly Justin Trudeau implemented his promised tax cut to how easily the much weightier promise of electoral reform was dropped.)
Collective solutions needed
Canada’s federal government today both takes in and spends less than it did thirty or forty years ago. Our debt-to-GDP ratio is near historic lows, falling and slated to keep falling. We do not have a spending problem or a debt problem. We have a revenue problem and an inequality problem. This is the worst time for a tax cut election.
Tax cuts, however, do more than leave more money in the pockets of the already well-off. They also shift the debate to individual solutions and market solutions. They are intended to diminish our collective capacities to deal with things like runaway rents, runaway drug prices, or runaway climate change. These problems, however, are in large part the result of markets failing. Instead of tax cuts, we need a massive build-out of non-market housing, universal pharmacare, and a Green New Deal.
Starting to deal equitably and efficiently with the big issues like this facing Canada and the world means pooling our resources and pooling our efforts. The tax cut trope of “putting money back in your pocket” obscures whose pockets the money is really going into, and it puts too much onus on us as individuals. It’s high time we started to focus on how we can solve our problems together.