EN FR

Why Tax Cuts Are Bad For You

Author: Mark Milke 2001/06/11

After years of ever-rising taxes, provincial and federal governments have finally moved to reduce the tax burden. The new Liberal government in Victoria added to previous provincial NDP cuts and federal reductions with a 25 percent cut on their first day on the job.

Some might see this as positive; a restoration of some balance in the eternal battle between Leviathan (as Hobbes labeled the state), and the average citizen, whose economic room to maneuver is directly correlated to the after-tax dollars left in one's wallet.
Predictably though, the tax-and-spend crowd is shocked, shocked, at tax reductions. Thus, free of charge, here is a guide to just two arguments taxpayers might hear from the shocked crowd, and - also complimentary - why the tax cuts critics are mistaken.

"Tax cuts are selfish." It is a bold ethical claim to assert that advocating larger tax bites on private income is somehow "charitable" and "unselfish," whereas tax relief, which helps the private sector, where all the job creation and philanthropy actually occurs, is somehow selfish. Not all (and perhaps very little) that is sweetness and light in life occurs because of tax redistribution.
In any event, the anti-tax cuts crowd focus overmuch on redistribution, not enough on wealth creation.

For example, according to the latest data available, if all income over $60,000 was taxed away, that would bring Canadian governments an additional $25.3 billion, (assuming behaviour was unchanged - a faulty proposition.)

Given out to all taxpayers that earn less than $60,000, that would equal an annual cheque worth $1,300. However, a 3.5% increase in total incomes would achieve the same effect. Thus, governments can either excessively tax away income, and in so doing, drag down overall growth, or they can attempt to boost the economy for all - the very opposite of "selfishness."

"Tuition is higher in other provinces, thus some of Alberta/Ontario's tax advantages are wiped out by higher tuition in those provinces." This argument would make sense if everyone went to university all of their life. As it is, about 150,000 British Columbians are now in some form of full or part-time higher education.

In comparison, 2.7 million people file an income tax return every year in British Columbia, and 1.9 million of those pay at least some income tax. The attempt to compare 50 years of lower tax levels for 1.9 million people (assuming those numbers don't change), with perhaps four years of slightly higher tuition fees for 150,000 (assuming governments that tax more lightly allow tuition fees to rise), makes the tax burden plus tuition comparison absurd. No one attends college for 50 years. Many in fact never attend. The argument that relatively lower BC tuition justifies a higher lifetime tax burden is all wet.

And the keep-tuition-low-and-taxes-high argument is itself curious coming from the tax-and-spend crowd. Public tuition is effectively subsidized to the tune of 70 percent or 80 percent, whether the recipient is from a rich family or a poor one. A sensible tuition policy would allow universities to charge whatever they deem necessary. That would be an improvement over Victoria's endless micromanaging of campus affairs.

As long as generous student loans and scholarships continue, are expanded as necessary, and are preferably combined with loan repayment based on income after graduation, taxpayers would no longer subsidize the higher education of even the very rich.

One would think the tax and spend crowd, which so often indulges in bash-the-rich rhetoric, would applaud any move to end such automatic giveaways to the wealthy.


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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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