Tuesday, February 1, 2011

Corporate welfare and health care

Sure, we all like tax cuts ... mo' money is mo' money, right?    Well, not necessarily.   We've seen the impact of the GST being cut from 7 to 5 percent.   And now, there is almost certainly going to be a showdown in Canada's Parliament over corporate tax cuts.

Let's not forget that to finance the first part of the GST cut in 2006, the Conservatives actually raised the basic personal income tax across the board for everyone and froze indexing of the basic personal amount for about two years.   When people caught on they got upset and the indexing was restored along with the previous tax rates, but the GST cut remained.

If there was a guarantee that people would actually be hired with the money saved from corporate tax cuts then I'd support them.  Trickle down economics -- or "voodoo economics" as George Bush Sr. so rightly call it -- only trickles down to the wealthy.

But there's also the question of all the things businesses large and small can deduct that ordinary working Canadians can not.   Every new tax "incentive" is a form of corporate welfare.   One good example are the credits we give for television and film production.   Sure people get hired, even if only on contact work but their wages are essentially subsidized by the taxpayer.   At a 50 percent subsidy and an average 25 percent bracket that means the effective tax rate -- what we get back -- is only 12½ percent.

Add to that the write offs for resource development, the relatively low royalty rates for mineral and forest extraction and so forth, and we're getting taken for a ride.  And now Harper wants to cut taxes for the fat cats even more?  Isn't he leading the same party that once published a famous pamphlet about the need to stop digging the debt whole?   Isn't he the same man who took Canada from surplus to deficit?

And any money out of the system means less money for our top priority, what should be our top priority in Canada -- health care.  It's 2011 and the first cohort of the baby boom is starting to collect Old Age Security.  I've written before about the impact the GST cut is having on funding OAS but over the next fifteen years as the rest of the Boom starts getting their guaranteed pensions we're really going to get screwed.

Despite our rather appalling personal choices across the board when it comes to personal health -- choices which if corrected would also save the system a ton of money -- we still have a basic consensus that we need to look out for each other.   One of the problems is that the present Prime Minister once ran the National Citizen's Coalition.   Its main purpose when it was founded over forty years ago was to kill public health care in its infancy.   It certainly does support tax cuts and has long been at the forefront of eliminating not just the tax credits that sustain political parties but also any limits to contributions.

It's all too obvious what this would mean.   Well heeled interests can easily out buy smaller voices in terms of advertising and thus skew public opinion in a certain way.  It's not that much of a stretch to figure out that tax cuts would not be used to hire people but to buy even more ad time to get people to distrust even more the social safety net we've worked so hard to put together.   And of course since advertising is deductible, they'd pay even less tax in turn.

I totally agree with the sentiment that payroll taxes on top of the corporate rate -- public pensions, workers compensation, health care premiums -- can be a burden on paperwork.   But it's better to have healthy employees who pay taxes than sick ones who do not.

The last major stab at tax reform was about 25 years ago.   We do need to have an a new debate, and we need to put everything in the pool.   This also means lower corporate rates -- with accompanying cuts to corporate welfare, i.e. far fewer write off regimes.  I thought this was the reason why the GST was introduced in the first place -- to get rid of a "manufacturer's sales tax" that was only paid by about 75,000 people but also had 22,000 "exceptions."

But given the choice now, short term, between fixing taxes and fixing health care, it's a no brainer.   If a prime minister once ran a group that wants to abolish a key plank -- the key plank -- of our social safety net, then he can't be trusted on health care.   This is the issue the opposition parties need to run on when the election is called or forced.   Period.

PS  Neither Harper nor any one else has offered an explanation as to why the NCC doesn't issue financial statements nor why it distinguishes between "voting" and "public" members or why it doesn't have meetings where its public members can influence policy.   How can we have a PM who opposed democracy for a private group but ... never mind.

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WesternGrit said...

Good post.

We need to ensure that the election ads this go-around focus on ALL of Harper's past. Heck, he hasn't stopped slinging (untrue) mud at Iggy since day one. The least we can do is fight back with the truth!

Eye Creams said...

I totally agree with the sentiment that payroll taxes on top of the corporate rate. We need to ensure that the election ads this go-around focus on ALL of Harper's past.