Saskatchewan’s Tax Cuts
The conventional wisdom may be that political parties cannot successfully campaign against tax cuts. But the federal NDP recently achieved its second-best electoral result ever by running squarely against Harper’s corporate tax cuts. South of the border, the US Democrats just won a massive victory partly by campaigning against the Bush tax cuts. In public opinion polls, citizens often prefer better public services to lower taxes.
However, as The Jurist notes, Saskatchewan’s NDP opposition has not made headway in response to the Saskatchewan Party government’s latest major initiative, “the largest single-year income tax reduction in Saskatchewan history.” Indeed, the opposition leader’s only complaint seemed to be that the tax cuts were not larger and faster.
Social democrats could criticize tax cuts for disproportionately benefiting wealthy/profitable taxpayers and for depleting fiscal capacity that could otherwise finance important public programs. Unfortunately, the Saskatchewan NDP is poorly positioned to make these criticisms because its tax cuts were worse by either standard.
Over the objections of the Saskatchewan Young New Democrats (especially yours truly), in 2000, the former NDP government slashed provincial income tax rates by nearly one-third and narrowed the difference between rates for different tax brackets. It partially financed these deep income tax cuts by extending the sales tax to more goods and services. Notwithstanding some modestly progressive measures like a small refundable sales tax credit, the entire package delivered far larger tax breaks to those with higher incomes.
By contrast, the Saskatchewan Party’s recent announcement did not reduce tax rates at all. Instead, it increased personal, spousal and child tax credits as well as the refundable credit. As tax cuts go, this package is quite progressive.
All unattached individuals with $13,000 or more of income will save $440 by claiming the full increase in the basic personal credit. Those with incomes of $35,000 or less will also get a bit more from the enhanced refundable credit.
Among families, the greatest benefit goes to the middle of the distribution, at income levels high enough to fully claim the increased non-refundable credits but low enough to still qualify for some of the enhanced refundable credit. Families with the same number of children will all receive about the same benefit.
Tax Breaks for an Earner with a Dependent Spouse and at least Two Children
|
 Pre-Tax Income |
 NDP            2000 Budget |
 Sask. Party      2008 Mini-Budget |
|
 $35,000 |
 $1,252 |
 $1,138 |
|
 $50,000 |
 $1,814 |
 $1,547 |
|
 $75,000 |
 $3,331 |
 $1,320 |
|
 $100,000 |
 $5,015 |
 $1,320 |
Sources: Saskatchewan Finance brochure, March 29, 2000: page nine (11 of 27); Saskatchewan Finance backgrounder, October 21, 2008: page three. (Note: The amount of provincial tax currently paid by the $35,000 earner, and hence the potential 2008 tax break, depends on an assumed level of existing tax deductions.)
Therefore, the 2008 tax cuts provide a fairly even distribution of benefits and cannot be characterized as a gift to the rich. (Indeed, they are more vulnerable to the right-wing criticism that they do not actually reduce marginal tax rates.)
Nevertheless, social democrats might argue that dispensing modest dollops of cash to each provincial resident is not the best use of $300 million annually. Indeed, some progressives made that critique of the rebate cheques mailed out by Conservative governments in Alberta and Ontario.
Although the Saskatchewan Party has announced “the largest single-year income tax reduction in Saskatchewan history,” the NDP’s multi-year income tax reduction was costlier. At the time, Saskatchewan Finance estimated that it would cost $440 million annually when fully implemented.
Given subsequent income growth in Saskatchewan, that figure must be larger today. Although the NDP recouped $160 million annually by broadening the sales tax, it is not well positioned to accuse the Saskatchewan Party of draining the provincial treasury.
In military tactics, flanking manoeuvres are dangerous because the flanking force is itself vulnerable to ambush. The same is true in political tactics. The NDP government tried to outflank the Saskatchewan Party on the right by slashing tax rates.
This manoeuvre allowed the Saskatchewan Party government to cut off the NDP by providing tax cuts that are much less regressive and a bit less expensive. To redraw the battlelines between itself and the Saskatchewan Party, the NDP opposition must withdraw from some of the policy positions that it occupied while in government.
Now Erin I don’t have an economist degree although I did take a couple of economic courses at university and since that time, I have read lots. And I am not from Sask., so I want to suggest that perhaps there is a way to combat this: how about not the right time. When times were good was when the NDP gave taxcuts, but now that the province/nation is going to go into recession and there is lots of economic turmoil, it would be prudent to hold onto those funds.
That’s how they can out flank them.
If we can’t pressure the NDP to be progressive, What hope do we have of pressuring the older rightwing parties to be progressive? It’s a shame, Because the capitalists have enough parties around to work on their behalf. Do they need another one? Meanwhile, Getting the NDP back would be a whole lot easier than starting a new party from scratch, not that that’s a bad thing, I guess. Maybe that would be a way to pressure them. Then again, What happens to progressive parties over time? It looks like the corporatocracy isn’t about to sit back and just wait to see.
Yes, Jack Layton’s NDP ‘partly’ won by opposing (inelegantly) Stephen Harper’s big tax cut of $50 billion. Yes, Obama won by ‘partly’ by opposing the Bush tax cuts. Those are facts, sort of. But Jack Layton also employed rightwing language (unholy deficits won’t be countenanced and balanced budgets are next to godliness) in his bid to get votes from rightwing voters. As for Obama, His record in fact is not that of a progressive, as many of his deluded worshippers are slowly finding out. And, With his appointment of hardcore rightwinger Rahm Israel Emanuel as his chief of staff, Obama hasn’t waited long to add to his record of corporatocracy-friendly actions.
Technically, People voted for the progressive attitude of easing up on costly tax cuts. In fact, It is less apparent that all of those Obama and Layton supporters were motivated to support each leaders’ bundle of planks solely as a result of the few seemingly progressive elements in them.
Here is my comment on the tax cuts:
Less well-off stung by tax cuts
by John W. Warnock
Leader-Post (Regina)
November 7, 2008
Guest Editorial
Since 1982 successive Saskatchewan governments have placed a high priority on cutting taxes. The royalties we receive from the sale of our non-renewable resources have all been drastically cut. The 15% return on the extraction of our oil is now the lowest in the world. Corporate, business and capital taxes have been cut. Income taxes have been steadily reduced, especially at the top end of the scale.
Our governments have moved away from progressive taxation, based on ability to pay. They have shifted to regressive taxation, where everyone pays the same rate regardless of income or wealth. Thus, over the past twenty-five years we have seen a general shift to goods and services taxes, flat taxes, an increase in property taxes, and hikes in user fees.
The results are as expected. Statistics Canada reports that the top five percent of income earners are steadily increasing their share of total income while the bottom 25% show a decline. Part of this is due to the decline in the minimum wage; in real terms, Saskatchewan’s peaked in 1976. Despite the current economic boom, the average wage and income in Saskatchewan is still below the national average.
There is also a growing inequality in the distribution of wealth. Statistics Canada reports that in 2005 69% of all wealth was owned by the top 20% of income earners. The bottom 20% actually had no net worth as debts exceeded assets.
Saskatchewan’s wealth comes primarily from the extraction and sale of non-renewable natural resources. But the dominant large transnational corporations transfer their enormous economic rent (monopoly profit) out of the province and indeed out of the country.
The distribution of provincial income is another indicator of the fallout from this tax policy. Between 1991 and 2007 the share of the provincial income going to corporate profits rose from 8% to 29% while the share going to people on wages and salaries fell from 63% to 46%.
Tax cuts inevitably benefit those in the higher income and wealth brackets. They always result in the reduction in government services. For example, in Saskatchewan social assistance rates are now well below the basic needs level. There is little affordable housing. There is no money available to pay for dental care. Child care services remain the worst in Canada. Seniors go without needed eyeglasses, hearing aids, and dental work. It now costs serious money to take an ambulance to the hospital.
Let us look at one issue that affects most of the Saskatchewan population: property taxes used to fund municipalities and school boards. During the NDP government of Allan Blakeney (1971-82) the province provided grants to local governments which covered 60% of these costs. The Local Government Finance Commission, appointed by Premier Grant Devine in 1984, recommended that this be raised to 75%. Yet the Tory and NDP governments cut these grants to 40% of costs, offloading their tax cuts to local governments.
Today property taxes in Saskatchewan are among the highest in Canada. For example, in 2007 the average single family dwelling and condominium in Vancouver was appraised at $716,900, and the average property tax assessed was $2,220. In contrast, in my neighbourhood the average house is now assessed at $114,000 and the average tax forecast is $1,989.
But it is worse. British Columbia has a homeowner’s grant of $570. Seniors can get an additional grant of $275. If seniors cannot afford to pay their property tax, it can be deferred until their house is sold.
Property taxes are regressive taxes. They do not take into consideration the income or the wealth of those who pay. The lower you are on the income scale the higher and more burdensome are these taxes, and that includes those who rent. It is not uncommon in Saskatchewan for seniors to have to spend over 10% of their annual income on property taxes.
Lorne Calvert has praised Brad Wall’s tax cuts as a “happy day†for Saskatchewan. He pointed out that the Saskatchewan Party government is following the tax policies established by our recent NDP governments. But Calvert and others in the NDP may want to consider why they are now in the opposition and why 40% of the eligible voters in Saskatchewan are now sitting out elections. This includes a great many who used to vote for the NDP.
John W. Warnock is a Regina political economist and author.