This piece was initially posted on the Globe and Mail’s online business feature, Economy Lab. Join the comments section!
For 18 years I’ve been part of a national project in participatory budgeting called the Alternative Federal Budget.
Each year dozens of national and community organizations representing millions of Canadians convene over a six month period, debating and costing out measures that reflect the priorities and values of most Canadians, if polls are any indication.
This year two vastly different economic realities have emerged out of a context of fragile recovery and economic uncertainty.
Yesterday, Statistics Canada reported that household wealth is again on the rise. But so, too, is household debt.
The cost of almost everything is climbing: energy, prescription drugs, tuition fees, and food.
Retirees worry about the vulnerability of their pensions and benefits. Near-retirees worry that they can’t afford to retire.
People thrown out of work during the Great Recession worry that they will never again find jobs at their old wages and benefits. Young workers wonder when they will get a job at all.
Parents fret about what more they have to do to make ends meet, now that it takes two to get into and stay in the middle.
Everyone wonders if the health care system will be there when they need it.
This year’s federal budget seems ill-disposed to meaningfully address any of these serious financial insecurities. But this year’s Alternative Federal Budget takes them on, one by one.
It also proposes taking advantage of the lowest interest rates in economic history and high unemployment rates to address the $200 billion infrastructure deficit across the country, creating jobs and building a platform for future prosperity.
And it outlines a focused and future-looking green strategy for the nation’s homes and businesses.
Sound too expensive? Consider what is being spent on fighter jets and jails, or corporate tax cuts with dubious job-creating benefits.
The Alternative Federal Budget uses the same pot of money, but allocates it differently. In fact, we may come in under budget. As the Parliamentary Budget Officer has noted, it’s not clear how much money the military and prison security shopping spree will cost us over the next 30 years. Even the official estimates of the revenues lost by the tax cut agenda are in question.
The truth is Canadians can afford more of just about anything we want. Canada is the ninth largest economy in the world, with a fraction of the population of other large economies. But the distribution of our economic power and strength has grown increasingly lopsided.
Not since the 1920s have so few Canadians captured so much of the gains of economic growth. Not since the 1920s have so few Canadians controlled so much of our wealth. Not since the 1920s have Canadian millionaires paid such low taxes.
The Alternative Federal Budget proposes a legacy tax on incomes over a quarter of a million dollars. In fact it proposes two new tax brackets, one on incomes over $250,000 and one on incomes over $750,000. Currently all incomes above $129,000 are taxed at the same rate, 29%. The proposed rates on the new brackets are slightly higher (32% and 35% respectively), but still take in less tax than the top federal rates in the U.S. (33% on incomes over $171,851 and 35% on incomes over $373,651).
The legacy tax would affect less than 1% of Canadians. Some say it’s not worth going after such a small group, but modest increases in the top tax rate raise enough additional revenue to create a universal $10 a day child care program or kick-start a pharmacare program that could save Canadians $10 billion a year when fully implemented.
The Alternative Federal Budget not only proposes cancelling future corporate tax cuts; it suggests rolling them back to their level in 2007.
That’s because the corporate tax cut agenda is a high-cost, low-benefit bargain. The stated goal is more investment and more jobs, but across-the-board corporate tax cuts rewards companies whether they create or kill jobs, whether they invest in Canada or elsewhere. By 2013 the new corporate tax rate will have stripped $13.7 billion a year from the public purse, enough to fully eradicate poverty in Canada and return tuitions for post-secondary back to 1992 levels.
Both measures have long-term investment and job creation impacts that are comparable to tax cuts, with much more obvious and immediate benefits in people’s day-to-day well-being.
Canada already has the lowest corporate tax rates on business investment in the G7. Our major competitor, the U.S., has the highest in the OECD nations. We can afford to ask corporate Canada to contribute to our collective economic recovery.
Are these measures controversial? You bet they are. Do we need an honest discussion about the trade-offs between spending and taxes that lie ahead? Without question.
We are calling on profitable corporations and Canada’s richest citizens to play their part in securing Canada’s economic future.
We can’t be successful without them. And they can’t be successful without us.
- Ontario Budget: All Quiet on the Revenue Front (May 6th, 2013)
- Absolving our Carbon Sins: the Case of the Pacific Carbon Trust (April 2nd, 2013)
- Austerity through infrastructure Cuts: Budget 2013 (March 22nd, 2013)
- Budget 2013: Time for a real action plan, not another ad campaign (March 19th, 2013)
- The Alternative Federal Budget 2013 – Doing Better, Together (March 13th, 2013)