Marc hears a squeal from the National Post

One of my colleagues likes to say, “if you throw a rock in a barn and hear a squeal, you know you’ve hit a pig.” So it goes with a National Post column attacking my tax incidence paper. I guess my study caught their attention, though I feel like I really deserved a rebuttal from a first-line player like His Majesty Terence Corcoran (who attacked my colleague Hugh Mackenzie for his gas gouging report back in the Spring). Instead, the job got outsourced to a journeyman, Peter Shawn Taylor.

I’m open to all and any criticisms of my study. I think I made defensible choices around the methodology and am happy to debate the finer points. The thing is, from the column it is hard to tell whether Taylor gave the paper more than a glance, as he uses it mostly as a launching pad to attack the CCPA. Overall, I’m highly unimpressed at the lack of sophistication in his rebuttal. Here is what passes for critique:

Lee claims our tax system has become far more regressive since 1990. He finds that lower income brackets now pay an equal or higher percentage of their income in taxes as rich folk do. Lee lumps all forms of income, including inheritances and corporate earnings, into his pot and refers repeatedly to the lack of “fairness” in our system. But this ignores the fact that across the board, rich and poor, Canadians are doing better now than they ever have. Calls for more taxes on rich Canadians, inheritances or corporate profits are not arguments aimed at helping the less-fortunate or improving efficiency, but exercises in envy.

I guess I would suggest to Taylor that he needs to take a walk around town, then brush up on his research before claiming that “poor Canadians are doing better than they ever have.” After good economic times for about a decade (with a minor bump around 2001), the amount of abject poverty in Canada’s major cities remains epic. This was not the case when I was growing up. (See this post for more on the Richards study by CD Howe that “informs” Taylor’s view.)

In any event, my study was not about poverty, it was about who pays the taxes and how that has changed between 1990 and 2005. Taylor then goes on to misrepresent my findings. He quotes:

The CCPA’s ultimate goal is to “to raise Canadian tax revenues from one-third of GDP to one-half.”

This is taking what I said out of context. Here is the full quote:

In contrast to the largely theoretical and occasionally dubious arguments about tax mix and economic performance, the real-world experience of the Nordic countries is illustrative. They show that it is possible to have much higher overall levels of taxation in order to pay for more expansive public programs and greater social cohesion (lower poverty and inequality). The big question is whether we, as a society, want to go there. Economics is not the obstacle, but political challenges and moral objections are bigger barriers.

Notwithstanding the potential for raising top income tax rates, in order to raise Canadian tax revenues from one-third of GDP to Sweden’s one-half, a large portion of this increase would likely need to come from consumption taxes. The challenge would be to ensure that revenues are spent in a highly progressive manner, so that any regressive taxation impacts are more than offset. This is more consistent with the message of the tax mix literature than the simplistic notion that income taxes should be replaced by consumption taxes (with rather large inequality impacts as the pattern of spending would remain unchanged). Claims that Canada relies too much on personal income taxes do not really hold up when we add the Nordics to the comparison.

Taylor then says I “lack conviction” for not supporting the Harper GST cuts. Given the choice between stylized income tax cuts and GST cuts, I would probably pick the latter. But that’s not the real choice. The poorest would be much better off it the proceeds of the GST were spent in a progressive manner on public transit, early learning programs, pharmacare, and so forth – as I allude to in the quote above.

In Taylor’s eyes, I am on a crusade that is “utterly ideological and wholly uninterested in the real world” but in the end, Taylor reveals his true colours as an ideologue of discredited voodoo economics, with a remark that: “[t]ax revenues are up because tax rates are down.”

Squealing indeed.

7 comments

  • Yes it’s not flattering to get such a weak hatchet job. You get the impression that the author only hangs out with friends who think the same as him.

    If the National Post is so devoted to a free market system based on profit maximizing activity, then why do they repeatedly operate at a massive financial loss? At least the CCPA knows how to break even.

  • Yikes. It’s not clear that Taylor even read the paper. It is clear that he didn’t understand it. There’s not even enough there to justify using 800 words for a rebuttal.

  • Hilarious! The Inequality Project strikes again.

    Congratulations on the National Post coverage. The only thing worse than being talked about is not being talked about.

    A problem with his analogy to a Japanese submarine unaware that the war has ended is that it would quickly run out of fuel, whereas your organization is still going strong. A better analogy would have been the CCPA as the Nautilus from Jules Verne’s 20,000 Leagues Under the Sea, with Bruce Campbell as Captain Nemo.

  • Marc, ask for space for a rebuttal, and then re-state your argument, rather than debate with him.
    When the Post got going I asked Terrance Corcorran if the CCPA could send him a piece from time to time, and he said no. He had Linda McQuaig and that was enough.
    Any time you get a chance to operate on hostile territory take it, I say.

  • Trish Hennessy has the following letter in today’s National Post, which picks up on the submarine theme:

    Re: Poverty Down, Taxes Down, Out rage Up, Peter Shawn Taylor, Nov. 20.

    I was on shore leave from my office, which Peter Shawn Taylor glibly calls a Second World War submarine, when I read his pithy but error-laden diatribe about our work at the Canadian Centre for Policy Alternatives. He claims Canadians have never been richer than they are today. Actually, it’s the richest 10% who are benefitting from the past decade of economic growth — the majority of Canadians are running harder just to stay in place. Many are actually falling behind in real dollars.

    Mr. Taylor says poverty is down, but today’s child poverty rate is actually at the same level it was in 1989 when our Parliament made an all-party declaration to wipe it out. We should all be outraged about that. Our economy has been firing on all cylinders for almost a decade, our federal coffers are bursting at the seams, and yet we can’t wipe out child poverty?

    Mr. Taylor claims my organization is ideological. I fear this is another case of the pot calling the kettle black.

    Trish Hennessy, director, Inequality Project, Canadian Centre for Policy Alternatives, Ottawa.

  • Good points Trish, ss she points out speaking of being Ideologically based,

    “But this ignores the fact that across the board, rich and poor, Canadians are doing better now than they ever have”

    If you say so Mr. Taylor, I guess it must be, (which is pathetic state of media affairs). I would also add in there is a plethora of data that would suggest otherwise.

    A recent statcan report Revisiting Wealth Inequity, which concluded that the distribution of wealth within the country is at its most inequitable level in decades. The report noted that the Gini coefficient, a measure of wealth distribution, has risen from 0.691 in 1984 to an abysmal 0.746 in 2005
    http://www.statcan.ca/english/freepub/75-001-XIE/75-001-XIE2006112.htm

    Canadian Policy Research Networks estimated that 16.3% of full-time workers earned less than $10/hr in 2000. The study focused on workers aged 15-64, who were not full-time students and worked mainly full-time.
    The report also found that the share of jobs paying less than $10 per hour (in real 2001 dollars) has not fallen since 1981

    In another Statcan study located here

    http://www.statcan.ca/english/research/11F0019MIE/11F0019MIE2007298.htm

    The results show that family income became more equally distributed across the 1980s. The ratio of after-tax income of the top 10% to the bottom 10% fell from 7.46 in 1979 to 6.58 in 1989, and the Gini also fell. However, from 1989 to 2004, income inequality rose. The ratio of after-tax income of the top 10% to the bottom 10% rose from 6.58 in 1989 to 8.85 in 2004 (up by 35%), and the Gini also rose. The results indicate that after-tax-income inequality was higher in the post-2000 period than at any other point since 1976.

    If you do not like the quantitative, then go out and talk to some people, (off of bay street). THere is a duality in this country and for a newspaper in this country to blatantly and irresponsibly suggest that we are just a mirage is the most pathetic I have heard in some time. (Okay did I say newspaper, sorry, it is quite an embarrassment actually, isn’t the founder of this rag now heading to jail, appropriate I would say considering his entrails)

    Sad I must say, of course this is but a ruse.

  • Joan Robinson used to say that only thing for a worker worse than being exploited by a capitalist, is not being exploited by a capitalist.

    I’d say the same applies here: the only thing worse than being trashed by the NP, is being ignored by the NP.

    Well done, Marc!

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