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Lana Payne: Tax fairness needs a bold champion

Federal Finance Minister Bill Morneau is shown in Ottawa, Oct. 24. Lana Payne writes: "As soon as the troubles over blind trusts began for Morneau, politically the Liberals had every incentive to turn the page on tax fairness." — Fred Chartrand/The Canadian Press
Federal Finance Minister Bill Morneau is shown in Ottawa, Oct. 24. Lana Payne writes: "As soon as the troubles over blind trusts began for Morneau, politically the Liberals had every incentive to turn the page on tax fairness." — Fred Chartrand/The Canadian Press

 

When the International Monetary Fund (IMF) calls on governments to tax the rich, you know things have gotten utterly and completely out of whack.
And yet here we are with the IMF sounding a little like Oxfam or the Tax Justice Network. Trickle-down economists must be cringing. They used to be able to count on the IMF to support their voodoo economic theories. Theories that have been disproven and discredited and yet still drive too much of the world’s political ideology. Even some billionaires have called on governments to stop the madness and tax them more.
And for a fleeting moment, it looked like the federal Liberals were going to take at least one step towards closing tax loopholes for the wealthy and a small step towards tax fairness.
But defending and fighting for tax fairness appears not to be worth the headache. As soon as things got tough, sparked by extreme overreaction from those with influence and affluence, they caved. Some might argue their defense of tax fairness lacked heart and passion in the first place.
Sure there will be some minor tinkering around the margins of the loopholes identified in this summer’s Finance Department consultation document, but for the most part it appears the government has turned the page on tax fairness without doing very much.

And for a fleeting moment, it looked like the federal Liberals were going to take at least one step towards closing tax loopholes for the wealthy and a small step towards tax fairness.


Both times federal Finance Minister Bill Morneau tried — stock options last fall and incorporation for the purpose of paying less tax this fall — he walked away with a few more grey hairs and not a lot to show for his efforts.
It’s unfortunate. Disappointing. And to many, perhaps not at all surprising. As soon as the troubles over blind trusts began for Morneau, politically the Liberals had every incentive to turn the page on tax fairness.
Indeed, in order to smooth over ruffled feathers, the government announced it would accelerate cuts to the small business tax rate (already the lowest in the Organisation for Economic Co-operation and Development), making it arguably even more attractive for high-income earners to incorporate themselves so they can pay a lower tax rate than their unincorporated neighbour earning the same or less.
In the middle of this tax fairness debate, the IMF issued an interesting report entitled: “Inequality: fiscal policy can make a difference.”
In the past couple of years, the thinking on economic growth and trickle-down economics has changed considerably from the global banker.
Indeed, the IMF is on record calling for actions to close the gender pay gap, including affordable child care. The bank has argued that reducing inequality through a series of policies is critical to kick-starting stagnant growth.
And this month, in its latest research on inequality, the IMF called on governments to make their tax systems more progressive. In other words, increases taxes on the rich.
The IMF notes that tax systems for advanced nations are considerably less progressive than they were 40 years ago with those at the top seeing their tax rates cut on average nearly in half. And often tax systems are not nearly as progressive as they look because the rich have so many tax breaks and loopholes to take advantage of. This case can certainly be made about Canada’s tax code.
The IMF also debunked the often-repeated conventional wisdom that lower taxes for the rich will mean more investment in the economy.
The report concludes that the rich can pay more tax and it won’t hurt economic growth, but on the other hand a more progressive tax system will reduce inequality when those additional taxes are used for the common good, improving public services for everyone and helping those at the bottom get ahead through investments in education and health. And the IMF has already noted that less inequality is good for economic growth.
In other words, there are many reasons for wealthy and advanced nations like Canada to make their tax systems fairer and more progressive.
But even the IMF warns this requires political skill and commitment. “This could be difficult to implement politically because better-off individuals tend to have more political influence.”
No kidding! So far, what we have learned from Canada’s great tax-reform debate is fairness requires boldness, a champion and perhaps most importantly a belief in it in the first place.

Lana Payne is the Atlantic director for Unifor. She can be reached by email at lanapaynenl@gmail.com. Twitter: @lanampayne Her column returns in two weeks.

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