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Kelly McParland: If Biden can raise taxes, how long before Canada follows suit?

Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland.
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland.

In Washington there’s a great deal of talk about tax increases. President Joe Biden has already spent a good deal of money on a stimulus package, and plans to spend a great deal more in a second bill if he can get it through Congress.

In Canada, Prime Minister Justin Trudeau has also spent unprecedented sums of borrowed money on the Liberals’ pandemic-relief program, and is certain to pledge plenty more in this month’s federal budget. But no one in Ottawa is talking openly about tax increases — not among Liberals in any case. Should we be worried?

Biden won approval for his initial US$1.9 trillion COVID program by uniting his party behind it. He needed unanimous backing from Democrat senators, because even a single defection would have derailed efforts in a Senate split 50-50 between the two parties. It will be much harder to ensure that level of support for the next leg of White House ambitions, which involves US$3 trillion in additional spending, largely on infrastructure , climate change and wealth redistribution.

Not all Congressional Democrats are enthused about more borrowing, given the heaps of debt already added to a national total that has increased sharply under each of the past three presidents. With that in mind, Biden evidently feels compelled to offer another means of raising money. That means new taxes.

Naturally, “progressives” have focused on their two usual targets, rich people and corporations. Taxing the rich is always popular because most people aren’t rich, and even Democrats don’t usually count anyone making under $400,000 in that category. Raising corporate taxes is likewise an easy sell on the left. Since neither would likely raise enough to pay the full $3 trillion, however, other targets may have to be added to the list. For instance, higher rates on capital gains or dividend income, which is another way of siphoning off money from people whose income involves something other than a simple salary. There has even been mention of a tax on consumption — as in a U.S. version of Canada’s GST/HST — but it would take a brave administration to get in the way of Americans and their spending habits.

Republicans, of course, claim outrage at the whole idea, even though six of the biggest increases to debt since the end of the Second World War have come under Republican presidents. Those shortfalls were usually due to a reduction in revenue caused by tax cuts. Right-wingers can generally stomach higher debt as long as much of the benefit accrues to them.

The U.S. debate will likely be fierce, and extended. The point, however, is that they’re having it. It’s out there in the open, so people have a sense of what’s coming. We don’t do that in Canada. In all the speculation about what might be in Finance Minister Chrystia Freeland’s budget, you’ll find barely a peep about tax implications from anyone who might know what Freeland is thinking. To date, official statements on the issue offer classic Liberal ambivalence. “We all need to pay our fair share, especially in times of crisis,” Freeland said after being appointed. “The last thing Canadians need is to see a rise in taxes right now,” Trudeau said in appointing her.

Freeland’s mandate letter directs her to “identify additional ways to tax extreme wealth inequality.” Anyone out there know the government’s measure of “extreme wealth inequality?” Me neither. Do we know if Freeland has a specific measure to go by? Nope. She wrote a book about plutocrats, “the rise of the new global rich,” but that was almost a decade ago and she wasn’t tasked then with doing anything about it. The closest she’s come lately to offering precision is to maintain there’s a “safe harbour” out there somewhere, though she won’t say where it is.

The absence of a government willing to share what it’s thinking doesn’t change the fact money needs to be found. Both Trudeau and Freeland are happy to advocate more taxes on the rich, but those have been increased several times in recent years and somehow deficits just keep growing. A rise in corporate taxes is possible as well, though just a few years ago received wisdom was that lower corporate rates were the route to attracting investment and creating jobs.

New Democratic Party leader Jagmeet Singh advocates a wealth tax, though at current federal spending rates the anticipated take would last about three days . More likely is a raid on capital gains by increasing the “ inclusion rate ” to 75 per cent from 50 per cent, or an inheritance tax, presumably at a level Ottawa can claim is just another means of squeezing families that are well off. More radical would be an end to the tax exemption on the sale of the family home, which would be a great way for any government to ensure it got crushed at the next election.

Not that Freeland, Trudeau or any other senior Liberal is likely to discuss any of the options in any detail. That may be OK for Washington, but in Canada we wait for our politicians to make their decisions, and then reveal the result when it suits them. What Washington’s plan offers Canada is political cover to follow suit: it was only after the U.S. started cutting taxes in the 1980s that Canada got the nerve to do so; once they start to rise south of the border Ottawa will have a handy excuse to argue we must do the same. We have a huge debt too, right? So if Biden can push through higher taxes, how long before Canada does as well?

@kellymcparland

Copyright Postmedia Network Inc., 2021

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