Tax policy

This blogpost originally appeared in the Globe and Mail. 

Partly fuelled by reports from conservative think-tanks such as the Fraser Institute, many Canadians believe that they are taxed far too heavily and that the tax “burden” has been rising over time. Recently published Statistics Canada data show, in fact, that most individual Canadians pay very low effective rates of personal income tax, and that the tax “burden” has been falling.

The federal government is widely expected to announce a new competitiveness strategy as part of its Fall Economic Statement. Corporate Canada has been lobbying hard for a new round of corporate-tax cuts in response to recent tax “reform” under President Donald Trump in the United States.

Ottawa – The federal budget missed an opportunity to recover up to $12 billion in tax revenue that could be invested in  needed health and social programs, contends the Broadbent Institute.

“Tax loopholes used mainly by the very wealthy are costing us billions every year,” stated Rick Smith, Executive Director of the Broadbent Institute. “A fairer tax system that sees these loopholes closed would help us fight the inequality that’s threatening many of our communities.”

This blog post is part of a series of posts that will be focusing on the tax avoidance by Canada’s most wealthy. This series was sparked by findings in the Paradise Papers — the latest leak that revealed the offshore tax haven activities of former Canadian elected officials and political insiders. Tax avoidance is wrong. It robs the Canadian government from paying for and maintaining our health and social programs; ones that work to improve the lives of all Canadians. A government crackdown on offshore tax havens is urgent and necessary.

It’s safe to say that taxes aren’t everyone’s favourite subject. Canadians are usually confronted with the idea during tax season: as we frantically get our financial documents in order, while tempering our slight annoyance with the government for peering into our pockets. But we need to have more comprehensive conversations on how taxes affect our lives on a daily basis; because the fight for a fairer tax system is real and urgent.

This blog post is part of a series of posts that will be focusing on the tax avoidance by Canada’s most wealthy. This series was sparked by findings in the Paradise Papers — the latest leak that revealed the offshore tax haven activities of former Canadian elected officials and political insiders. Tax avoidance is wrong. It robs the Canadian government from paying for and maintaining our health and social programs; ones that work to improve the lives of all Canadians. A government crackdown on offshore tax havens is urgent and necessary.

Data from the 2016 Census show that income inequality grew quite significantly over the previous decade from 2005 to 2015, and that the supposedly most progressive part of our overall tax system failed to make much of a difference. This underlines the need for progressive tax reform in the next federal budget.

Special tax treatment of dividend income costs a lot in terms of foregone government revenues, mainly benefits the very affluent, and thus merits serious re-consideration as part of the federal government's current review of tax expenditures.

The new Canada Child Benefit (CCB) unveiled in the 2016 federal Budget has been widely supported by progressives and anti poverty activists who have long favoured the expansion of income tested child tax credits. By contrast to the so called middle-class tax cut which favours the more affluent, the CCB will have a positive impact upon the lamentably high rate of child poverty in Canada (which stood at 16.5% in 2013), and will promote greater income equality among families with children.

Somewhat ironically, the new program is an unintended consequence of the regressive policies of the Harper government which opened up the needed fiscal room for progressive change. 

1. Family Income Splitting

The federal government plans to spend about $2-billion per year on family income splitting that will mainly benefit high-income, traditional families with a stay at home spouse, to a maximum amount of $2,000 per year. There is no benefit at all from income splitting for single parents, or for two parent families in which both earners are in the same tax bracket, including the middle and bottom income tax brackets; these families with children under 18 represent over half of all families that are the apparent target of the scheme, according to the Broadbent Institute study, The Big Split. Meanwhile, the large savings will go to families with one partner in the top tax bracket and a stay at home spouse with a tax rate of zero. This big pre-election tax cut will directly increase income inequality.

Les Whittington / Toronto Star

OTTAWA—A confidential letter from Finance Minister Joe Oliver all but confirms that his April 21 budget will double the contribution limit for the government’s popular tax-free savings vehicle.

Stephen Hume / Vancouver Sun

Is Prime Minister Stephen Harper Canada’s equivalent to Richard Nixon, that U.S. president who was eventually impeached for using state powers to punish critics of his government and policies?