Bill Scarth is a highly respected mainstream Canadian economist at McMaster University. In a piece just published by the C.D. Howe Institute, a generally conservative think-tank, he argues that the pace of federal deficit reduction should be slowed in order to lower unemployment.
His key point is that the economy still has a lot of slack which will not be quickly closed just by maintaining interest rates at their currently very low levels.
The issue of income-splitting — a tax policy whereby income is reattributed within a household from a higher-earning spouse to a lower-earning spouse — has been front of mind among tax experts, federal Conservative ministers and, most recently, the left-leaning Broadbent Institute. The practice advantages households in which income is predominantly earned by one spouse, since it allows a taxpayer in a high tax bracket to attribute income to a partner who pays at a lower marginal rate (or who earns nothing at all).
If Stephen Harper’s goal was to design a tax policy to make income inequality in this country even worse, he can pat himself on the back. That’s exactly what the Conservatives’ family income-splitting tax scheme will do.
Research from various organizations across the political spectrum has demonstrated already that this tax policy, projected to cost the federal treasury $3 billion in 2015, would be an expensive and inequitable tax giveaway.
Employment Minister Jason Kenney says the Harper government has no intention of backing away from its income splitting pledge, despite a new report concluding the plan would exacerbate income inequality and bestow the most benefits to the West.
The run up to the recent Quebec election prompted a revival of the argument that only federal transfers keep that fiscally-challenged province afloat. For example, Mark Milke of the Fraser Institute argued in the National Post that Quebec is “massively subsidized by the rest of Canada.”
This argument is hugely over-done. And it contradicts a more effective and positive argument for federalism, namely that it has been no barrier to the construction of a distinctive and progressive social model in Quebec.
A widely-reported study by the New York Times shows that middle-class Canadians now have higher after-tax incomes than middle-class Americans, and that Canadian middle-class incomes, adjusted for inflation, have been rising significantly over the past decade.
The facts cited in the original article are not in dispute. The median per-person income in the United States (half earn more and half earn less) has stagnated for the past decade, and the income share of the top 1% in that country has continued to rise to record-high levels.
But this does not mean, as the Harper Conservatives and right-wing pundits have been quick to claim, that all is well with the Canadian middle class.