02-03 Taxation

If anyone thinks there is no need for governments to raise taxes after the pandemic, they have another think coming. You can only print and borrow so much.
Canada, before the pandemic, had public debt levels that were about 30% of the economy. But, after the massive relief spending this could be as high as 100%. And it is the same story everywhere.
Back in 1970 I led a national tax crusade against a proposed overhaul of the nation’s tax system. Lessons from the past are relevant today.
My focus was on plans to tax small business corporations at the rate of 50%, whereas the effective tax rate for the large international companies was in the order of 25%. And I was opposed to another death tax on top of two existing taxes. Something the wealthy could end run, but not the average small business owner.
What I did not realize at first was that this tax initiative by the federal government was really tax increases in disguise. It was a new tax regime to fund a range of new social spending schemes, which Prime Minister Pierre Trudeau called his “Just Society” initiatives.
So rule number one in 2020. Tell the public exactly what the new taxes are designed to cover. It would be my suggestion to have a number of temporary three-year surcharges to fund the Coronavirus expenditures. Make payment of the surcharges a patriotic duty.
Typically, when politicians decide to raise taxes, the bureaucracy use the opportunity to change a pile of technical provisions, knowing the politicians and the public will not have a clue what they are about. There were 60 of these changes in the White Paper on Tax Reform back in 1970. And, unless you can read Greek, forget about it.
So make new proposed taxes understandable. Why not use the need to raise taxes to fund pandemic spending to achieve other social objectives. Tie the pandemic to climate change. Green taxation always sounds so warm and fuzzy.
The big revenue raiser for governments is the Value-Added Tax, which is called the GST in Canada. Under the administration of President Obama in the US there was a discussion of a VAT, and all the political cartoonists had a field day.
It would not be a surprise if the GST was increased in Canada. It was 7% and dropped to 5%. It provides revenues that governments can count on. Unlike the proposals to tax wealth, or go after the billions hidden in places like the Cayman Islands.
What is so different today compared to the past is the hardship and suffering of so many during the pandemic, and the acceptance of the role of the state.
I am not sure if I am typical, but I will gladly pay an increase in income or sales taxes to fund what has been an extraordinary effort by our federal and provincial governments to protect our society and our economy. It has been like nothing I have seen in my lifetime.