Taxes versus services

This article illustrates some of the alternative ways in which the Federal surplus could be sent rather than just automatically cutting taxes. As the article points out there are all sorts of unmet needs and almost crisis situations with respect to work needed on infrastructure, expenditures on health care to cut waiting lists etc. In fact it could be argued that if programs had been decently funded in the first place there would be no surplus just much better services for Canadians.
Our social programmes have been deteriorating for years. By cutting taxes rather than funding social programmes we will be assured that they will deteriorate further and certainly there will be no more national programs such as a national drug programme.

Taxes vs services

Feds favour knee-jerk tax cuts over urgent public needs.

Dateline: Tuesday, October 30, 2007

by Anthony Westell

Would you rather have a few dollars a week off your shopping bill or better medicare, better schools, bridges that don't fall down and a greener environment? That's the question we should be debating, instead of how best to cut the taxes that would pay for all those good things.

The federal government is awash with cash, which it says it doesn't need, so it is preparing to shave a point off the GST. That would reduce prices slightly and make shopper/voters happy, or so Prime Minister Stephen Harper hopes. Economists, almost unanimously, say that a cut in income tax would make more sense, but that would not be immediately visible, and probably not as popular.

Provinces and municipalities are pleading for money to hire nurses and teachers, improve transit and fill potholes.



But why does the federal government think it has more dollars than it needs? Hasn't it heard the provinces and municipalities pleading for money to hire more doctors, nurses and teachers? Doesn't it know that we need to pour billions into infrastructure, improve public transit, fill potholes and much, much more?

The provinces and municipalities in fact provide most of the services important to Canadians. But Ottawa has more taxing power than those "junior" levels of government. Call it an imbalance, if you wish, because it is an imbalance, and it has dogged Confederation for decades.

What has happened is that Ottawa has launched national programs (such as medicare) within provincial jurisdiction by offering to pay some of the costs for provinces that run their programs according to federal specifications. However dubious this use of the federal power to tax and spend may be, it has at produced national programs the provinces might never have launched on their own. And it has transferred federal tax revenues to provinces that would play along.

Now Mr Harper has announced plans to limit any such use of the federal spending power.

So what will happen to Ottawa's cash? There will be tax cuts — but less investment in public services. The provinces and cities can of course raise their own taxes to capture the cash Ottawa has returned to the people. But that would be clumsy and costly; Ottawa would tax the people and then return what it doesn't need and the lesser governments would grab it by raising their own taxes. Example: Ottawa cuts the sales tax and Toronto raises its taxes.

It would make far more sense if Ottawa forgot about trimming taxes and turned surplus revenues over to the junior governments. But that might not play well politically.

Anthony Westell is a retired political reporter and columnist.

Westell was the Globe and Mail's bureau chief in Ottawa, 1964-69, and later a national affairs columnist for the Toronto Star.



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