Moderate Taxes May Lead to Civilization

Commentary, Local Government, Taxation

“Taxes are the price we pay for civilization,” said Oliver Wendell Holmes Jr., an accurate observation on the surface but one often quoted without context: when Holmes wrote his quip in 1927, taxes as a percent of the economy, both in the U.S. and Canada, were much lower than now. Without context, simplistic arguments result.

A good example of such simplification appeared recently in an anti-tax relief study from the Canadian Centre for Policy Alternatives. The nub of the CCPA’s claim is that many Canadians receive more in government benefits than they pay in taxes.

In other words, taxes redistribute income. No kidding.

The study was financed by government unions who have an interest in higher taxes and more government spending but that doesn’t disqualify it; everyone has an initial bias. They key is to ask whether conclusions are fairly drawn and if something is missing in a particular claim. It is on this latter test that the tax-happy crowd are often wrong and where the CCPA study in particular fails.

The CCPA study creates a false choice: it’s either taxes and civilization (and preferably high and punishing!) or no taxes and no civilization. Except that no one with a scintilla of nuance thinks that’s the choice. The debate should revolve around the question of what sort of government is desirable and what’s the best way to pay for that.

Assuming most of us want jobs and appreciate the role entrepreneurs play in the creation of the new companies and the employment that comes from the same, a useful question to ask is: what are the optimal taxes and tax levels for such an end, i.e., when do taxes destroy opportunity?

But the CCPA study ignores all that and also whether taxpayers receive good value. Instead, the study claims government programs are a “quiet bargain.” But to claim some Canadians have it good because other people pay for a chunk of their government services isn’t a measurement of a good deal; it’s just another way of saying governments redistribute money.

To know you’re getting a good deal, one has to be able to compare services and costs and to choose other suppliers if prices are too high or services inadequate. But governments are often held hostage by monopolistic public sector unions. That has consequences. A few years back, a BC health care union went on an illegal strike for one week and caused surgeries to be cancelled at the BC Children’s hospital.

Or there is this measurement. Data from the Canadian Federation of Independent Business reveals wages and benefits in the public sector are significantly higher than in similar private sector jobs: by 41.7 per cent federally, 24.9 per cent provincially, and 35.9 per cent municipally. Also, in the public health care sector, wages and benefits exceed private comparables by 19 per cent.

The CCPA study also ignores how governments waste money. Think of $182 billion in corporate welfare over 12 years instead of provincial and business tax reductions which would have allowed allow more entrepreneurs to flourish.

There is this other omission in the CCPA’s work: how various groups seek and receive tax dollars for their own agendas.

Back in the dying days of the BC NDP government in early 2001, that government awarded an untendered “contract” to the Canadian Centre for Policy Alternatives. The contract was to stretch from 2001 and 2005, a four-year period to coincide with the expected term of the B.C. Liberals who were a sure bet to win the election in 2001 (and did).

Besides that tax-funded gift, the government-owned insurance company also bought 50 “subscriptions” to CCPA materials during the NDP time in office, even though the information was available free on the web. And the BC Ministry of Finance purchased an “enhanced” subscription to CCPA materials.

All told, during the NDP period, the CCPA received over $410,000 in tax-funded support from BC’s taxpayers—significant for any small think tank; the CCPA also received money from the Manitoba NDP government, and later, in 2002, $900,000 from the federal government. I know all this because I filed many of the Freedom of Information requests that uncovered the BC information.

When groups claim that tax relief is bad for you, and that government delivery and especially non-competition are desirable, it’s not just their public sector patrons who may benefit from such arguments; it may be the groups themselves.