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Tax Is Not a Four-Letter Word: A Different Take on Taxes in Canada
Taxes connect us to one another, to the common good, and to the future. This is a book about who pays what and who gets what. More than that, it’s about the role of government, about citizenship and our collective well-being, about the Canada we want. The contributors, leading Canadian practitioners and scholars, explore how taxes have become a political “no-go zone” and how changes in taxation are changing Canada. They challenge the view that any tax is a bad tax and provide broad directions for fairer and smarter approaches. This is a book that will be of interest to anyone concerned with public policy and public affairs, economics, and political science and to anyone interested in challenging the conventional wisdom that lower taxes and smaller government are the cures to what ails us.
304 pages, Paperback
First published May 28, 2013
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December 21, 2013
“Tax is Not a Four Letter Word” by the Himelfarb brothers (eds.), and various authors, is a useful text for anyone interested in exploring the relationship between taxation and public services. More specifically, this text examines the potential of different tax regimes to close inequality gaps and maintain essential services in an ongoing climate of “austerity”. This book is structured as a series of short and sourced essays.
Throughout this book the authors contend they are “progressive” and describe progressive positions as being “liberal” whereas I would view their ideas as being more NDP. Most of the essays begin with a critique of Canada’s current tax regime that the authors suggest doles out numerous deductions, credits and tax haven options that disproportionately benefit high income earners. The authors also claim this has become exceedingly worse under Harper’s conservatives and has been responsible for exacerbating the market-income divide between the 90% of low income earners in Canada and the 10, 1 and .01% of high income earners. The critique consistently levied by various authors against the conservatives is how they play upon the superficial dispositions and understandings of the general public in order to stay in power, which ultimately works to the detriment of the public good.
The conservatives rode to power on a promise of tax cuts which to the ears of the general public sounds like “free money”. But tax cuts are never free, and the implications of these cuts are rarely discussed.
When Stephen Harper came to power in 2006 he reduced the GST by two points, over two years, while straddling a massive pile of debt. He also lowered corporate taxation rates even though the existing rates were already competitive. This double-gutting of public revenue came at exactly the wrong time as Canada moved into the global recession. But even if we hadn’t moved into a recession, would either of those two moves been wise while sitting on a huge pile of debt? Let’s take a look at the cycle.
The conservatives dole out a massive tax cut such as reducing the GST while still having to maintain an irreducible minimum of public services. With reduced public revenue, this means the government will have to run a higher deficit to finance services which results in a higher debt that requires higher interest payments. These higher interest payments are made by taxpayers and these taxes are perhaps the most regressive a taxpayer can pay since there is zero return. Interest payments only enrich the coffers of financial investors external to the public system. The ensuing irony however is that the conservatives will then turn around and say they must slay this insurmountable of their own creation as if they are mindful fiscal stewards. The tragedy is that they will tackle the debt by cutting public services. And so this cycle ensues each and every time the conservatives come to power.
Quality public services is one form of wealth transfer that benefits the vast majority of Canadians, and in return, improves the both the short and long-term civic and economic prospects of the state. In other words, most Canadians get out more than they put in and this book includes the empirical evidence to prove it (the evidence provided overlaps with evidence provided in a variety of separate sources which strengthens the validity of these claims). Not only do public services that are supported through progressive taxation enable the state to harness the economic potential of all citizens but the universal access to the common goods also results in immeasurable third-party benefits (positive externalities) that help the state to achieve their civic objectives such as equality of opportunity, democratic participation, reduced inequality, reduced crime rates, and so on. Without a progressive transfer, “…wealth, influence and well-being will disproportionately accrue for an ever decreasing minority at the top of our nation’s economic pyramid to the detriment of an ever broadening majority (labour/working class) at the base” (Sylvester, 2011). In the event this imbalance ever becomes too great, the pyramid may flip over and give rise to a new political and economic arrangement, and perhaps one less amenable to suiting a cross section of interests when compared with the type of market democracy we have now. In other words, in order to sustain civil stability and economic growth over the longer-term, governments must maintain a balance of public policy interests between capital and labour. According to these authors, our currently skewed taxation is undermining our ability to achieve that balance. Public services constitute the “soft infrastructure” this country requires to compete in an increasingly competitive global economy.
In terms of solutions, the authors offer several. Foremost is the need to think of taxation differently. Tax expenditures are “tax cuts” that should be viewed as foregone revenues that would have otherwise been used to finance public programs. Therefore, when we think of taxes, we should no longer judge taxes solely on their impact in private markets but also by what is lost in exchange for that cut. Instead, we need to re-evaluate our understandings of tax expenditures, their effectiveness and the distributional impacts these cuts have on society. This requires developing an understanding of how federal taxes and transfers work together, and the extent to which taxes are either progressive or regressive, and how that affects productivity (growth), well-being and socio-political stability over the longer term without creating perverse distortions.
Some of the authors suggest that the development of an equitable regime requires that all taxes be levied homogenously, across Canada, at the federal level in order to reduce the race-to-the-bottom that occurs in response to inter-provincial competition. The development of an international regime would work similarly to prevent capital flight. Yet beyond these detailed semantics, the one common theme that emerged was the need to change the conversation.
Several authors claimed that Canadians have grown accustomed to calling for tax cuts while complaining of the need to improve public services often without recognizing the incongruence of these two positions. The onus, however, in changing this discourse is the responsibility of labour and union groups whose mandate is to advance the interests of labour, and the public, which includes all occupational groups, including professionals.
Traditionally, public and non-profit institutions have not developed or promoted cost-benefit positions that adequately justify the services they provide. Essentially, they haven’t had to since many institutions have had a monopoly over provision. The downside is that it feeds suspicion as to whether provision is as efficient or effective as it could be, which is a fair curiosity to arrive at given the critiques that have been levied against these institutions by the majority of public think-tanks and modern governments over the course of the last 30 years.
Consequently, these authors contend that public institutions would benefit from developing a new narrative that moves beyond their traditional base critiques of individuals, ideology and status quo government positions, and instead should be expending those resources on the development of the type of cost-benefit narrative our modern societies demand. One author concluded that “progressives who talk about raising taxes without connecting it to the broader social benefit lose the political argument”. And according to this source, and several others progressives have been losing for some time, and will continue to lose until they wield the humility and wherewithal required to develop an adequate counter to the consensus view narrative that low-taxes are good and that market reforms are required to enhance the efficiency and effectiveness of public goods provision.
What are the prospective benefits or implications of specific programs, policy instruments, or policy directions? How does the current tax regime enable or limit our ability to support programs or pursue different policy directions?
Another related but slightly different proposition was the need to adopt a Financial Transaction Tax (FTTs). FTTs are a levy on equities, bonds and foreign exchange in addition to a range of other taxes on transactions made by financial intermediaries. The intent of this tax would be to stabilize the economy, promote productive investments, and reduce speculation and inequality. The rationale employed is that the financial sector has grown disproportionate to its use in the real economy and has bore little-to-no responsibility for the 2008 recession. According to the authors, FTTs could be used to mitigate the types of perverse incentives that contributed to the current meltdown and could also provide a financial cushion to mitigate the implications that inevitably and cyclically arise within the business cycles of market economies.
Overall, I can agree with the need to broaden the tax regime and to make sure it is progressive and that parliamentary committees should be mandated to review the impact of tax expenditures as they do program spending. I can also agree that public institutions should be developing cost-benefit positions that justify the resources required for the services they provide, to not only gain public support, but also to circumvent the supposed need to quasi-privatize these services. Another useful aspect of this book is the inclusion of an array of empirical evidence to support the assertions made within it. These stats, in addition to several logical arguments, would be a helpful resource for anyone trying to develop an alternative narrative that challenges the status quo and provides opportunities beyond it.
My only critique is the disparity of quality between essays. Several of the essays include leftist arguments that are largely passe and are those that are dismissed out-of-hand by modern policy and decision-makers. That these relatively weak essays are lumped in with those more likely to gain the attention of policy and decision-makers is unfortunate, not only for those authors, but also for the public who could prospectively gain from these ideas.
Had the more leftist fluff not been included, I would have given this book a 4 out of 5, but given this inclusion, the Himelfarbs’ get a 3.
Throughout this book the authors contend they are “progressive” and describe progressive positions as being “liberal” whereas I would view their ideas as being more NDP. Most of the essays begin with a critique of Canada’s current tax regime that the authors suggest doles out numerous deductions, credits and tax haven options that disproportionately benefit high income earners. The authors also claim this has become exceedingly worse under Harper’s conservatives and has been responsible for exacerbating the market-income divide between the 90% of low income earners in Canada and the 10, 1 and .01% of high income earners. The critique consistently levied by various authors against the conservatives is how they play upon the superficial dispositions and understandings of the general public in order to stay in power, which ultimately works to the detriment of the public good.
The conservatives rode to power on a promise of tax cuts which to the ears of the general public sounds like “free money”. But tax cuts are never free, and the implications of these cuts are rarely discussed.
When Stephen Harper came to power in 2006 he reduced the GST by two points, over two years, while straddling a massive pile of debt. He also lowered corporate taxation rates even though the existing rates were already competitive. This double-gutting of public revenue came at exactly the wrong time as Canada moved into the global recession. But even if we hadn’t moved into a recession, would either of those two moves been wise while sitting on a huge pile of debt? Let’s take a look at the cycle.
The conservatives dole out a massive tax cut such as reducing the GST while still having to maintain an irreducible minimum of public services. With reduced public revenue, this means the government will have to run a higher deficit to finance services which results in a higher debt that requires higher interest payments. These higher interest payments are made by taxpayers and these taxes are perhaps the most regressive a taxpayer can pay since there is zero return. Interest payments only enrich the coffers of financial investors external to the public system. The ensuing irony however is that the conservatives will then turn around and say they must slay this insurmountable of their own creation as if they are mindful fiscal stewards. The tragedy is that they will tackle the debt by cutting public services. And so this cycle ensues each and every time the conservatives come to power.
Quality public services is one form of wealth transfer that benefits the vast majority of Canadians, and in return, improves the both the short and long-term civic and economic prospects of the state. In other words, most Canadians get out more than they put in and this book includes the empirical evidence to prove it (the evidence provided overlaps with evidence provided in a variety of separate sources which strengthens the validity of these claims). Not only do public services that are supported through progressive taxation enable the state to harness the economic potential of all citizens but the universal access to the common goods also results in immeasurable third-party benefits (positive externalities) that help the state to achieve their civic objectives such as equality of opportunity, democratic participation, reduced inequality, reduced crime rates, and so on. Without a progressive transfer, “…wealth, influence and well-being will disproportionately accrue for an ever decreasing minority at the top of our nation’s economic pyramid to the detriment of an ever broadening majority (labour/working class) at the base” (Sylvester, 2011). In the event this imbalance ever becomes too great, the pyramid may flip over and give rise to a new political and economic arrangement, and perhaps one less amenable to suiting a cross section of interests when compared with the type of market democracy we have now. In other words, in order to sustain civil stability and economic growth over the longer-term, governments must maintain a balance of public policy interests between capital and labour. According to these authors, our currently skewed taxation is undermining our ability to achieve that balance. Public services constitute the “soft infrastructure” this country requires to compete in an increasingly competitive global economy.
In terms of solutions, the authors offer several. Foremost is the need to think of taxation differently. Tax expenditures are “tax cuts” that should be viewed as foregone revenues that would have otherwise been used to finance public programs. Therefore, when we think of taxes, we should no longer judge taxes solely on their impact in private markets but also by what is lost in exchange for that cut. Instead, we need to re-evaluate our understandings of tax expenditures, their effectiveness and the distributional impacts these cuts have on society. This requires developing an understanding of how federal taxes and transfers work together, and the extent to which taxes are either progressive or regressive, and how that affects productivity (growth), well-being and socio-political stability over the longer term without creating perverse distortions.
Some of the authors suggest that the development of an equitable regime requires that all taxes be levied homogenously, across Canada, at the federal level in order to reduce the race-to-the-bottom that occurs in response to inter-provincial competition. The development of an international regime would work similarly to prevent capital flight. Yet beyond these detailed semantics, the one common theme that emerged was the need to change the conversation.
Several authors claimed that Canadians have grown accustomed to calling for tax cuts while complaining of the need to improve public services often without recognizing the incongruence of these two positions. The onus, however, in changing this discourse is the responsibility of labour and union groups whose mandate is to advance the interests of labour, and the public, which includes all occupational groups, including professionals.
Traditionally, public and non-profit institutions have not developed or promoted cost-benefit positions that adequately justify the services they provide. Essentially, they haven’t had to since many institutions have had a monopoly over provision. The downside is that it feeds suspicion as to whether provision is as efficient or effective as it could be, which is a fair curiosity to arrive at given the critiques that have been levied against these institutions by the majority of public think-tanks and modern governments over the course of the last 30 years.
Consequently, these authors contend that public institutions would benefit from developing a new narrative that moves beyond their traditional base critiques of individuals, ideology and status quo government positions, and instead should be expending those resources on the development of the type of cost-benefit narrative our modern societies demand. One author concluded that “progressives who talk about raising taxes without connecting it to the broader social benefit lose the political argument”. And according to this source, and several others progressives have been losing for some time, and will continue to lose until they wield the humility and wherewithal required to develop an adequate counter to the consensus view narrative that low-taxes are good and that market reforms are required to enhance the efficiency and effectiveness of public goods provision.
What are the prospective benefits or implications of specific programs, policy instruments, or policy directions? How does the current tax regime enable or limit our ability to support programs or pursue different policy directions?
Another related but slightly different proposition was the need to adopt a Financial Transaction Tax (FTTs). FTTs are a levy on equities, bonds and foreign exchange in addition to a range of other taxes on transactions made by financial intermediaries. The intent of this tax would be to stabilize the economy, promote productive investments, and reduce speculation and inequality. The rationale employed is that the financial sector has grown disproportionate to its use in the real economy and has bore little-to-no responsibility for the 2008 recession. According to the authors, FTTs could be used to mitigate the types of perverse incentives that contributed to the current meltdown and could also provide a financial cushion to mitigate the implications that inevitably and cyclically arise within the business cycles of market economies.
Overall, I can agree with the need to broaden the tax regime and to make sure it is progressive and that parliamentary committees should be mandated to review the impact of tax expenditures as they do program spending. I can also agree that public institutions should be developing cost-benefit positions that justify the resources required for the services they provide, to not only gain public support, but also to circumvent the supposed need to quasi-privatize these services. Another useful aspect of this book is the inclusion of an array of empirical evidence to support the assertions made within it. These stats, in addition to several logical arguments, would be a helpful resource for anyone trying to develop an alternative narrative that challenges the status quo and provides opportunities beyond it.
My only critique is the disparity of quality between essays. Several of the essays include leftist arguments that are largely passe and are those that are dismissed out-of-hand by modern policy and decision-makers. That these relatively weak essays are lumped in with those more likely to gain the attention of policy and decision-makers is unfortunate, not only for those authors, but also for the public who could prospectively gain from these ideas.
Had the more leftist fluff not been included, I would have given this book a 4 out of 5, but given this inclusion, the Himelfarbs’ get a 3.
February 1, 2014
“Tax is not a four-letter word; rather, it's the price we pay for the country we want,” write Alex and Jordan Himelfarb in their book Tax is Not a Four-Letter Word.
And yet, too often, we only think of the negative connotations of the word tax ("a burden to be relieved" as opposed to "the price we pay for civilization"), the authors note. This is not by accident, they explain: "This is the logical consequence of the neo-liberal model, which emerged in the US and Britain in the late 1970s and more slowly and subtly in Canada starting at around the same time....And so civilization has inevitably suffered. Absent the possibility of a balanced conversation about taxes, we have severely limited our capacity to respond to persistent financial instability and growing inequality, and we have stunted our collective aspirations. The conversation needs to change."
The book offers practical strategies for changing the conversation. I felt energized and filled with hope when I finished reading it.
Highly recommended.
And yet, too often, we only think of the negative connotations of the word tax ("a burden to be relieved" as opposed to "the price we pay for civilization"), the authors note. This is not by accident, they explain: "This is the logical consequence of the neo-liberal model, which emerged in the US and Britain in the late 1970s and more slowly and subtly in Canada starting at around the same time....And so civilization has inevitably suffered. Absent the possibility of a balanced conversation about taxes, we have severely limited our capacity to respond to persistent financial instability and growing inequality, and we have stunted our collective aspirations. The conversation needs to change."
The book offers practical strategies for changing the conversation. I felt energized and filled with hope when I finished reading it.
Highly recommended.
July 9, 2014
The overall thrust of this book is that taxes deliver public service (gasp!). If that general attitude describes you, and you're willing to slog through some tough chapters, then you'll enjoy the book. I preferred the narrative-style chapters to the more academically-weighted chapters, but I'm also a practitioner and not an academic. A good read that should stir up some thoughts and ideas.
November 25, 2013
"We were convinced the conversation about taxes was the conversation about the future of our country," says Alex Himelfarb during the panel discussion at his book launch. It was held on Tuesday, November 5th at Ryerson hosted by the Canadian Centre for Policy Alternatives and director Trish Hennessy.
The introduction to the book begins with an ambitious although worthwhile goal: to reframe the Canadian tax debate. It asserts that 'tax cuts' have been lauded both provincially and nationally as a rhetorical tool because no one likes taxes and yet there is little debate about what taxes buy and what this means. Using Harper's GST cut from 7 to 5 percent, they assert that not one party protested the cut despite the fact this is lost revenue for the government and there is still a deficit. While there are certainly partisan ideas about what the role of government and the extent of taxation, it's become multipartisan policy to embrace tax cuts.
This book attempts to shift this discourse through a series of essays from different policymakers and academics about how this obscures the real issues and affects our conversations about where Canada should be going in the future. I also attended the book launch to further understand what kind of
But, this is not a one-sided conversation about why our tax system is broken. Several of the articles model what progressive tax system could look like--all of which are different. Himelfarb joked during the launch that he considered calling the book "Let's Raise Taxes" but in any case, he would have lost a number of authors. The authors all believe in tax reform, certainly. Even though the authors disagree about taxes, but they agree on a transformation of public policy about them. Taxes from carbon to transaction are explored in detail, as well as Canadian public opinion on taxes.
One of the few flaws of the book is how dense it is. While the individual articles were fairly short, there were enough that it took me a fair amount of time to wade through them, especially given the varying styles of the authors. While all were scholarly and would have fit in an academic journal, it was the equivalent of doing a semester of my course readings in a few hours--rewarding, interesting but difficult.
The other criticism worth mentioning is that although I agree we need tax reform and I even agree that the change in discourse is the first step, this book is missing the connection between the public, stakeholders, party members and the policy process from there. In many of the articles it skips from the concept to the possible implementation and benefits without answering besides broad support how a policy can be implemented. I would have liked to see a little bit more thought to the partisan policy process outside of actual governance.
Overall, I think Tax Is Not a Four-Letter Word is an engaging and worthwhile book for anyone interested in #cdnpoli and hopefully the beginning of an ongoing conversation. Alex Himelfarb ended the panel section of the book launch with a final thought. "We'll get the future we pay for." Now beyond this book, it's time to ask what we are willing to pay for.
Full disclosure: I received this book as through Netgalley from Wilfrid Laurier University Press in exchange for an honest review. Also, Alex Himelfarb is the Director of the Glendon School of Public and International Affairs and although I'm a Political Science undergraduate at Glendon, he's never been a professor/advisor of mine, unfortunately.
The introduction to the book begins with an ambitious although worthwhile goal: to reframe the Canadian tax debate. It asserts that 'tax cuts' have been lauded both provincially and nationally as a rhetorical tool because no one likes taxes and yet there is little debate about what taxes buy and what this means. Using Harper's GST cut from 7 to 5 percent, they assert that not one party protested the cut despite the fact this is lost revenue for the government and there is still a deficit. While there are certainly partisan ideas about what the role of government and the extent of taxation, it's become multipartisan policy to embrace tax cuts.
This book attempts to shift this discourse through a series of essays from different policymakers and academics about how this obscures the real issues and affects our conversations about where Canada should be going in the future. I also attended the book launch to further understand what kind of
But, this is not a one-sided conversation about why our tax system is broken. Several of the articles model what progressive tax system could look like--all of which are different. Himelfarb joked during the launch that he considered calling the book "Let's Raise Taxes" but in any case, he would have lost a number of authors. The authors all believe in tax reform, certainly. Even though the authors disagree about taxes, but they agree on a transformation of public policy about them. Taxes from carbon to transaction are explored in detail, as well as Canadian public opinion on taxes.
One of the few flaws of the book is how dense it is. While the individual articles were fairly short, there were enough that it took me a fair amount of time to wade through them, especially given the varying styles of the authors. While all were scholarly and would have fit in an academic journal, it was the equivalent of doing a semester of my course readings in a few hours--rewarding, interesting but difficult.
The other criticism worth mentioning is that although I agree we need tax reform and I even agree that the change in discourse is the first step, this book is missing the connection between the public, stakeholders, party members and the policy process from there. In many of the articles it skips from the concept to the possible implementation and benefits without answering besides broad support how a policy can be implemented. I would have liked to see a little bit more thought to the partisan policy process outside of actual governance.
Overall, I think Tax Is Not a Four-Letter Word is an engaging and worthwhile book for anyone interested in #cdnpoli and hopefully the beginning of an ongoing conversation. Alex Himelfarb ended the panel section of the book launch with a final thought. "We'll get the future we pay for." Now beyond this book, it's time to ask what we are willing to pay for.
Full disclosure: I received this book as through Netgalley from Wilfrid Laurier University Press in exchange for an honest review. Also, Alex Himelfarb is the Director of the Glendon School of Public and International Affairs and although I'm a Political Science undergraduate at Glendon, he's never been a professor/advisor of mine, unfortunately.
August 27, 2014
A great book that goes beyond critiquing the current tax situation in Canada and lamenting how difficult it will be to change the conversation and feelings towards taxes, to offering solutions to these problems.
Most of the essays are very accessible and together form a great foundation for discussing tax.
Most of the essays are very accessible and together form a great foundation for discussing tax.
November 30, 2014
An interesting discussion about taxes from a variety of perspectives. An absolutely essential contribution to political debates throughout Canada.
August 29, 2014
It is a very good book for a political junkie
this book was very enjoyable it is stunning to find out more about our tax system and the different methods we could use.
this book was very enjoyable it is stunning to find out more about our tax system and the different methods we could use.
Displaying 1 - 7 of 7 reviews