For Love of Taxes

Has this vital topic become so toxic that no one dares talk about it?

How’s this for a definition of utter misery: a politician trying to convince voters that more taxes are a good thing. Selling vacuum cleaners door to door would be a sweet gig by comparison. Popular rage against taxes has grown in recent years, rendering it such a dangerous topic for politicians that public-policy experts fear an open debate on the subject has become almost impossible. And with governments struggling to handle post-recession deficits, the lack of dialogue is a serious problem.

It’s easy to understand why politicians are fearful. The B.C. Liberals, who once seemed so undefeatable, were licked by the NDP in several opinion polls last fall after bringing in the much-reviled Harmonized Sales Tax, and former SoCred premier Bill Vander Zalm is busy mobilizing a public outcry against the tax, complete with public demonstrations and an official provincewide petition to revoke the tax. 

Federally, economists are deriding the Conservative government’s plans to conquer a $56-billion deficit without raising taxes or making major cuts to federal transfer payments. Critics also maintain there would barely be a deficit had the Conservatives not lowered the GST by two percentage points since 2006. Tories themselves are quick to strike back and label their foes as tax-loving spenders. An internal email sent to Conservative MPs and supporters in February that was leaked to the news media accused the federal Liberals of having secret plans to raise taxes, after a prominent banker known as a Liberal adviser publicly endorsed a hike. This despite the Liberals’ publicly stated stance against tax increases. 

The rhetoric in politics is in step with public opinion, according to Hamish Marshall, research director of public affairs at Vancouver polling company Angus Reid Strategies Corp., who notes that “there seems to be a real reticence in terms of tax increases that has become harder compared to polling five or six years ago.” 

An increasing number of poll respondents in B.C. and Canada as a whole are willing to lose government services rather than pay more tax, Marshall says. Fuelling this attitude is a widespread belief that governments are plagued by wasteful spending that should be cut before taxes go up. 

This is one of many popular myths propagated by certain politicians and anti-tax groups that hinder a healthy debate on taxation, says Jonathan Kesselman, a public-policy professor at SFU who has spent years studying tax policy. Of course there’s some waste in government, he says, but not nearly on the scale many believe. Political slogans with little basis in fact often outweigh sound analysis when it comes to taxes, he says, which, understandably, can become frustrating.

The HST, scheduled to be implemented in B.C. in July, is a good example of how the dialogue can get twisted. The HST is both more efficient economically and more transparent democratically than the Provincial Sales Tax, which it will replace, Kesselman argues. The PST is applied to a lot of the costs that go into creating a product, he explains, and thus gets hidden in the final price and passed on to consumers. The HST doesn’t apply to these inputs, so the tax is front and centre for all to see. Making a tax more transparent is generally an honest move by government, but ironically this can also make it less popular. “The more visible these things are,” Kesselman says, “the more people can gripe about it.”

Former B.C. premier and Vancouver mayor Mike Harcourt has been under fire over taxes many times in his career, notably as mayor after Vancouver hosted Expo 86 and as premier when the federal Liberals cut transfer payments to the provinces in the ’90s. It was hard to have productive discussions about taxes then, he says, and it hasn’t got better since.

“There’s a lot of falsehood; there’s a lot of misleading, empty rhetoric and propaganda,” Harcourt says. “I think it’s gotten pathologically dangerous that all taxes are bad. It’s harmful.” These messages do have strong support among many taxpayers, he concedes, but largely because people have been misinformed about government spending. When people are shown exactly how their tax money is spent and get an accurate picture of the services they’re getting, they tend to accept tax levels. This is the kind of discussion that needs to happen more often if there is to be a productive debate about taxation, he says. “It takes some courage, but it is possible.”

Given the opposition to taxation today, SFU’s Kesselman suggests that governments have essentially two options if they want to make changes to the tax system: do it by stealth, without consulting the public, or be prepared to endure a long public-awareness campaign. The latter option might last years, he says, and include a non-partisan experts panel that could thoroughly study and communicate the ugly details. And after much difficult debate and study, he says, “you have to bite the bullet and do it.”

– Peter Severinson