The Dominion - tax

The Canadian Taxpayers Federation: A Myopic Watchdog?

Moira Peters — Fri, 20 Aug 2010 12:02:35 +0000

Anti-tax group setting up in Atlantic Canada, critics says it's all rhetoric

HALIFAX—A self-described “taxpayer watchdog” group with offices across Canada is poised to open an office in Halifax this fall, according to recent media reports. But critics say the organization is little more than a right-wing media mouthpiece.

The Canadian Taxpayers Federation (CTF) advocates for “lower taxes, less waste, and more accountable government,” according to Kevin Gaudet, the group’s federal director.

CTF’s website highlights the federal long-gun registry, the amount paid to elected officials, and “eco-taxes” as examples of wasted taxpayer money.

But Larry Haiven, a professor in the faculty of management at Saint Mary’s University, says most of CTF’s stances on issues—and particularly their relentless calls to lower taxes—are “the most simplistic garbage.”

“It assumes that nothing that is purchased with our taxes is of any use for us,” said Haiven.

Despite CTF’s anti-tax, spending-is-out-of-control rhetoric, said Haiven, taxes are lower now than they’ve been in decades, leaving governments struggling to provide essential services.

“Provinces and the [federal government] have been cutting taxes frenetically, frantically, for the past 25 years... Governments across Canada are taking in about $250 billion less than they did 15 years ago.

“You have to weigh that against everything the Taxpayers Federation says,” said Haiven.

Erin Weir, an economist with the United Steelworkers’ Union who has publicly debated and frequently published online commentary about CTF, said the organization “represents the right-wing fringe of Canadian politics” and most often chooses which issues to emphasize based on ideology and not their impact on taxpayers.

CTF “uses issues like gun control and politicians’ salaries—which have almost no effect on overall government expenditures or tax rates—to foment distrust of public institutions,” said Weir.

Gaudet said CTF stands up for taxpayers against “special interests,” which he defines as “anybody who’s taking money from government, to a certain extent.”

“We look at all issues, all political issues, all public policy issues through a lens of government spending,” he said.

However, some of the Harper government’s most expensive recent policy decisions barely figure on CTF’s radar.

Gaudet was reluctant to criticize the federal government’s package of "tough on crime" legislation, even though, by the government’s own admission, there is no data to indicate that the new laws will reduce crime in Canada—while the cost of building new prisons and increasing sentences is estimated at $10 billion.

“Legislation ought to have cost impacts put out with it,” stated Gaudet, stopping short of more specific criticism of the legislation.

In comparison, CTF led an extensive campaign against federal prisoners receiving old-age pensions; the group claims the costs associated with inmates’ pensions total $14 million per year.

Gaudet did not question the government’s decision to purchase new F-35 fighter jets from a US multinational, despite a $16-billion price tag; although he did post to his Facebook and Twitter accounts saying the contract should have gone to tender. Several analysts have criticized the purchase on such grounds as the Canadian military's lack of need for such jets.

“I find that type of question [of whether the fighter jets are needed] usually to be the type of refrain from those interests who generally...don’t like Harper, period,” said Gaudet. Opposition comes “from a bunch of people who like to pretend to think they’re experts on the unique service requirements of the Canadian Air Force, as if they had some unique perspective into the minds of the generals that run the show,” he said.

On most issues, CTF indeed camps out on the far right of the Canadian political spectrum. Along with the Fraser Institute and the National Citizens’ Coalition, CTF was one of the few prominent voices in Canada to support the decision to abolish the mandatory long-form census, even though the replacement voluntary household survey may well cost more.

On the issue of climate change, CTF justifies its opposition to all government initiatives to reduce carbon emissions with a straightforward argument: “We don’t believe there’s such thing as man-made climate change,” said Gaudet, adding that initiatives such as “cap-and-tax” are in no way proved to reduce CO₂ emissions.

When it was noted that 97 per cent of scientists support the theory that greenhouse gases emissions are changing the climate, Gaudet challenged the Media Co-op. “I think you’re probably very selective, and this is part of the problem with the movement,” he said. “You get a bunch of Kool-aid suckers who choose not to actually do much work, and mainly focus on that amount of stuff that gets published that suits their own interests. I disagree with the characterization that there’s consensus [among scientists about climate change].”

It is worth noting that some of CTF’s campaigns could be seen to align with the political left. The group’s website denounces “corporate welfare,” and Gaudet listed the aerospace and automobile industries among the “special interests” it accuses of begging at the public trough, noting the millions of dollars doled out in government subsidies.

The group is “fairly consistent” in this respect said Haiven. “They just don’t think government should be spending money on anything.”

The group's website claims 74,000 supporters—a phenomenon Haiven chalked up to the financial situation many Canadians find themselves in.

“Average earnings of Canadians...have not kept up with inflation,” noted Haiven. “[People are] looking for ways to save money, and one of the easy places to look is taxation. That’s part of what’s driving the anti-tax movement... The average person is earning less money...and so the appeal to somehow save some money is very attractive.”

But, he said, anti-tax advocates are barking up the wrong tree. He pointed to a study he co-authored in 2008 with economist Mathieu Dufour that shows that although Nova Scotia’s economy grew by 62 per cent over 20 years—11 percentage points more than the national average—and workers’ productivity increased, their paycheques still shrunk by five per cent.

“The province is getting richer [in terms of GDP]...but working people are not getting richer—they’re poorer. So where is that money going? It’s obviously going into the hands of a few,” said Haiven. His 2008 study noted that across Canada, the incomes of the top five per cent of Canadian families increased sharply between 1982 and 2004 while those of the bottom 70 per cent declined.

“The Taxpayers Federation will tell you that government is getting richer, but that’s not true,” Haiven added. “Government has shrunk...all across the country—the size of government, compared to GDP, has shrunk.

“Their pronouncements tend to be sensationalist, so the media gravitates to it. Media feeds the public perception that we’re somehow overtaxed and government’s too big,” he said.

Christine Saulnier of the Nova Scotia office of the Canadian Centre for Policy Alternatives (CCPA), challenged the notion that CTF’s anti-tax message resonates with very many Canadians.

The Canadian Taxpayers’ Federation at a Glance

Self-description: A citizen’s advocacy group dedicated to lower taxes, less waste, and accountable government.

Origins: Formed in 1990 through the merger of anti-tax groups in Manitoba and Saskatchewan.

Ideology: Though Federal Director Kevin Gaudet rejects ideological labels, finding them “not useful,” he says the best tag to attach to the group might be “libertarian.” Political scientist Brooke Jeffrey has written that CTF has a “neo-conservative approach to the role of government.”

Political partisanship: “All CTF staff and board directors are prohibited from holding a membership in any political party,” reads the organization’s website. Gaudet mentions that CTF is often accused of being a front for the federal Conservatives; however, he points to a “long list” of CTF’s criticisms of the Harper government. Some CTF staff have had ties to political parties – Gaudet himself worked for the Reform party, and Jason Kenney, current Conservative minister of Citizenship and Immigration, was president and CEO of CTF in the mid 1990’s.

Structure: Although CTF claims 74,000 “members,” critics charge CTF is not a member-run organization in the traditional sense of the word – Larry Haiven compares it to the Canadian Automobile Association, calling it a “franchise.”

Kevin Gaudet says CTF is run “the way Greenpeace is run.” The Media Co-op contacted Greenpeace Canada and found that like CTF, Greenpeace is a member-supported organization that accepts neither corporate nor political donations. Unlike CTF members, however, Greenpeace members can vote on resolutions at an Annual General Meeting, according to spokesperson Brian Blomme. Also unlike CTF, a summary of Greenpeace’s financial statement is available for download on its website.

Gaudet says CTF has a policy of not revealing its employees’ salaries, “like any private company.” (Though he did reveal his own annual salary when asked—$77,500.) As of press time, Greenpeace had not responded to a request for its top employees’ salaries, though a “campaigns coordinator” position on its website lists a salary of $50,297.

She pointed to a national poll commissioned by the CCPA in the fall of 2008, in which the overwhelming majority of respondents agreed that government should take concrete action to reduce poverty, raise minimum wages above the poverty line, and provide affordable housing—even if it meant “higher taxes or cuts in spending in other areas.” On nearly every question, Atlantic Canadians polled higher than the Canadian average.

“Yes [lowering taxes] resonates, but not with as many people as they say it does,” said Saulnier. “We’re not talking about the full implications of what it means to lower taxes. If we did, that would be a fairer debate. Then we’d see if it actually does resonate."

Saulnier is lukewarm about CTF’s pending arrival in Atlantic Canada.

“We’re about opening this debate,” she says. “We want to have a discussion about taxation.

“Having said that, I’m not sure it’s the Canadian Taxpayers’ Federation that can have that debate. We can’t have a discussion on taxation without talking about public services,” she said.

Weir noted that unlike think tanks, “the CTF does not produce research or analysis. Instead, most of its employees are essentially full-time media spokespeople.”

Weir remarked that while “the CTF presents itself as a grassroots movement...individual Canadian taxpayers cannot become members of the CTF, vote on its policy positions or elect its leadership.”

Gaudet defended the organization’s structure and grassroots credentials. The CTF functions “the way Greenpeace is run,” said Gaudet. “We don’t take government money. We exist by virtue of cheques from 74,000 people, usually small cheques, in the $50 to $300 range... [from] small businesses, mom-and-pop shops, farmers, for example.”

Saulnier hopes media coverage of CTF’s stance on issues will be fair, and the group’s aims transparent.

“We’re more often than not presented in the media as left-wing,” she said. “We are open about what our mandate is and we’d like the same from the other side.”

“I think we agree with some of [their priorities], like accountable government,” she added. “But we’d like to talk about who’s holding government accountable, and for what.”

Ben Sichel is a member of the Halifax Media Co-op, where this article wasoriginally published originally published.

Tax Monopoly

Canada Confronts Europe on Bank Levies

Martin Lukacs — Thu, 24 Jun 2010 05:45:42 +0000

Flaherty leads the charge against Robin Hood Tax

TORONTO—A confrontation is brewing at the upcoming G20 summit in Toronto, pitting Canada against European countries who are promoting a global “Robin Hood” bank tax that could raise hundreds of billions of dollars for social programs, food security or debt-payment.

A number of European nations, led by Britain, are calling for the adoption of taxes that would discourage speculative trading. Canada, however, is opposed to the taxes, and the US, while still uncommitted, is leaning towards Canada’s position. Opposition from one country would undermine the consensus required for the adoption of the multinational bank tax.

In early February, British Prime Minister Gordon Brown suggested that a deal on a potential tax levy could be reached at the Toronto G20 Summit. A few days later the Canadian government publicly opposed any such agreement.

“We’re not going to impose capital taxes on our financial institutions,” Canadian Finance Minister Jim Flaherty told journalists. “We’re against raising taxes and I hope to be able to convince my colleagues that these are unwise moves.” The Conservative government has also argued that as the only G8 country whose banks did not require bailouts it should not have to enter into a bank taxation plan.

The Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC) has criticized the Conservative government for rejecting financial regulation, accusing it of being beholden to financial interests.

“The Conservative government is opposed in principle to any new form of tax,” said Claude Vaillancourt, co-president of ATTAC-Quebec. “The Conservatives are blinded by the non-interventionist principles of neo-liberal economics, to which they adhere with ideological fervency.”

Britain has been at the forefront of the push for various tax and levy schemes to curtail bank risk. Prior to the economic crisis, London was a preeminent banking centre and over the past 20 years has been steadfastly opposed to most regulation of financial services.

The crisis changed all that. After the insolvency of several British banks and a $1.38 trillion bank bailout, and with an election looming, Prime Minister Brown is suddenly talking tough about banks “giving back to society,” telling the media he is “interested in how support is building up for international action.”

Britain’s proposals include a tax on bank transactions and a levy-style tax on assets. The transaction tax, often called the "Robin Hood tax" or the "Tobin tax" (after the US economist James Tobin, who first proposed it in 1972), is the more ambitious. It would focus on the trillions of transactions that take place in financial markets every day, including speculative ones such such as derivatives, which were a key part of the financial crash.

Precipitating the crash, these assets, including bundles of sub-prime mortgages, became overvalued due to speculation. When their values fell rapidly in 2008 the collapse began.

The transaction tax would put a very small tax (from 0.05 per cent to one per cent) on each of these transactions. Critics of unregulated banking argue that had such a tax been in place a few years ago investment banks would have thought twice about performing these transactions, thus lessening the likelihood of the crash.

“A low transactions tax...has little or no impact upon useful, longer term transactions, but limits ‘noise trading’ and very short-term ‘in and out’ speculation,” said Canadian Labour Congress economist Andrew Jackson. “Progressive economists who have advocated a financial transaction tax...believe that it would reduce speculation and volatility, without interfering with normal and useful activities including stock and currency trading and even hedging for legitimate purposes.”

A 2009 study by the Austrian government showed that a 0.05 per cent tax on UK financial trades could raise about £100 billion per year, paying for the expansion of social programs, paying down debt and providing insurance funds against future bailouts.

Grassroots organizations like ATTAC-Quebec take a stronger position, suggesting that any new funds from a tax should not go to banks, which might only encourage them to take more risks, potentially leading to new crises.

“The tax should simply be a fee for assisting citizens across the world,” said Vaillancourt. “This tax could, for example, give all citizens basic services—quality health care or free education.”

Despite its current opposition Canada was one of the first G20 countries to consider adopting the Tobin tax. In 1999 the Liberal government passed a resolution to “enact a Tobin tax in concert with the international community.” However, the Reform Party (later the Conservative Party) opposed the resolution and it did not gain enough international support to be enacted.

The other proposal promoted by European countries is a tax or levy on the assets of banks. It would not bring in sums on the scale of a Tobin tax, though some financial analysts believe it would restrain banks and raise some bailout money. As it stands now the levy has gained support from Britain’s key European counterparts, France and Germany, both of whom are strongly promoting it. From the perspective of the banks this is a more acceptable proposal than the Tobin tax as it would be either a one-off or infrequent fee based on a bank’s worth rather than a tax on its every transaction.

A great deal of Canada’s authority on these bank tax issues within the G20 is based on the perception that the country’s traditional banking sector was able to withstand the financial crisis. The historical record is murkier. While it is true that Canada did not have to bail out its banks there is much more to the story than mainstream media accolades of bank prudence and wise Conservative government policy.

In the late 1990s, and again in the early part of the new millennium, the five Canadian banks aimed to merge into three institutions to obtain the capital base to compete internationally with banks such as Citigroup, UBS and Royal Bank of Scotland. They hoped to enter the “major leagues” of investment banking and non-traditional speculative banking: the very markets that were at the heart of the crash.

Critics argue these merger attempts were not prevented because of a prudent fear of systemic risk, or the Liberal government’s foresight. News of the banks’ ambitions and public outcry about layoffs, branch closures and increased service charges forced the Canadian government to block the mergers. Canadian financial elites and the business class harshly criticized the government. Yet it may have been fortunate for them, and the current government, that the Canadian public was not swayed. Otherwise, Canadian banks might have been bailed out as well in 2008.

The International Monetary Fund has also weighed in, with Managing Director Dominic Strauss-Kahn saying countries opposing bank levies only because they escaped the current crisis unscathed are being “shortsighted.”

The US position leading up to the June G20 meetings is likely to be a major determinant of the success or failure of the G20 bank tax talks. The US bank bailouts have made it difficult for the US government, unlike Canada, to point to their strong financial sector as a reason to oppose bank taxes. Nevertheless, the US has also come out strongly against the Tobin tax and has reacted ambiguously to the idea of an international bank levy.

On the other hand, the Obama administration has made public statements over the last few months about an internal bank levy proposal. This may lead the US to be more open to an international levy given that it would shield them from capital flight if all nations bought in.

Because consensus is required for G20 policy decisions the growing Atlantic divide leaves any tax or levy plans up in the air. Meanwhile, the positions of the other 15 G20 countries are still being developed and do not seem to be getting much attention from the major players.

Though tax-watching might seem like a dull sport it is worth observing the developments this month. The European powers backing these taxes have been shaken by the crisis and pressured by their electorate. Regardless of motivations the taxes could have real-world effects that should not be minimized. The taxes are not radical but at least they point in the right direction: towards the banks.

Darren Puscas is a researcher on a project on women and unionization at McMaster University, and is the editor of the blog www.g20breakdown.com.

This story was published in The Dominion's special issue on the G8 and G20 summits in Ontario. We will continue to publish independent, investigative news about the G8 and G20 throughout the month of June.

For up-to-the-minute G8/G20 news from the streets of Toronto, visit the Toronto Media Co-op.

Dollar bills stick together