The Dominion - taxes

Three ways Quebec can freeze tuition without raising taxes

Tim McSorley — Sun, 19 Aug 2012 20:51:34 +0000

What the media isn't telling you about government spending in Quebec

MONTREAL—Everything and its opposite has been said about Quebec's historic student strike. Strikers and their vocal supporters have been pitted against hostile opinions from the government and middle class Quebeckers. At the heart of much of the debate is concern that without a tuition fee increase the government will instead raise taxes. As Jonathan Mercier, a government lawyer and father of three, explained recently, he supports the principles behind the student strike, but he simply has no faith that the government of Quebec will not raise taxes, leaving no money in his wallet.

Mercier isn't alone in distrusting the government: According to a July 2012 poll, IPSOS Reid found that 95 per cent of Canadians do not trust their politicians. Combine this lack of trust with a constant squeeze on middle class wallets—debt to disposable income ratio for the average Canadian family hit a new record high this summer of 152 per cent—and you have an explosive situation when a student knocks on your door asking for a freeze on their tuition.

With that in mind, here are three quick and dirty ways for finding $300 million under the Quebec Finance Minister’s pillow, without having to raise taxes:

1. Uncovering corruption leads to lower prices in construction industry

The impact of the provincially appointed Charbonneau Commission into allegations of government corruption has already been felt in municipalities across Quebec. In 2011, Quebec City initially forecast a $170 million budget for its road works and infrastructure repairs. However, following the start of the commission's hearings, the construction companies lowered their prices, offering the same services for $130 million: a 25 per cent “savings.” Investigations into corruption are said to be leading construction companies to cease their collusion. According to its annual budget, the government of Quebec plans to spend over $9 billion on road work and infrastructure over the next few years. Even if prices for the provincial government only fall by half as much, let’s say 10 per cent, that equates to $900 million more in the pockets of taxpayers. Eliminating this “subsidy” to the construction industries, known as “extras,” could finance free university education.

Savings: at least $900 million per year.

2. Stop subsidizing the pollution of mining companies

In its 2012 budget, the government of Quebec included $2.2 billion in environmental debt to account for orphan sites. Orphan sites are toxic waste sites left behind when a mining, gas or petroleum company has finished exploiting its allotted land. The government of Quebec refuses to reveal the real costs of cleaning all contaminated sites, noting only that there are at least 679 contaminated sites and that cleanup costs are pegged at $2.2 billion. When the minister in charge of mines, Serge Simard, was asked who will foot the bill for the cleanup of the mines, he was unambiguous: “For sure, the people of Quebec will be the ones paying. It won't be the Martians paying, it will be the people of Quebec.”

Savings: at least $2.2 billion

3. Rethink or eliminate the Plan Nord

The Plan Nord, which aims to ramp up resource development in the northern 70 per cent of the province, seems to be a perfect demonstration of why taxpayers are stuck with never-ending provincial deficits. Studies show that government officials are making unprecedented and unexpected gifts to mining companies. Before the reform to Quebec mining royalties in 2010, the provincial government received $287 million in royalties from mining companies over a 10-year period. Previously considered one of the most generous royalty programmes on the planet, Quebec has since reformed its system, increasing the rate from 12 to 16 per cent in royalties on profits (but not on total production). Quebec should now, in theory, be receiving $400 million per year from an annual mineral production of $8 billion. Profitable mining companies that were once made to invest in infrastructure, such as roads and ports, have now been told the Quebec government will support them via Plan Nord. Over the next 25 years, the government estimates $82 billion will be spent on the Plan Nord (roughly 50 per cent from Hydro-Quebec, 30 per cent from the government and 20 per cent from companies) generating $14.2 billion. The hidden social and environmental costs would be roughly $6.15 billion. We can therefore expect an $8.45 billion deficit over the next 25 years for the Plan Nord.

Savings:
1. Apply the 16 per cent royalty on total mineral production instead of on profits: $1.28 billion in revenue per year.
2. Require companies to build and maintain their own roads: $2.8 billion in savings over 25 years.
3. Rethink the Plan Nord so that it will be affordable for taxpayers, socially just for First Nations and ecologically sound for Earthlings and Martians: at least $8.45 billion in savings over 25 years.

Luca Palladino is a HEC Business School graduate who studied capitalism to understand the nature of the beast. He studied economics but had to read Adam Smith and Karl Marx in secret because they only taught him math at school. You can follow his work at @lukaesque.

John and the crooks

Lighter Wallet? Low Wages, Not High Taxes, To Blame

stephlaw — Wed, 25 Jan 2012 10:46:03 +0000

Analysts say "bracket creep" much less of a concern than stagnant wages

HALIFAX—Nova Scotians are going to feel their belts get a little bit tighter this year. And according to some experts, stagnant wages—and not tax increases—are to blame.

“[P]eople can't make ends meet because wages are too low in this province,” said Christine Saulnier, the Nova Scotia director at the Canadian Centre for Policy Alternatives (CCPA).

Saulnier pointed to a recent study released by the Atlantic Provinces Economic Council that showed that Atlantic Canada created four times as many low-wage jobs (defined as jobs paying less than $40,000 a year) than high-wage jobs in the past decade.

Saulnier also noted that Canadians’ real purchasing power is down—average yearly wages increased by 2.7 per cent in the past year, which was slightly less than the inflation rate of three per cent.

The plunge in real purchasing power was worse for Nova Scotians than the average Canadian. Their wages increased by just 0.4 per cent, while inflation was four per cent—meaning that buying power actually fell 3.6 per cent, points out Larry Haiven, professor of management at St. Mary’s University.

“The average Canadian earned 15.8 per cent more than the average Bluenoser,” Haiven said.

Some groups, including the Nova Scotia Chambers of Commerce, have been calling for tax cuts to make the province "more competitive" for businesses.

But Saulnier disagrees.

“Cutting taxes by adjusting for inflation or raising the personal exemption or otherwise tinkering with the progressive tax system (making it less progressive), is not the answer,” she said.

Saulnier was responding to recent comments from anti-tax activists like Kevin Lacey of the Canadian Taxpayers Federation about “bracket creep,” the phenomenon whereby workers receive wage increases tied to inflation, but then enter a higher income tax bracket as a result.

“Any such initiatives that are across the board benefit the wealthiest the most,” Saulnier said. “Adjusting for inflation would not benefit those who are far under the bottom tax rate—the same people who need it the most and those who are the most likely to spend it, thus stimulating the economy.”

At a recent public lecture organized by the CCPA, tax specialist Neil Brooks of Osgoode Hall Law School in Toronto noted that Nova Scotia currently has the most progressive income tax system in Canada, meaning that the highest-income earners are taxed at a higher rate.

Low wages, and consequent low tax revenues, are also a reason why “the government struggles to pay for needed services” in Nova Scotia, Saulnier said.

“Plus, given how little workers have actually seen their wages increase, I am not sure who we are worried about moving into a higher tax bracket,” he added.

Professor Larry Haiven acknowledged that “as real earnings drop, a cut in taxes starts to look good.”

But tax reductions are a low-hanging fruit that fails to get to the crux of the problem, he said.

“[P]eople don’t immediately think ‘what services will I lose?’”

Haiven co-authored a 2008 study that suggests rising inequality should be of far greater concern than tax increases to Nova Scotians struggling to make ends meet.

Governments “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,” Haiven told the Media Co-op in 2009.

And while Nova Scotia’s economy grew by 62 per cent between 1981 and 2006, according to the report, average weekly earnings actually declined five per cent.

“Where is that money going? It’s obviously going into the hands of a few,” Haiven said.

The CCPA’s national office recently released its annual report on compensation of the 100 richest CEOs in Canada, who last year saw a 27 per cent increase in their average earnings from the previous year. The report notes that this means Canada’s top CEOs made 189 times more than the average worker, and by noon on January 3 that year, had earned as much as the average worker’s annual salary.

This article was originally published by the Halifax Media Co-op.

Ben Sichel is a teacher and a writer and editor with the Halifax Media Co-op.

Empty wallet

Torontonians Smash Ford's Anti-Tax Agenda

Martin Lukacs — Mon, 25 Jul 2011 09:27:27 +0000

Consultation shows public wants services before tax cuts

TORONTO—The results of a public consultation with Torontonians released in mid-July has dealt a blow to Mayor Rob Ford's agenda.

The Core Service Review - Public Consultation released by the City shows that public opinion of the City's budget deficit is in direct opposition to the Mayor's agenda. Over 13,000 Torontonians completed the consultation.

Ford, who campaigned heavily on reducing City "waste" and freezing tax increases, has faced a dilemma partly of his own creation. While Ford inherited a large surplus from his predecessor, his decision to freeze taxes in 2011 and eliminate a number of revenue streams has the city facing a deficit of over $700 million for 2012.

The Mayor has commissioned audit firm KPMG to find savings in various departments. Meanwhile, the size of the deficit has forced Ford to recently backtrack on one of his 2010 campaign promises. He initially claimed that a property tax increase would not go over 1.8 per cent. But he recently said, “At the very most, I’ve said you can raise property taxes, at the most, 2.5, maybe 3 per cent.”

Ford had urged his supporters (dubbed "Ford Nation") to overwhelm the public consultations to promote an anti-tax, cutting-spending agenda. However the results of the consultation have turned out quite differently.

The results of the consultation conclude that:

Torontonians' number one priority is "Transparent and accountable government." The third highest priority is "Meeting the needs of vulnerable people" while "Fair and affordable taxes" was ranked dead-last out of nine available options.

Public Transit, Fire Services and Water Treatment were deemed to be the most necessary services for the City. The management of Exhibition Place and the Toronto Zoo by the City were considered to be least important.

Survey participants overwhelmingly supported increasing "property taxes to keep the same level of City services." Not increasing "user fees or taxes even if this means reducing the level of service" had the least support.

According to the report the mean recommended "property tax increase for all participants was 5.15 per cent." Over 20 per cent of participants recommended a 5 per cent tax increase. A 10 per cent increase was recommended by 19 per cent of participants.

With the publication of the results, some of Ford's allies on City council have stated that they will not follow the recommendations of the consultation. Councillor Denzil Minnan-Wong stated, “It’s not statistically valid, those people self-selected, they decided to fill that form out as opposed to if you were to take a representative sample and have a pollster do it.”

Statistically, participation in the consultations was over-represented—compared to other consultations in the Downtown core—by computer users (higher income, higher education, youth), parents and low-income Torontonians.

Enid Godtree is a journalist with the Toronto Media Co-op. This article was first published with the Toronto Media Co-op.

Ford's survey