On June 10, the Minister for ESDC Pierre Poilievre sent out a slew of tweets, celebrating the Fraser Institutes controversial Tax Freedom Day. Their analysis is based on that founded by the Tax Foundation in the US, and here is the Center on Budget and Policy Priorities critique of their work. If you are interested in reading about critiques of tax freedom day in Canada, might I suggest the Parliament of Canada’s piece as well as law professors Neil Brook’s piece and David Duff’s views.
There were two particular tweets that caught people’s attention. First, there is this gem
We cut taxes in 180 ways so more money stays in the hands that earned it, not the government’s coffers #cdnpoli
— Pierre Poilievre (@PierrePoilievre) June 10, 2015
Most of the ways that the CPC government has ‘cut taxes’, to use their phrase, is through the form of boutique tax credits, including the family tax cut. These tax credits do not appear on the TD1 form, meaning that they are not taken into account for the calculation of withholding. As a result, more money does not stay in the hands that earned it. Instead the money is first taken away by those that earned it and given back to those that claim it. This means a 16 month delay between it being taken away before it is given back, with no interest paid, which means the distortionary effects of the taxes are being incurred which are not offset by the eventual repayment. There is also little to no matching between those that pay the tax and those that get the eventual tax payment. The more truthful statement would be “We borrow your money for 16 months, interest free, and give it back to those we think are most likely to vote for us.” Many feel different, but this is not something I think is worthy of celebration. And by his logic, the liberal plan for the CTB provides a bigger and better ‘tax cut’ to more Canadians than the CPC plan. Just saying.
Second, is this mystifying statement
Jennifer Robson summed up one troublesome aspect of this tweet here
Q1: Could the Minister please ID which city governments he believes to be “Liberal” ?
— Jennifer Robson (@JenniferRobson8) June 11, 2015
I also proffered that the current Liberal government in BC would likely suggest that the Minister get his facts straight, as the BC government has been well known for its cutting of taxes, so much that many BCers pay less income tax than most Albertans.
But more troubling is that this statement has no real basis in fact. Municipalities have not experienced any increase the devolvement of revenue instruments from the provinces, so their tax instruments have not increased. So if not new taxes, then I guess he means an increase in tax revenues. There is very good data on Municipal revenues, data that I have used in my own forthcoming book on municipal user fees in Canada. Here is a graph of local government share of total government revenues showing that in the last decade, yes, their share has increased.
But where is this coming from? If we look at share of total local revenue, we see that own source payments did increase in the mid to late 1990s, but has been falling since then, while transfer payments from, gasp, other governments have increased.
You might wonder whose transfer payments increased, well that would mostly be federal specific transfers with the biggest increase coming from transfers for transportation and communication.
Now there is some suggestion that property taxes have increased, but mostly we have seen declining mill rates due to increased valuations. This final graph shows that property taxes, as a share of own source revenue have indeed decreased, only partially offset by an increase in user fees.
So I am not sure in what way municipal government are ‘taxing more’, again using the Minister’s own language. Then again, perhaps the overall trend is masking what those pesky Liberal municipal governments are doing. However, I and many others have no idea how to identify those Liberal municipal governments and wonder how he is doing it.