Daniella Dávila Aquije
On November 5th, the Centre for Ethics and the School of Public Policy and Governance hosted Dr. Alex Himelfarb, Director of the York University Glendon School of Public and International Affairs. His talk, titled “Tax is not a Four Letter Word,” explored the political discourse surrounding taxation. This discourse has encouraged people to think about taxes as divorced from what they personally buy, and moreover, removed from the potential public goods that taxes can provide.
Himelfarb used several events to illustrate the prominence of this political discourse. First, he discussed the tax cuts under President George W. Bush’s administration. He explained that while the US participated in expensive wars, tax cuts sent the message that war was cheap. In fact, war was so cheap that the government was issuing tax breaks instead of raising taxes to fund military projects. Second, he referenced the 2 cent cut to the GST in 2006. Even though these 2 cents represented about 14 million dollars lost in federal revenue, there was no opposition to the Conservative minority government that proposed the cut, nor was there any discussion surrounding what would happen if that amount of money was pulled from the budget. Such examples illustrate the public’s perception of taxes, particularly the belief that cutting taxes is inexpensive and inconsequential.
What are some of the arguments used to justify tax cuts and support this pervasive discourse? Himelfarb pointed to the late 1970s stagflation and identified two economic paths to deal with the economic uncertainty of the time. The first involved raising taxes to ensure constituents had access to basic services. Nordic countries and other non-Anglo European countries, such as Germany, adopted this approach. The second path involved embracing neoliberalism.
Western Anglophone countries emphatically adopted the neoliberal philosophy. The pursuit of individual interests through the market was seen as the most efficient way to allocate resources and achieve collective wellbeing; therefore any form of government interference would restrict efficiency. One of the best ways to get the government to stop interfering with market was, of course, to cut taxes. Himelfarb thus noted that neoliberalism has reshaped what we think is possible (for the government to effectively regulate the public good), what we think is impossible (for the market to be truly free with government intervention), and how we think about taxes (we should cut them). By disconnecting collective wellbeing from taxes, the public disassociated the public services they enjoyed from government funding and government “intervention” in the market. Furthermore, while it is often argued that tax cuts pay for themselves, evidence from the 1980s suggests the opposite, as lower taxation does not translate into the same quantity and quality of government-funded services.
Another argument often used to support tax cuts is that they create jobs. We cannot tax the wealthy or the corporations because they are the job creators. As Himelfarb asserts, however, people with money are not necessarily job creators. There is thus no evidence that cutting taxes yields jobs. Consumers, not corporations, are in fact the job creators. They determine demand and therefore the need for jobs. Corporations build their profits off of workers and they are some of the most frequent users of public infrastructure, which is paid for by taxpayers. Himelfarb agrees that people and corporations should be taxed sensibly, yet the argument that taxation poses a danger to job creation should be avoided.
Finally, Himelfarb challenged the argument that cutting taxes is “empowering” because the taxpayer knows how to spend her money better than the “bloated bureaucrats.” In this way, the government returns the collective good to the individual but provides no infrastructure for the individual to access that good or service. An example of this is childcare. The government puts some money in the hands of individual families so that they have choice and can decide for themselves where to get childcare services. Nevertheless, there is no childcare infrastructure and an individual family’s money cannot build the public infrastructure that is essential for people to have quality choices. Taking that money collectively, however, can allow government to build a sustainable and high quality childcare system.
This anti-tax discourse has had several consequences for the relationship between citizens and their government. First, there has been a loss of trust. People have become more cynical about what governments can do effectively in the pursuit of the public good. As Himelfarb asserts, this erosion of trust is corrosive and explains the micro controls within the public service and the increasingly risk-averse nature of government. Himelfarb is thus adamant about the need to restore enough trust in government institutions so that they could reform themselves and become more efficient.
Second, Himelfarb challenged the belief that we have no choice but to cut taxes. Canada has become an international champion of austerity even though austerity in “rocky” economic times is not effective. Himelfarb cited an IMF study released in 2011-12, which found that austerity policies slow down economic growth, increase unemployment, reduce wages, and have dire human and social consequences in the short and long run.
Third, Himelfarb explained that smaller government contributes to a loss of aspirations. We assumed in the past that future generations would be better off, but we can no longer do so. We have bought into the notion that we should not interfere with the market, and have therefore left it up to the market to determine our future. This is disempowering not only at the individual level but also at the government level, where we have experienced a loss of political imagination. Himelfarb asserts that when you take taxes off the table, you take choice off the table as well. FDR’s New Deal is an example of the political imagination at work. Even though the government always referred to the New Deal as an “experiment,” there was no public backlash in response to FDR’s innovative venture. Our risk-averse governments do not have the opportunity to develop that imagination, and budget constraints translate into constraints to those imaginative capabilities.
Ultimately, we need to change the conversation surrounding taxation and the role of government. All great change is brought about from the outside-in through public involvement, and only when the masses are willing to change the conversation can change be possible.
Daniella Dávila Aquije is a 2014 Master of Public Policy candidate at the School of Public Policy and Governance. She holds a BAH in Political Studies and History from Queen’s University. Her interests include immigration and social policy, as well as Latin American foreign policy.