Both the Alberta and federal  governments now have huge  budget surpluses. The Klein Conservatives and the Chretien Liberals are both proposing massive tax cuts as the best way to “spend” the surplus.

All the other parties except the NDP – from the federal conservatives to the Alliance to the provincial liberals – are singing the same tune. But, what are the facts about tax reform?

1. Why do we pay taxes?

Taxation provides funding for services like education, health care, public safety (fire, police, ambulance), transportation, utilities and a host of other services without which the nation could not exist.

Services in these areas are most efficiently, fairly and cheaply provided through the public system.

2. Are We Overtaxed?

Canada’s overall tax revenues as a share of our total national economy  (Gross Domestic Product) are slightly below the average for industrialized countries – and right in the middle of both the OECD and G7 nations.

But, doesn’t our most important economic partner, the United States, have lower taxes than us?

As you can see, in comparison with the United States, the only Canadians who pay higher federal taxes than Americans are those who make less than $25,350 per year.

However, Canadian provincial income taxes are higher, in the main, than U.S. State taxes. But the States tend to rely more upon sales taxes and property taxes to raise revenue.

As one study observed “once private medical and education expenditures are added to total government receipts, the difference between Canada and the United States vanishes.” (DRI Canada).

3. What Are the Costs of Tax Cuts?

Question: Would anyone object to getting a few more dollars in their pocket on payday?

The answer is obvious, we’d all like a little more money and many of us need it badly.

However, tax cuts are a form of public spending. If government surplus is largely disbursed in the form of tax cuts, it will prevent increased program spending in areas like health care, education, child care, job creation, training and environmental protection.

In fact, if the question is put to them that way – “would you rather have government reinvest in health care and other social programs, or would you prefer a tax cut” – the majority of Albertans favour reinvesting in social programs.

A national survey done by the Toronto Star and EKOS Research Associates on June 23, 2000 bore that out.

When asked to identify the issue facing governments in Canada over the next 5 years that was most important to them, only 7% of Canadians identified the level of taxation as the issue.

Despite that, Paul Martin and the federal Liberals forged ahead with tax cuts at the expense of social programs. In the 1999/2000 federal budget, new expenditures on health care represented just 2¢ for each dollar expended on tax cuts.

4. What about Klein and Stockwell Day’s ‘flat tax’?

In a very shallow way, a flat tax seems to be a fair proposal. Why shouldn’t everyone pay at the same rate?

It turns out there are all kinds of reasons why the Alberta flat tax isn’t a good idea.

First, in terms of fairness, consider a ten per cent flat tax on income. For someone making $40,000 a year, the provincial tax would be $4,000. For someone making $500,000 a year the tax would be $50,000 and for someone making $20,000 a year the tax would be $2,000. So for so good.

But, now consider the impact of taxes on different income levels. For someone making $20,000 a year, that $2,000 may mean a single mother with two children being forced to forego nutritious meals to make ends meet. But for someone making $500,000 a year, $50,000 may only effect the upper limits of a luxurious lifestyle.

In other words the tax sacrifice is greater for the poorest individuals and least for the wealthiest. And, this is despite the fact that the wealthy are clearly benefiting far more from being a member of our society.

Flat Taxes and the Rich

The other problem with flat taxes is that the biggest benefit – both in dollar value and in percent of income goes to the highest tax brackets.

In fact, a flat tax benefits workers – and particularly unionized workers in the $45,000 – $60,000 range – the least. And, what will we face in increased user fees for health care and school fees for children because of this tax windfall for the wealthy?

The Crisis in Alberta Classrooms K-12

The Alberta Federation of Labour believes that only an informed electorate will keep our democracy healthy.
With big business dominating the mass media, it is essential that alternate, reliable information be available to working people -- so that they can cast their ballots in their own best interest. As part of the effort to provide that information, the AFL has put together this political action kit for union members. It contains fact sheets on key issues that each local can either distribute to members, schedule into regular meetings, or make use of in part or in whole as they see fit.