WARNOCK: Less well-off stung by tax cuts

WARNOCK: Less well-off stung by tax cuts

Postby Oscar » Sun Nov 09, 2008 11:49 am

Less well-off stung by tax cuts

http://www.canada.com/reginaleaderpost/ ... 11e64a&p=1

John W. Warnock
Special to The Leader-Post

Friday, November 07, 2008

Since 1982, successive Saskatchewan governments have placed a high priority on cutting taxes. The royalties we receive from the sale of our nonrenewable resources have all been drastically cut. The 15-per-cent return on the extraction of our oil is now the lowest in the world. Corporate, business and capital taxes have been cut. Income taxes have been steadily reduced, especially at the top end of the scale.

Our governments have moved away from progressive taxation, based on ability to pay. They have shifted to regressive taxation, where everyone pays the same rate regardless of income or wealth. Thus, over the past 25 years, we have seen a general shift to goods and services taxes, flat taxes, an increase in property taxes, and hikes in user fees.

The results are as expected. Statistics Canada reports that the top five per cent of income earners are steadily increasing their share of total income while the bottom 25 per cent show a decline. Part of this is due to the decline in the minimum wage; in real terms, Saskatchewan's peaked in 1976. Despite the current economic boom, the average wage and income in Saskatchewan is still below the national average.

There is also a growing inequality in the distribution of wealth. Statistics Canada reports that in 2005, 69 per cent of all wealth was owned by the top 20 per cent of income earners. The bottom 20 per cent actually had no net worth as debts exceeded assets.

Saskatchewan's wealth comes primarily from the extraction and sale of non-renewable natural resources. But the dominant large transnational corporations transfer their enormous economic rent (monopoly profit) out of the province and indeed out of the country.

The distribution of provincial income is another indicator of the fallout from this tax policy. Between 1991 and 2007, the share of the provincial income going to corporate profits rose from eight per cent to 29 per cent, while the share going to people on wages and salaries fell from 63 per cent to 46 per cent.

Tax cuts inevitably benefit those in the higher income and wealth brackets. They always result in the reduction of government services. For example, in Saskatchewan social assistance rates are now well below the basic needs level. There is little affordable housing. There is no money available to pay for dental care. Child care services remain the worst in Canada. Seniors go without needed eyeglasses, hearing aids, and dental work. It now costs serious money to take an ambulance to the hospital.

Let us look at one issue that affects most of the Saskatchewan population: property taxes used to fund municipalities and school boards. During the NDP government of Allan Blakeney (1971-82) the province provided grants to local governments which covered 60 per cent of these costs. The Local Government Finance Commission, appointed by Premier Grant Devine in 1984, recommended that this be raised to 75 per cent. Yet the Tory and NDP governments cut these grants to 40 per cent of costs, offloading their tax cuts to local governments.

Today, property taxes in Saskatchewan are among the highest in Canada. For example, in 2007 the average single-family dwelling and condominium in Vancouver was appraised at $716,900, and the average property tax assessed was $2,220. In contrast, in my neighbourhood the average house is now assessed at $114,000 and the average tax forecast is $1,989.

But it is worse yet. British Columbia has a homeowner's grant of $570. Seniors can get an additional grant of $275. If seniors cannot afford to pay their property tax, it can be deferred until their house is sold.

Property taxes are regressive taxes. They do not take into consideration the income or the wealth of those who pay. The lower you are on the income scale the higher and more burdensome are these taxes, and that includes those who rent. It is not uncommon in Saskatchewan for seniors to have to spend over 10 per cent of their annual income on property taxes.

Lorne Calvert has praised Brad Wall's recent tax cuts as a "happy day" for Saskatchewan. He pointed out that the Saskatchewan Party government is following the tax policies established by our recent NDP governments. But Calvert and others in the NDP might want to consider why they are now the Opposition and why 40 per cent of eligible voters in Saskatchewan are now sitting out elections. This includes a great many who used to vote for the NDP.

- Warnock is a Regina political economist and author.

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