Morneau’s ‘tax escalator’ a bad precedent

Most taxpayers probably breathed a sigh of relief that Finance Minister Bill Morneau’s spring budget didn’t include any headline-grabbing tax hikes, such as increases in income taxes or business taxes.

Rumoured new taxes on health and dental benefits and capital gains thankfully never materialized.

But that doesn’t mean taxpayers got off the hook completely.

There were still a few small increases, including tax hikes on cigarettes, and a two per cent tax hike on beer, wine and spirits.

On the surface, it’s hard to argue the sky would fall because of such a small rise, which works out to about five cents for a case of 24 cans or bottles. Pretty small beer in the grand scheme of things, right?

But buried in the proposed legislation is a troubling provision that matters much more than the five-cent tax hike: an automatic “tax escalator” which would see those same booze taxes rise every year at the rate of inflation.

In other words, it isn’t a one-time tax hike. It’s one that will be hitting beer drinkers over and over again. Every year. Forever.

This is not the way governments usually bring in tax increases. Normally, when governments want to raise taxes, they must table the request in Parliament and actually tell Canadians that they’re going to raise them.

But with Morneau’s proposed “tax escalator”, future tax hikes would be automatic.

Think about that.

Rather than having to face the public and explain, every year, why they’re taking even more money from Canadians, Morneau can just sit back while taxpayers get soaked.

Nice work if you can get it.

It’s also obvious what a dangerous precedent it would set.

If politicians can get away with automatic tax escalators for beer, wine and spirits, why not other goods too?

For that matter, what if they tried it with something like income taxes or business taxes?

One common argument in defence of tax escalators is that they take the “politics” out of tax hikes and ensure “stability and predictability” for producers and consumers.

Nonsense.

There’s no such thing as a “non-political” tax hike. Raising taxes is an inherently political decision, made by politicians.

Trying to bury tax hikes in legislation with a formula, in a cheap attempt to make them seem “above politics,” is an insult to Canadians who have every right to see the clear link between tax hikes and the politicians who choose to impose them.

If politicians want to take more of Canadians’ hard-earned money, at the bare minimum they should be obligated to face the public and explain why they’re doing it. And if Canadians don’t buy their argument, they should pay a political price.

In other words, if Morneau wants to hike taxes on beer drinkers every year, he should have to wear it every year, rather than hiding behind a tax escalator.

As finance minister, he needs to be accountable for his budget – not just one year, but every year.

A great way for him to demonstrate that he understands this principle would be to take the automatic beer tax escalator out of the budget bill.

If he doesn’t, Canadians could have much bigger reasons to cry in their beer.

Aaron Wudrick is federal director of the Canadian Taxpayers Federation

 

Ottawa Sun by Aaron Wudrick

June 11 2017

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