A continuing review of the Green Party of Canada’s Platform:
1.5 Balanced budget – debt reduction
For the first time in decades, the economic situation has pushed many governments to accept deficits. The return of Keynesian economics, and the welcome sidelining of Milton Freidman’s approach, have been mandated due to the serious economic crisis created by the U.S. credit collapse. Greed and an addiction to higher-than-achievable rates of return on investments created a casino economy. Greens favour a steady economy, maximizing meaningful work and economic health. The highs and lows of booms and busts may be bearable for those with lots of chips to gamble away, but are brutal for the average Canadian.
Now that Canada is in the business of increasing deficits to end the recession, we have to be very mindful of how we get out of a deficit. The Harper 2011 budget is on track to create a whopping $40 billion deficit last year alone, with a poor plan to get out of it.
Economists warn of creating a “structural deficit.” Greens are very concerned. A future structural deficit could threaten our health care system and other indispensable government-funded programs. Prime Minister Harper’s government had already eliminated Canada’s surpluses before the recession hit, by cutting taxes and increasing government spending. Some economists have argued that Canada was in a recession even before the September ’08 economic crisis. Now Greens are concerned that the Harper government is creating a structural deficit by cutting income taxes, increasing government spending, and not finding any new forms of government revenues, as Greens would do through a carbon tax.
As long as a country is in deficit, it cannot find the resources to pay down the debt.
Canada’s debt is projected to be $591 billion in 2011-2012. The cost of servicing that debt will be $33 billion. Our government pays $93 million in interest every day. That debt burden drains support from essential government programs. Imagine what $33 billion could do to alleviate poverty and provide affordable housing and affordable post-secondary education in Canada.
Being indebted to external creditors also makes our political decision makers vulnerable to pressures from outside our country. The 1994 International Monetary Fund (IMF) Report to Canada recommended that our government reduce the number of hospital beds, convert student bursaries to interest-bearing student loans and cut funding to the National Film Board, the CBC and VIA Rail. The government of the day implemented all of these cuts. Canadians lost 10 % of our hospital beds the following year and today we have a wait time crisis in our health care system. If we had no debt, we would no longer be beholden to the IMF and global credit rating agencies.
The Green Party believes in living within our limits, ecologically and fiscally. We are committed to a balanced budget and to reducing the national debt. It won’t be easy. To pay down the debt while supporting programs that meet immediate social, economic and environmental needs, we must maintain a healthy and fair level of taxation and we must ensure that Canadians get good value for their tax dollars.
Green Party MPs will:
Ensure we can climb out of the deficit once the recession is over, by placing taxes on pollution to replace those cut in income by avoiding the creation of a structural deficit.
Set a disciplined schedule to gradually pay down the debt while maintaining public services and programmes that meet immediate social and environmental needs, increasing debt reduction over time but starting with modest targets to permit investment in critical programs.
1.6 Removing corporate subsidies: Distorting the market
“Governments are not adept at picking winners, but losers are adept at picking governments.”Mark Milke, A Nation of Serfs.
The federal government has paid the nuclear industry $17 billion in subsidies over the last four decades. Various regional development programs (Atlantic Canada Opportunities Agency, Western Economic Diversification, Canadian Economic Development in Quebec) have funneled billions into failed enterprises. Since 1982, Industry Canada has made grants totaling more than $5.8 billion to some of Canada’s largest corporations. Technology Partnerships Canada has swallowed up $2 billion and the accelerated capital cost allowance to the tar sands industries totals over $1.3 billion a year.
Perverse subsidies distort the market and send mixed messages: reduce carbon/use more fossil fuels; create jobs/reorganize through lay-offs. Subsidies to Canada’s oil and gas industry from 1996 to 2002 totaled $8.3 billion. During the same period the government allocated $3.7 billion to achieve its Kyoto greenhouse gas reduction targets. The funding to meet Kyoto has been abandoned, but the fossil fuel subsidies continue.
Greens want an end to corporate subsidies and a start to the green tax shifting that will make the fiscal system more coherent.
Green Party MPs will:
Eliminate perverse corporate subsidies and institute new taxes on corporate activities that harm the environment.
Introduce more effective antitrust laws in concentrated industry sectors.
Require corporations to provide detailed information about their records of compliance with labour, environmental, human rights, consumer, health and safety, criminal, competition, and tax laws or policies, and protect those who expose non-compliers.
Support broad-based, democratically-structured citizens’ watchdog groups to monitor major sectors of the economy.
1.7 Income trusts
Based on the Conservative Party’s 2006 campaign promise to allow income trusts to retain their non-tax status, more than a million Canadians invested in income trusts. The Conservatives broke their election promise and these investors lost over $30 billion. Many older Canadians saw their retirement savings disappear within hours.
The reason given for breaking the promise was that the government was losing revenue because the trusts did not pay tax. Finance Canada proceeded as if there was no tax revenue from income trusts. This was wrong. The trusts made payments to their investors and those payments were taxed. Recently, it has been revealed that the reason put forward by Stephen Harper at the time was not his real motivation.
There are public policy reasons to constrain or even discourage income trusts. If it could be proved that, over time, such arrangements led to a failure to re-invest profits in modernizing and expanding Canadian operations, action would be appropriate. So far this reasoning is intuitive and not empirical. What is clear is that the stated reason for breaking the promise, tax leakage, was not justified.
The Green Party condemns the Harper government for breaking an election promise and leaving citizens and companies in the lurch. The decision to tax income trusts has left Canadian companies more vulnerable to foreign takeover. It will be years before we fully understand the damage caused by this decision.
Green Party MPs will:
Review and redress the significant damage to Canadians caused by the broken promise and adjust tax rates in light of that error.
Instruct Finance Canada to complete a study sampling full-cost accounting of income trusts, including lost corporate revenues and personal income tax revenues from investors, to determine a fair taxation rate on income trust incomes and dividends.
Push government to adopt these fair taxation rates. Ensure foreign holders of income trusts are taxed at a higher rate. In the interim, tax income trusts at 10 %.
Inform both companies and investors of the process to determine fair tax rates on income trusts.
Comments and discussion are welcomed. I am examining this as I go to gain a better grasp of their platform and invite all who are interested to do the same with comments and discussion.