
Erin O’Toole, leadership contender for the federal Conservative party, raised eyebrows last week when he promised to “conduct a thorough review of the tax code to reduce, flatten, and considerably simplify taxes.” It did not take long for some to argue that because of our quickly mounting public debt it won’t be possible to cut taxes. If anything, we will need to raise taxes.
That is not the whole argument. We’re seeing lots of proposals for new spending to grow the economy, especially spending on public infrastructure. Calgary council has debated its $5.5-billion debt-financed Green Line LRT, which the mayor defends as the best way to grow the economy. At the same time, he and city council have hiked property taxes. It is amazing how people argue we cannot cut taxes because of deficits and debt but, somehow, we can spend more. Go figure.
We need to keep timelines in mind here. Right now, we are in the midst of the pandemic. The economy is just beginning to recover but businesses still face health restrictions and, unless a vaccine is found, a possible resurgence in the virus. With deferred taxes coming due and temporary life support ending in the fall, we don’t know how many businesses and households will become insolvent. What is most likely is that governments will be extending credit and probably spending even more this year and next to avoid letting the economy sink further.
In this scenario, governments would be foolish to tax more. This lesson already seems lost on federal Liberals, who had the audacity to raise carbon taxes at the peak of the first wave. Adding on energy costs to beleaguered small and medium-sized businesses was not smart. Instead, we should learn from the B.C. NDP, which wisely postponed its carbon tax increase. O’Toole is right that taxes should not be raised at this time. And if stimulus is needed, there is no reason not to consider tax cuts as one quick method of delivering help.
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