On paying taxes and sharing the wealth
Published: Monday, November 28, 2011
Updated: Thursday, July 5, 2012 15:07
Taxes. This is what I have been thinking about in the aftermath of the dismantling of the various Occupy Movement camps around the World (including Toronto's St. James Park tent-town on Nov. 23). In particular, I've been thinking about the Occupy Movement's message of inequitable distribution of wealth; this got me thinking about how important and valuable taxes are in creating a just and fair society. Interestingly, on the same day the St. James Park campers were packing up, Campaign 2000, a group with the mandate to "end child and family poverty in Canada" released its annual report card. The report card highlights many disturbing realities about poverty in Canada. For example, according to the report one in ten Canadian children lives in poverty (that's 639,000 Canadian children living in poverty). And a third of those children are from families in which there is at least one parent who works full-time, year-round.
So, why did this make me think of taxes? Because the report also highlights the following, "Since the early 1990s, tax changes at all levels of government have altered a somewhat progressive tax system (i.e. a tax system whereby the more money you make the higher the percentage of your income you pay in taxes) into a less progressive one in which high-income Canadians gained the most and inequality was aggravated". Sadly, there are very few voices out there encouraging us to embrace the positive role that a progressive taxation system can play.
Indeed, the mantra from so many politicians from municipal, provincial and federal governments is that they want to do us a favour. They want to let us keep more of our hard-earned money in our pockets. And I understand that such rhetoric has kind of an appealing ring. But, reality teaches us otherwise. That's because when politicians talk about keeping more money in our pockets, they're talking about keeping more money in the pockets of everyone – in other words they're also talking about keeping more money (a whole lot more) in the pockets of, in the words of the Occupy Movement, the 1%.
The logic behind making the taxation system less progressive can be summed up thusly: "trickle-down". This is the idea that lower taxes for top earners will motivate those "bright," "creative," and competitive folks at "the top" to do their best – and, as a result, the rest of us will benefit from their "brilliance". History, not to mention lots of research, indicates, however, that the theory is flawed. Indeed, in his 2007 New York Times article "In the Real World of Work and Wages, Trickle-Down Theories Don't Hold Up" Cornell University economics Professor Robert Frank debunks the myth of trickle-down. For example, he highlights research based on data from the World Bank and the Organization for Economic Co-operation and Development illustrating that a country's economic growth is stronger when a greater proportion of national wealth was shared with middle-income earners and the poor.
At the end of his article, Professor Frank encourages progressive taxation concluding that, "The rich are where the money is. Many top earners would willingly pay higher taxes for public services that promise high value [i.e. health care, education]. Yet trickle-down theory, which is supported neither by theory nor evidence, continues to stand in the way. This theory is ripe for abandonment" (New York Times, April 12, 2007). And if trickle-down was ripe for abandonment in 2007, it's really, really ripe now. For example, the Campaign 2000 report offers that the wealthiest Canadian families with children earned $225,436 a year more than the poorest families with children. Indeed, as the Campaign's Media Release offers — and the Occupy movement has done such a good job of encouraging us to think and talk about — "The gap between rich and poor families has continued to widen, and low-income and average-income families are left struggling to keep up".
So, yes, I embrace taxes. And I embrace the opportunity to pay a higher percent of my earnings in taxes than those who earn less than I do. And yes, I expect those who make more than I do to pay a higher percent of their earnings in taxes. In the meantime, I encourage you to resist mainstream taxation rhetoric about money in your pocket. The Occupy Movement gained certain traction because we were reminded that we don't have to accept inequity, greed and indifference. The tents may be gone (for now), but let's hang on to the message.