The return of the tax-cut- that's-not-really-a-tax-cut.

Canada right now is a lot what the US would be if the US were a nicer place, a more liberal place. Yes that's smug; but it's also basically true. It's also a pretty good thing in my opinion -- as a free market liberal, I'd like to be proven correct that a humane democratic capitalism can work: not just better than socialism or libertarianism but that, in an absolute sense, it can provide universal dignity, opportunity and social peace. Canada and the US are both very fundamentally liberal socieites. The main difference is in how suspicious or accepting we are of the "humane" aspect of "humane democratic capitalism" -- and how our politicians deal with that popular sentiment.

The current Canadian election campaign offers a nice illustration of what I mean. One of the big issues in the election is child care, and the government's role in delivering it. On that, we've a fairly solid divide across the mainstream political spectrum. Our centrist party, the Liberals, proposes the centrist solution -- a network of government-subsedized child care spots, with funding levels determined in individual deals between Ottawa and the provinces, with the actual care subject to government regulation but provided partly through the private sector.

From the left, the NDP challenges this idea for too great a reliance on the for-profit private sector. The NDP favours a federal Act, like the Canada Health Act, that would condition generous transfers to the provinces on a guarantee that subsedized child care can only be provided by the public or nonprofit sectors (a concept I favour in theory but to which the provinces are extremely unlikely to agree at this point). The NDP would combine these transfers with a cash infusion to the Child Tax Benefit transfer program.

And from the right, Steven Harper's conservatives attack the Liberal solution from the classic conservative pro-market stance: as dictatorial; as limiting choice. They prefer a child care system that does not involve any federal-provincial transfers and includes no government role (beyond basic regulation) in the actual provision of daycare. Instead they would provide what Cerberus' TB (and Jack Layton and CUPE's Paul Moist) deride as a "tax cut" -- a credit or stipend of $1200 a year, un-means-tested, to every household per child under six (also a credit to businesses creating spots as part of their employee compensation or who partner up with charities to do so). The $1200 stipend could be put toward enrolling a child in daycare. It could also replace part of a mother's second income, allowing her to stay home with the kids. "Choice" is the point here; and the idea of a hands-off government that provides economic relief to families without meddling in the free market.

The Liberal counterattack is obvious: the Conservative plan offers nowhere near enough money to buy spaces on the free market. Rhetorically, Liberals and liberals reject the idea that a "tax cut" can solve people's problems.

They're right in this case. $1200 is a lot of money for a low-income family, but it sure isn't the cost-effective way of solving the specific problem of day care affordability, especially when creating a new space in daycare is estimated to cost at minimum $8000. And no government -- let alone a conservative government -- can afford, or ought to afford, to be unconditionally throwing $8000 or even $6000 at families for having another kid -- not without very sharp, politically unpopular means-testing. (The $1200 credit will cost about $2.5 billion a year alone, though some of that can be taxed back.) The smaller, ideologically and fiscally feasible amount the Cons are proposing won't solve the basic child care problem for low income families and it's a pure giveaway to wealthy families.

So it's true that Harper's "tax cut" is a bad solution. But it's also true that what Harper is proposing isn't actually a "tax cut". What Harper is proposing is closer to what American Democrats always propose in national campaigns -- the "tax-cut-that's-not-really-a-tax-cut": a stipend or allowance administered (in Harper's case) through Revenue Canada.

This is pretty fundamental. What did Al Gore and John Kerry call their proposed lower-middle-class targetted welfare programs? They called them "tax cuts" (or "targetted tax cuts" or "middle class tax cuts"), because calling them tax cuts made the Democrats sound less like traditional liberals and because the very notion of some people paying negative taxes, in the form of transfers, is actually somewhat controversial in the US (see Tim Noah's great series "Memewatch -- Poor People Pay Too Little in Taxes" for a summary of this phenomenon).

Here, for instance, is Citizens for Tax Justice' analysis of Gore's proposed "tax cut" from 2000 -- the last time a Dem candidate had a surplus to throw around. Except for the partial repeal of the estate tax and elimination of the "marriage penalty" standard deduction, there's nothing in this set of proposals that really passes the laugh test as a "tax cut" -- which I take to mean either a rate cut or a standard non-beahviour-based exemption from a certain tax. There are, however, lots and lots of innocuous-sounding "refundable tax credits". Another description of "refundable tax credit" is "means-tested welfare applied for and administered through the IRS". But most voters don't understand this, and big Democrats are loathe to clarify things in campaigns. One of Kerry's big talking points in 2004 was how his plan would offer a "tax-cut to 98% of Americans" -- by which he also meant various means-tested claimable credits for health care, university tuition etc.

In Canada, by contrast, Steven Harper doesn't call his child care proposal a "tax cut" -- because Canadians don't generally (in a median-voter sense) see "tax cuts" as any kind of social pancea, or as a particularly good way to administer social policy. In the press release, Harper called his proposal what it is, an "allowance":

This morning in Ottawa, Stephen Harper announced that a new Conservative government will introduce a new $1200 per year Choice in Child Care Allowance for children under the age of six. The money will be paid directly to parents and will apply to an estimated 2 million children of pre-school age. This is part of a larger Conservative plan to allocate $10.9 billion to child care over the next five years, compared to $6.2 billion for the Liberal plan.

The Conservative plan supports the choices of all parents, regardless of where they live, regardless of income, and regardless of whether they choose to work or stay home with their children. “You can spend that money the way you see fit,” Mr. Harper said. “You can choose the child care option that best suits your family’s needs.".

In other words, it's about choice, people! Choice!

I don't want to take this argument too far. American Democrats do propose serious direct federal investments. Gore proposed making preschool universal through the federal/state/non-profit Head Start program -- not too dissimilar rhetorically or substantively from what the Liberals are proposing with day care. Kerry, for his part, proposed a massive Robert-Reichian government-funded public reinsurance program for employer health care to be paid for by a rollback of the Bush tax cuts. In fact, it was the domestic centerpiece of a security and foreign-policy dominated campaign. (Kerry also offered one genuine tax cut in the form of an across-the-board applicable corporate tax rate cut of 5%.) And, while nothing like Bush's tax bonanza for plutocrats from the 2000 election would be politically feasible in a Canadian election, both the Liberals and the Tories are proposing and campaigning on real (progressive) tax cuts on the grounds that Canadians would like some of our surplus back. (And I understand why. I dislike tax cuts in principle and would rather see the money go to debt reduction, but, man, the Liberal income tax cut proposal would really hit my sweet spot, i.e. pocketbook, next tax-time.)

Nevertheless, if you want an illustration of how ideological debates and the spinning they require differs on both sides of the border, this is a good one.