Tax blogging 2: The Globe & Mail whiffs on the Fraser study.
Declan wrote about this a couple of days ago, but I think it's useful to point out again the screaming inadequacy of Terry Weber's Globe & Mail summary of the Fraser Institute's latest TaxFacts (pdf). Essentially, Weber's piece is a flat regurgitation of the anti-tax hyberbole contained in Fraser's press release -- minus the whining about how hard the system is on the nouveau riche. Meanwhile, the wealth of actually interesting (despun) data contained in TaxFacts goes unreported.
For instance, Weber leads off the article by repeating -- at length -- the completely misleading Fraser spin about how taxes are, percentage-wise, replacing spending on essentials like food in the "average family" budget. In fact, the reason shares of income spent on necessities have fallen has nothing at all to do with taxes -- it's because most Canadian incomes kept going up long after households could purchase enough calories to feed themselves and still pay the electric bill. That's also, by the way, a big reason that the tax burden has gone up, not just in Canada but worldwide (see p. 91 of the report). Wealthier voters demand better roads, safer streets, more convenience in government services, and more cutting-edge health care.
As Declan complained, the article also repeats Fraser's ropiest, inflation-unadjusted numbers at face value, i.e. that the mean family tax burden has increased about 1600% in dollars since 1961. That sounds exciting but of course has no economic meaning whatsoever when presented as a raw number (hence the bogus "essentials" comparison Fraser perfers you to make). In fact, from the numbers on page 40 of the report (Table 4.3), almost two thirds of the real increase -- that is, inflation-adjusted but not wealth-adjusted -- in per-household tax-burden took place in the years between 1961 and 1974, i.e., during the decade that government-provided universal health care was coming fully online in Canada. A full 80% of the real increase had been accounted for by 1980. The trend toward statis is even more obvious when looking at the tax burden as a percentage of total household income. Dividing the relavent columns in table 4.2, shows that the figure was 29.5% in 1981 and 29.8% in 2005. (Taxes paid out of cash income -- which excludes things like employer health plans, accruing pension income and corporate retained earnings and has fallen as a percentage of total income over the period -- increased about 5 percentage points for the average family over the same period.)
Weber goes on to tie the oh-my-god-you're-being-taxed-a-lot excitement into the Tories' coming budget in the most unimaginative way he can: "The government has heralded the [GST] cut as the best way to deliver broad tax relief to all Canadians. Critics, however, have argued that the move is likely come at the expense of personal income-tax reductions planned by the previous Liberal government."
Yeah, yeah, we all know that. Personally, I think a more interesting factoid is found in the graphs on on page 53 of TaxFacts. The timeline suggests that the GST did nothing at all to make the effective tax system more regressive, as the Tories (and, previously, the Liberals) keep claiming as justification for chopping it. In fact, the income distribution of taxes has gotten slightly more progressive (a good thing!) over the past decade -- probably due in part to the low-income GST rebates. Meanwhile, the international comparison chart on page 89 indicates that Canada already already has relatively low consumption taxes, and relatively high income taxes, among developed countries. I wonder what percentage of Canadians knows this?
I beat on this lazy article not because I think tax cuts are always unjustified or because it's pure irresponsibility on the part of an electorate to believe, as ours does, that it pays too much tax. Neither of these things are true; in fact, I basically favoured the Liberals' income tax cuts (though partly out of self-interest). But I do worry about the massive disconect that exists in the West between what we want out of government and what we want to pay for it (and how unrealistically efficient and clean we sometimes expect government to be). That disconnect has done loads of damage south of the border by fostering a political culture that enables both massive taxcutting and massive spending on entitlements, as well as helping the sort of rightwing opportunists who demagogue against taxes without knowing or caring about the consequences. It's easy for politicians like George Bush and Tom Delay -- or Stephen Harper -- to play the you-pay-too-much-tax pander, and very hard for their opponents to counter it, even when they're right.
That is -- or should be -- the job of journalists. So how about it, Globe & Mail?
For instance, Weber leads off the article by repeating -- at length -- the completely misleading Fraser spin about how taxes are, percentage-wise, replacing spending on essentials like food in the "average family" budget. In fact, the reason shares of income spent on necessities have fallen has nothing at all to do with taxes -- it's because most Canadian incomes kept going up long after households could purchase enough calories to feed themselves and still pay the electric bill. That's also, by the way, a big reason that the tax burden has gone up, not just in Canada but worldwide (see p. 91 of the report). Wealthier voters demand better roads, safer streets, more convenience in government services, and more cutting-edge health care.
As Declan complained, the article also repeats Fraser's ropiest, inflation-unadjusted numbers at face value, i.e. that the mean family tax burden has increased about 1600% in dollars since 1961. That sounds exciting but of course has no economic meaning whatsoever when presented as a raw number (hence the bogus "essentials" comparison Fraser perfers you to make). In fact, from the numbers on page 40 of the report (Table 4.3), almost two thirds of the real increase -- that is, inflation-adjusted but not wealth-adjusted -- in per-household tax-burden took place in the years between 1961 and 1974, i.e., during the decade that government-provided universal health care was coming fully online in Canada. A full 80% of the real increase had been accounted for by 1980. The trend toward statis is even more obvious when looking at the tax burden as a percentage of total household income. Dividing the relavent columns in table 4.2, shows that the figure was 29.5% in 1981 and 29.8% in 2005. (Taxes paid out of cash income -- which excludes things like employer health plans, accruing pension income and corporate retained earnings and has fallen as a percentage of total income over the period -- increased about 5 percentage points for the average family over the same period.)
Weber goes on to tie the oh-my-god-you're-being-taxed-a-lot excitement into the Tories' coming budget in the most unimaginative way he can: "The government has heralded the [GST] cut as the best way to deliver broad tax relief to all Canadians. Critics, however, have argued that the move is likely come at the expense of personal income-tax reductions planned by the previous Liberal government."
Yeah, yeah, we all know that. Personally, I think a more interesting factoid is found in the graphs on on page 53 of TaxFacts. The timeline suggests that the GST did nothing at all to make the effective tax system more regressive, as the Tories (and, previously, the Liberals) keep claiming as justification for chopping it. In fact, the income distribution of taxes has gotten slightly more progressive (a good thing!) over the past decade -- probably due in part to the low-income GST rebates. Meanwhile, the international comparison chart on page 89 indicates that Canada already already has relatively low consumption taxes, and relatively high income taxes, among developed countries. I wonder what percentage of Canadians knows this?
I beat on this lazy article not because I think tax cuts are always unjustified or because it's pure irresponsibility on the part of an electorate to believe, as ours does, that it pays too much tax. Neither of these things are true; in fact, I basically favoured the Liberals' income tax cuts (though partly out of self-interest). But I do worry about the massive disconect that exists in the West between what we want out of government and what we want to pay for it (and how unrealistically efficient and clean we sometimes expect government to be). That disconnect has done loads of damage south of the border by fostering a political culture that enables both massive taxcutting and massive spending on entitlements, as well as helping the sort of rightwing opportunists who demagogue against taxes without knowing or caring about the consequences. It's easy for politicians like George Bush and Tom Delay -- or Stephen Harper -- to play the you-pay-too-much-tax pander, and very hard for their opponents to counter it, even when they're right.
That is -- or should be -- the job of journalists. So how about it, Globe & Mail?
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