Tag Archives: government

Planning for preferable politics, in baby steps

 

This federal election seems to me to be a culmination of  all the dissatisfaction felt by progressive Canadians with our electoral system. The system, after all, dictates how well we are able to exercise our democratic rights. It dictates how responsive our government must be to the will of the majority of the people they govern.

There is more to Canadian democracy than electing a member of parliament. In fact, I would argue that the health and efficacy of a democracy should be measured not by the simple freedom to cast a ballot, but by how well those ballots cast inform the government and the plurality of views that government must represent.

And I ask you, how can either of those two requirements be met when our range of choices is restricted to two? A or B. Good or bad. Black of white. For nearly a century and half. It’s been ‘my way’, or the ‘highway’.

The system is not serving our better interest, that’s true. However, right now the first past the post system is the symptom, and our voting behavior is the disease. Our voting behavior can change the system and get us more of what we need from our government.

best doc crop

I don’t understand why we don’t intuitively realise that our system does not offer actual choice when we only ever give two parties power to form government. We praise capitalism, choice and competition, and by in large we regard it as the superior economic model. We boo and hiss at the mention of monopolies, or oligopolies that collude to restrict our perfectly capitalist range of options as consumers.

Yet, we don’t follow the same logic in our politics. Ours is a political oligopoly in which two parties collude to only work hard enough to appear to offer an alternative product, while actually churning out the same sense of entitlement to govern.

ice cream choice crop

We need democracy and choice, and we need the political innovation that comes only from collaboration. We should balk at having one party in power too long, or two parties sharing access to power unchallenged because these arrangements restrict our range of political options as voters.

Canada has swung between the Liberal and Conservative parties since Canada was Canada. We swing between centre right and centre left and feel as if we are experiencing the full range of political options available.  The Liberals make us mad, so we turf them and elect the Conservatives. The Conservatives make us mad so we turf them and replace them with the people who made us mad last time. What we have is revolving door politics and short term change for long term pain.

revolving door politics

It’s like the freakin’ hokey pokey. That’s not what it’s all about, trust me. It’s supposed to be all about real options and real political progress.

What does progress look like to you? Like what we had yesterday? Like what we have today? Personally, when I think of progress I think of what we could have tomorrow.

You need to think for yourself when you cast your vote.

Don’t fall for the fear of the unknown. Penicillin was once unknown, polio vaccine was once unknown, the sequence of the human DNA was once unknown. The unknown is just unknown. A party that is an unknown might also have new ideas. They might have more incentive to cater to us than to just try and look better than their only opponent. Right now the parties aren’t fighting for us, they are fighting each other for power. Elect three; two to wrestle, one to referee.

It will be no shock to those who know me that I voted NDP at the advance polls. One of the primary reasons is that I believe the NDP will bring in proportional representation because as a current political outsider they have a vested interest in new ideas and in breaking down the status quo. The Liberal platform was similar and current polls tell me they have the best chance of defeating Harper – AND THAT IS VERY IMPORTANT – but as a current political insider party they have a vested interest in maintaining the status quo. I am not confident that they will bring in proportional representation. The Green Party – god love ’em – simply don’t have a chance at enough power to create the momentum for change. I am hopeful that change will allow them to become the political force they deserve to be.

My ultimate goal is long term change. You may have very different reasons to vote, but do vote. Vote for what you hope to have and not just against what you’re afraid of getting. Vote to make your voice heard now and tomorrow.

murrow quote

 

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Personal Pedantic Political Peroration, the Corporate Taxation Effect

 

Franklin Delano Roosevelt once said that “Taxes, after all, are dues that we pay for the privileges of membership in an organized society.”

This is a good preface to a discussion of corporate taxation, the costs and benefits of which are debated among economists.

A commonly heard criticism of all taxation is that taxes hurt the economy and that, conversely, cutting them will increase economic growth. This is most frequently heard in relation to corporate taxation.

A corporate tax is a levy placed on the profit of a firm, generally operating earnings.

To be fair, from a purely economic point of view, all taxes are ultimately paid by people. So to really assess the effect of a corporate tax we have to tease out who the cost of the tax is passed on to. It is definitely not all borne by the owners of capital because capital itself is mobile and because the burden can be shifted to other places in production –  onto other groups involved in production. The other groups we generally really care about are workers, shareholders and consumers. It is possible that lower profits manifest as lower wages, lower dividends and higher prices.

All of these are worth considering and should be part of the considerations, WHEN a corporate tax is imposed.

I say WHEN because I am of the mind that corporate taxes are necessary – largely for the same reason that I accept that personal taxes are necessary.

Ask yourself, why do any of us pay taxes?

We pay taxes so government has the money to pay for the provision of the public goods and services that we benefit from. In the same way that I pay the plumber to install the plumbing for the new shower my family and I will use, I pay the government to pave the highway that my family and I will drive on it.

Now ask yourself, do corporations benefit from the provision of public goods and services? Do they benefit from paved roads? Yes; yes they do.

If they don’t pay taxes, they haven’t paid for the good and services. That certainly meets the definition of a free rider problem. No?

Some on the right side of the political spectrum portray corporate taxes as a way that governments force businesses to subsidize spending on programs. They frame it as if all the benefit goes to some vaguely defined proletariat, and these nasty anti-capitalist socialists are just out to punish the hard working drivers of the economy.

It is not anti-business to expect business to contribute to the upkeep of the community they do business in. Corporate taxes are a way a business pays for government provided good and services they derive direct benefit from.

Roads are a perfect example. It would be hard to get your stuff to market without roads. Or education. Do businesses not benefit from access to a pool of skilled labour? I think they do. How about policing? I am pretty sure that businesses benefit from government maintenance of law and order. And health. Healthy employees are efficient employees and  health and safety regulations lend stability to workplaces by providing parameters to how business is conducted that are common across everyone in an industry.

There is a good argument to be made for corporations contributing to the cost of government in the jurisdictions in which they operate.

So, while high taxes may influence where a corporation sets up shop, good infrastructure will also influence that decision.

As for cost shifting, there are constraints on how much a corporation can shift the burden of taxation on the two really vulnerable groups – consumers and workers.

Prices and wages are both sticky; wages downward, prices upward. Both are, to some degree, elastic.

Like capital, skilled labour is relatively mobile. I am sure you’ve noticed the number of eastern Canadians working in Alberta. The skilled labour followed the higher paying jobs. So, while lower wages and employment can increase profit, there is a point at which they will drive away skilled labour and decrease the efficiency of production.

For the same reason that high taxes can drive away capital, high prices can lower sales. Businesses will only pay so much, but the same can be said for consumers – albeit the elasticity of prices varies quite a bit from product to product. Businesses cannot foist the entire cost of taxation onto the consumer without eventually chipping away at their own bottom line.

Obviously there is a point at which corporate taxation will harm the economy, but I definitely believe there is also a lot more inelasticity in corporate taxation than our government is making it out to seem.

In Alberta, and specifically in the oil and gas industry, there is a fair amount of inherent inelasticity. First, the oil sands are physically located here and they have significant infrastructure investments in Alberta so taxing the corporations involved in that industry won’t immediately make them pull up stakes and leave their primary input behind. They need to be here to get the oil.

I don’t feel like Alberta has settled at the spot on the curve where there is a balance. I don’t think we have reached the place where the dues paid by corporations cover the cost the organisation that our government is capable of, and should be, providing. If we had achieved balance we wouldn’t suffer as much from this boom and bust cycle that plagues us. If we all paid our share we would have a little extra to get us through the lean times. That would be balance. We have to provide basics when times are good AND when times are bad. We don’t have a spending problem. We have a revenue problem. We have a government enabled corporate free-rider problem.

 

 

Personal Pedantic Political Peroration, the Progressive Taxation Effect

Oliver Wendell Holmes once said: ‘I like to pay taxes. With them I buy civilization.’

I think that’s a good way to frame this complex and emotionally charged topic.

How you are disposed to feel about taxation really depends on how you are disposed to feel about government. If you believe that government is a force for good then you probably are less opposed to paying taxes. If you believe that government is not a positive force in society then you probably resent every penny you pay.

I am, in theory, in the former camp. Tax= benefit. I say in theory because how much we benefit depends on how well we are governed, which is another blog…

The current fiscal situation in Alberta plays into the two major arguments against taxation.

  1. The tax system isn’t fair
  2. Governments can’t be trusted with our tax money

Alberta just came off a boom cycle. As quick as we busted, we were told to tighten our belts. That leaves me and many of my fellow Albertans scratching our heads and wondering, where did our tax dollars go? Personally, when I hit tough times I had income, and savings from that income, that I could fall back on. Why don’t we have anything put aside for a rainy day, Alberta?

We have two problems, income and fiscal management. Until an election is called I’m only going to tackle income.

Alberta has a flat tax. Ostensibly that seems fair. But it isn’t, and it deprives our government of valuable income.

Consider this flat tax scenario:

  • Government taxation exempts the first $100 from taxation and takes ten per cent from the rest.
  • Jane makes $110 a week. She pays $10 in taxes and has $100 left to feed, clothe and care for her family.
  • John makes $1100 a week. He pays $100 and has $1000 left to feed, clothe and care for his family.
  • The government collects $110 to provide public services for Jane and John.

A ten per cent tax imposes a significantly greater burden on Jane because it has a significantly greater impact on her ability to provide the basic necessities of life for her family. John has adequate money left to provide for his family, and even enough to save each month. Government has money to provide public services.

A flat tax is a REGRESSIVE tax because it places a greater burden on lower income earners.

That isn’t fair. Not in my books. No one should put their child to bed hungry. Ever. Every child should be able to afford education. Always.  If you don’t comprehend that from a moral point of view, I may at a later date discuss the dollar cost associated with poverty within society to help you quantify it.

Now consider a progressive taxation scenario, based on income; same Jane, same John:

  • Government taxation exempts the first $100 from taxation and takes ten per cent from earnings over $100 and under $200, and fifteen per cent on all earnings if the earner makes over $200.
  • Jane makes $110 a week. She pays $10 and has $100 left to feed, clothe and care for her family.
  • John makes $1100 a week. He pays $150 and has $850 left to feed, clothe and care for his family.
  • Government collects $160 government to provide public services for Jane and John.

Jane is a little better off and government is better off.  John, however, is worse off and might regret working those extra hours because it means that for every hour worked he now pays more.

A progressive tax system can act as a disincentive to earning. John may feel like the all effort he put into earning money was not worthwhile and he may choose to the minimum possible because it is hard to see how his tax dollars contribute to publicly provided services benefits from. We don’t want to dis-incentivize working.

What we want tax dollars to do is to provide a net gain to society.

There is a concept in economics called a ‘Pareto Improvement’. It occurs when resources are reallocated among members of a group so that the benefit, summed across members of that group, is greater than it was before the resource was reallocated.

Another useful economic concept is utility. Utility is measured in benefit derived. This helps explain why Jane’s money is not the same as John’s money. A dollar does not always have the same utility. The benefit Jane derives from her dollars is the ability to feed, clothe and educate her family – the ability to improve the quality of her life and the lives of her children. When those needs are met, and after that money is spent, things change. After John provides the same level of benefit to his family, his additional dollars start providing less utility. There is little gain in utility between a winter coat bought for $100 and a winter coat bought for $500. Both provide the same function. Function carries the most utility.

Marginal progressive taxes impose the higher tax ONLY on additional income earned. As income increases, each incremental increase is taxed at a higher rate. Only those who have reached the point where the utility of their income is decreasing, pay.

The two concepts of utility and pareto improvement are justifications for marginal progressive taxation.

Now consider a progressive marginal taxation scenario:

  • Government taxation exempts the first $100 from taxation, takes ten per cent from earnings over $100 and under $200, and fifteen per cent from income over $200.
  • Jane makes $110 a week. She pays $10 and has $100 left to feed, clothe and care for her family.
  • John makes $1100 a week. He pays $10 on his first income increment and $135 on his second income increment, for a total of $145, leaving him $955 left to feed, clothe and care for his family.
  • Government collects $155 government to provide public services for Jane and John.

Jane is better off than in the first scenario in two ways, she can personally provide for her family and she will have better access to public services to assist her in improving her quality of life. The government is only slightly less better off than in the second scenario but that loss in utility is offset by the benefit of avoiding dis-incentivizing John’s hard work.  John is less better off than under a flat tax, but better off than in the progressive tax. However in terms of society’s overall gain, John’s loss in utility is offset by the gain in utility for Jane. Additionally, he does derive some benefit from alleviating the poverty around him.

The sum of the utility in the third scenario is positive, and therefore a pareto improvement.

I vote for marginal progressive taxation.

 

 

 

 

 

Personal Pedantic Political Peroration, the Fiscal Edition

Politics in Alberta. *sigh*

Before I launch into “Personal Pedantic Political Peroration, the Fiscal Edition” let’s get some definitions out of the way. We pedants love definitions.

  • [1] Conservatism = preference for the existing order and opposition to efforts to effect change.
  • [2] Fiscal conservatism = avoidance of deficit spending, reduction of government spending and debt, and commitment to balanced budgets.
  • [3] Democracy = government by all eligible members of a population through elected representatives.

The other day on twitter I asserted that the majority of Albertans who claim to be fiscal conservative are in fact not Conservatives[1]. I got a bit of push back on my assertion, and while I admit my opinion is based on personal observation and gathered anecdotal evidence, I stand by it.

There is no doubt that Albertans are resistant to change, I don’t know how else our current 43 year single party run can be explained. However, why this is the case is not certain. My theory is that it is because somehow a significant percentage of the electorate is convinced that ‘conservative’ and ‘responsible’ are synonyms[2].

Oh, Alberta. They aren’t synonymous – as proven by the woeful fiscal record of our 43 year Conservative dynasty. Alberta, do we need a remedial lesson in what is and what isn’t a synonym?

I understand, Alberta. We all want fiscal responsibility with reasonable avoidance of debt and deficit spending. That is the definition of responsible and can be achieved from any ideological location on the political spectrum; conservative or liberal or centrist or progressive… whatever name you want to give an alternative political placement.

The Conservative ideologues’ claims that they are sole party of fiscal responsibility seem to rely completely on the specific part of conservative ideology advocating reduction of government spending and low taxes, and this is what I think most Albertans are not actually in favour of.

Complaining about government spending is a sure fire way to gain fiscal street cred on gravel roads and secondary highways here in Alberta. But what does that mean really? Spending is not wasteful necessarily. Right? It depends entirely on what you get in return for your expenditure.

Yet our message to government is usually that they should spend less but (there is always a but) also provide the level of services we demand.

Between you and me, Alberta, I think what we mean is that government should spend; and tax; responsibly to provide the level of services we expect.

Alberta, listen, I say this with the best intentions, get your shit together. Stop voting Conservative because it’s just the way we do things around here and then lamenting their dismal performance on the fiscal issues we actually care about. Don’t vote conservatively. Vote responsibly.

Alberta, I have a dream.  I dream that even as we face the difficulties of today and tomorrow this province will rise up and elect a government true to the meaning of fiscal responsibility. I have a dream that my three boys will one day live in a province where they will not be haunted by the fiscal misdeeds of a former government, but live the Alberta advantage delivered by a government responsive to the needs of all Albertans. I have a dream that one day, here in Alberta with its vast resources and human ingenuity, with our Premier’s lips mouthing the words ‘this is not budgeting as usual’ that Albertans will join forces[3] and with their ballots declare ‘this is no longer government as usual’ but government for the better and for the future, governing so we will all see my dream together. This is my hope, and this is the dream that I will go to the polling station with. *

Dream with me, Alberta.

(* with the utmost respect for Dr. Martin Luther King Jr, I borrow out of admiration for the master)

 

Next up on Planned Pedanthood … ‘Personal Pedantic Political Peroration, the Social Edition’