Harper's Tax Cut Folly
Oct 05, 2007
Prime Minister Stephen Harper has recently indicated that his government’s new agenda will include substantial tax cuts for Canadians, and that the federal Conservatives will signal their intention to reduce taxes when Parliament reconvenes on October 16.
This comes on the heels of last week’s revelation that Ottawa ran up an almost $14 billion budget surplus in the fiscal year that ended March 31. The surplus will be used to reduce Canada’s debt and liabilities by that same amount, meaning a $750 million savings in interest charges. These monies will then be funnelled back to Canadians as tax cuts under a “tax-back guarantee” that the Conservative government passed into law earlier this year. Each Canadian will likely see somewhere between $30 - $40 dollars in relief once the cuts have been introduced, assuming they are distributed broadly.
But is the best use of such a huge surplus? It is very easy to make the case that all of these monies should go towards addressing Canada’s aging infrastructure. Unfortunately, the state of our roads and bridges only becomes a public issue when a bridge collapses (as in Quebec or Minneapolis) or someone is killed.
According to the National Round Table on Sustainable Infrastructure (NRTSI), Canada’s infrastructure deficit stood at approximately $60 billion four years ago. Even scarier, the NRTSI also estimated at that time that Canada’s infrastructure had already reached 80 percent of its life expectancy. It can only have gotten worse since then.
A major part of the infrastructure problem is that cities have increasingly had to handle this financial burden. Canada spent heavily on infrastructure in the 1960s and 1970s. However, during the bad years of deficits and growing debt in the 1980s and into the 1990s, spending dropped significantly. Spending has gone up in this decade, but not nearly enough to keep pace with the investments required.
In 1961, Ottawa spent 33 cents of every infrastructure dollar while municipal governments contributed 30 cents. By 2005, the federal government’s share had dropped to 12 cents, and local governments’ had jumped to 58 cents. With the increasing urbanization of Canada and the rapid growth in urban populations over this time, cities became burdened with new infrastructure requirements, but had no money to keep up with them.
It’s easy to understand that a government can get more political capital out of a tax cut than an investment in a section of roadway. Infrastructure just isn’t very sexy. However, it provides a better, safer life for Canadian citizens, and is vital for our countries competitiveness and productivity. Infrastructure improvements also attract business investment.
So while everyone will welcome the idea of saving a few extra dollars in taxes, a more responsible, practical and long-term approach to Canada’s challenges would see the government invest this money where it is needed most – in our infrastructure.
Comments
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We pay about 30 cents per litre in taxes at the gas pumps. That money is more than enough to pay for roads.
pissinginthetent.com - 2007-10-05 18:36
And how much of that gas tax money do the feds pump back into roads? I think you'd be surprised at how little they invest. At least the Province puts all the money they bring in from the gas tax back into our roads.
kevin - 2007-10-09 13:20