When I attended the Canadian Forces Staff School many years
ago, we worked in syndicates of eight students.
Each day we were presented with different problems to solve. One such exercise started with the instructor
telling us that we had been convened to come up with ideas to spend several
million (probably billions today) dollars that had been assigned to the
military to spend as soon as possible.
In the next two hours, we filled three blackboards with ideas; everything
from new fighter jets to new married quarters.
It was a no brainer. The next
day, the instructor came in and told us that there had been a mistake. We now had to find ways to save those same
millions (billions) which had been slashed from the military budget (a much
more realistic scenario). We laboured
over this problem for a full three hours and at the end had only one item on
the board, something to do with building no new married quarters. The lesson was that it turns out to be much
easier to spend money than to save it.
This memory came to mind during the recent election
campaign. Each major party promised more
goodies for the people such as free drug programs, free dental care and
more. But each party also promised to
freeze or even lower taxes. This of
course must lead to higher deficits and debt at some level of government. After
all, as governments at both the provincial and federal level, one way to reduce
expenditures is to download programs to the next lower level. Ontario has been a master at this with every
Progressive (sic) Conservative government since Mike Harris. The result has been to overload every
municipal budget at the level that cannot run a deficit. No matter to who, the taxpayer always
pays.
If we are to break this cycle of something for nothing,
there are only two choices: cut
expenditures; or increase revenues. As
we see from the Staff School exercise, cutting programs, especially those that
people have come to rely on, is difficult, and very unlikely to produce the
types of savings necessary to come close to balancing a budget. So, the only thing left is to increase
revenue. Although things like tariffs and
user fees can be increased, again by themselves they would never be enough to cover
our current deficits. Things like free
trade agreements prohibit raising tariffs too much. And user fees are generally disliked by the
public.
The answer is to raise taxes. The largest contributor to revenues is income
tax and this is where the burden must fall.
I realize that this will be a very unpopular suggestion. People in Canada and the United States have a
serious aversion to paying taxes. But
most European countries have taxes significantly higher than ours. Income taxes
up to 60% to 70% are not uncommon for higher paid taxpayers in places such as the
Scandinavian countries. And we North Americans
envy them for the extent and quality of their services. Canada, meanwhile, tries to compare itself to
the US when it comes to taxes. But we
forget the differences between the two countries in such things as health care
and the enormous level of the US deficit and debt. Canada has much more land than the US but has
less than 10% of their population. Governments
in Canada try to keep business taxes as low as possible so that companies will
not move their business elsewhere. That
leaves the burden solely on income tax of the individual taxpayer.
So, one day you and your friends sit down with a copy of the
federal budget and try to find savings of $30 billion a year and see how many
things you can all agree on.
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