Last week, a committee of the Senate, lead by Conservative Sen. Elizabeth Marshall from Newfoundland and Labrador, voted to halt a small but significant part of the Liberal budget.
It was a tax measure that only means pennies of new taxes, but it has a curious structure. The move was to increase the excise tax on alcohol by two per cent, and then tie future increases to the rate of inflation.
With every annual inflationary rise, the tax would increase, too — but the federal minister of finance would never have to come back and fight for that increase. The minister would never even have to disclose that an increase applied. He or she could stand up and say, “My budget has no new taxes,” while taxes increased in lockstep, hidden from public view.
Finance Minister Bill Morneau had argued before a Senate committee that government costs increase by the rate of inflation, so an inflationary tax was justified — except, of course, for the fact that the amount of tax collected is going to rise by the inflationary increase in the value of alcohol as well. It’s having your tax, and collecting it again, too.
The senators on the committee OK’d this year’s two per cent increase, but balked at future increases.
And they’re right. Because they are voting on this year’s budget — not budget measures every year into the future in perpetuity.
The move by Morneau also moves taxes — and tax increases — well into the fraudulent world of governments pretending to do multi-year plans, often multi-year plans that extend well beyond their legislative mandate.
Multi-year arrangements allow governments to duck and blather; they would be able to escape public scrutiny late in their mandates by front-loading tax increases early in their administrations.
It’s bad enough that many governments have jumped on the fraudulent multi-year budgeting of things like infrastructure and road works.
Multi-year plans — plans that actually have no more legitimacy than a campaign promise — allow governments to announce claims like their “unprecedented investment in our roads” by lumping three or four years of work into a single budget, and then re-announcing it again every year afterwards as if it was all new money again. Everything is “record-breaking” and “unparalleled” — except, of course, that it isn’t.
The budgetary process works the way it does for a good reason: we get to see what governments plan for their fiscal year, every fiscal year, and we get to decide if what they’re proposing is what voters want. We get to see any tax increases — period.
Hiding tax increases by tying them to economic markers may sound like reasonable public policy, but only if you don’t bother to look at the fine print.
Tying a tax rate to the rate of inflation simply means that a government gets the benefit of constantly increasing taxes without having to carry any of the political freight of its actions.
Put it this way: if we allow our politicians to plant an inflationary money tree out of sight in our tax system, you can be sure that they will plant more and more of them. A veritable forest of tax-increase money trees.
Because, politically, they’ll only take whatever pain there is once, probably early in their mandate. Then, they’ll hope the short attention span of the electorate moves on to the next issue.
But those same politicians will harvest the benefits, sight unseen, for years and years — and pat themselves on the back for coming up with the idea.
Russell Wangersky’s column appears in 30 SaltWire newspapers and websites in Atlantic Canada. He can be reached at firstname.lastname@example.org — Twitter: @wangersky.