The problem with tax cuts: The promise doesn’t match the reality

The big news item in yesterday’s BC throne speech was that the Premier’s plan to relieve affordability pressures for families will include tax cuts of some sort. The problem with this plan: the inevitable flip side of tax cuts is lost public revenues. And while most governments—including Clark’s—promise that tax cuts won’t affect public services, the reality is often very different.

Lower taxes sound like a good idea only until such time that you or somebody you love needs the services that the tax cuts have starved. Until it’s time to go back to work after parental leave and you are unable to find a quality child care spot you can afford. Until you fall ill and can’t find a family doctor or get rushed into the overcrowded emergency room and are treated in the hallway. Until you find out how long the waiting list is for your aging mother to be assessed for supportive housing.

We’ve been there before. In the early 2000s, the BC government cut personal income taxes (and corporate taxes) by billions. Those tax cuts were billed as “tax cuts for all” but delivered paltry savings for all but the richest households in the province.

What is worse, these tax cuts did considerable damage to our collective capacity to care for one another and protect the environment. If BC collected the same level of personal income tax revenues as a share of our economy (measured by GDP) as we did in 2000, we would have had about $3 billion more every year since the recession. But we didn’t. That’s why people on disability assistance have to resort to food banks to make ends meet (as their benefits don’t even come close to covering the cost of living in this province). That’s why children in government’s “protection” suffer neglect and abuse (which could be prevented if social workers weren’t overworked and under-resourced). That’s why child care is so expensive in BC and even if you can afford the fees, it’s so hard to find a spot. That’s why emergency rooms are crowded and frail seniors are forced to stay in the hospital longer than medically necessary. That’s why we haven’t come close to building the social and co-op housing so desperately needed for decades. This is the legacy of our tax cuts.

The reality is that a few extra dollars in your pocket can’t build affordable housing or quality child care spaces, can’t build transit infrastructure, fund more home support hours for frail seniors or provide mental health and addictions services to those who need them.

But when we pool our resources—through our taxes—we can afford to do all these and more. Using the surplus to make smart public investments can make a much bigger difference to affordability province-wide than a tax cut could.

The way politicians get people to support tax cuts is by overselling the benefits and hiding the consequences. Don’t be fooled.

Topics: Economy, Provincial budget & finance, Taxes