A good example of Fraser Institute thinking, and strategy.
Taxes are indeed needed to fund important government services, critical both to a well functioning economy and, more generally, civilization. But there is a point when a larger, more interventionist government, combined with a heavier tax burden, can stunt economic growth and social outcomes, or achieve those outcomes only at great additional cost. …
Research shows that taxpayers get the best bang for their buck (in terms of economic and social outcomes) when total government spending is around 30 per cent of the economy. In Canada, total government spending is now 41 per cent, down from about 53 per cent in 1992, but still higher than what is optimal.
That means there’s room to scale back. When governments faced major fiscal problems in the 1990s, they responded with sweeping action to cut spending and reform programs, leading to a major structural change in the government’s involvement in the Canadian economy. The reforms created room for important tax reductions and ultimately helped usher in a period of sustained economic growth and job creation.
So it’s not surprising that Bramham and others feel that the public discourse since the 1990s has focused primarily on tax reductions and ensuring the right tax mix. After all, the reforms worked! …
In fact, voters in the upcoming plebiscite, which proposes a regional PST hike to fund transit expansion, should understand the economic problems associated with this particular type of tax, which discourages investment and job creation.
Lastly, and perhaps most importantly, it’s not even clear that governments in Metro Vancouver need the extra revenue. Municipal governments would do well to more heavily scrutinize their spending choices before requiring Metro Vancouverites to pay higher taxes, simplistic arguments notwithstanding.
Well, that seems unequivocal: 30 percent gives the best bang. And whose research might that be? And who defined what ‘best bang’ means in terms of economic and social outcomes? In any event, it’s contradicted by the next highlight:
The reforms created room for important tax reductions and ultimately helped usher in a period of sustained economic growth and job creation.
If sustained economic growth was achieved at 41 percent while still delivering social goods (like non-market housing, a program sacrificed as part of the noted reforms), then why is 30 percent better? This sounds like dogma, not economics: tax cuts good, government spending bad. In a word: simplistic. In another: silly.
But this is the usual op-ed back-and-forth. The most important line is the one at the end:
Municipal governments would do well to more heavily scrutinize their spending choices before requiring Metro Vancouverites to pay higher taxes, simplistic arguments notwithstanding.
This in fact is what the referendum is about: forcing local government to cut their budgets by denying any source of revenue, new or existing, to fund anticipated growth – in this case, public transit. (More here in Fraser Games – 5: The Larger Agenda.)
As an unstated outcome, the strategy has led to rising inequality, first by defunding those programs that provide similar services to all regardless of income. Secondly, by cutting taxes that disproportionately benefit the affluent.
Let me repeat something that so far has failed to resonate:
AMOUNT RICHEST 2 PERCENT OF BRITISH COLUMBIANS WILL RECEIVE IN A TAX DECREASE THIS YEAR:
Roughly the same amount that could be raised by the sales tax to fund transit – and support the economic activity that would result – will be retained by the richest 2 percent in the province. It couldn’t be more blatant.
For the Fraser Institute, this, presumably, is the best bang for the buck: less government services for all, more wealth for the already rich.