Why Your Taxes are Going Up

Here's an exclusive look you won't see anywhere else, on why your taxes are going up, why governments are getting bigger and what philosophy is to blame. I'm a former Manager of Media Relations for Canada Post, a former National Television News Reporter for CBC and a former consultant to Cancer Care Ontario, the Alberta Cancer Board and the BC Cancer Agency. I know the score on this, believe me.

 Canadians celebrating Canada day

It's Not Because of What You Think

by Frank Hilliard

In Montreal they're rebuilding all their bridges, in Toronto they're talking of a major subway expansion and in Vancouver they're building the most expensive water delivery system in Canada, more high speed transit and a new bridge. All these expensive projects are being driven by one reason. Can you think what it is?

The short answer is population growth; more people means more infrastructure is needed, more water, more sewage, more highways, bridges and transportation systems. But this raises another question. How can there be any growth when the Canadian fertility rate is around 1.6 children per female?  This is well below the replacement rate meaning the population isn't expanding, it's contracting. 

Or at least it would be contracting if Canada's immigration rate wasn't the largest in the developed world. In 2009 Canada took in an astounding 500,000 permanent and temporary residents, not counting illegal economic migrants.

Contrary to government statements, and the shrill cries of immigration advocates, the current crop of third-world immigrants we receive pose a net drain on society directly as explained by the Centre for Immigration Policy Reform, as well as creating the indirect costs I've just mentioned. So that's the first cause, mostly felt by municipal taxpayers.

The second cause is due to the greatest public policy mistake made in the history of the Canadian state. This was the decision in March, 1967 to allow collective bargaining in the federal public service, done through the Public Service Staff Relations Act. The reason this was a colossal error can be seen when you understand how collective bargaining works in theory.

The theory is that if employees of a company force wage rates too high, the company either lays some of them off or goes bankrupt, forcing them all out of work. This dynamic restrains wage demands in in the private sector and makes bargaining a real give-and-take operation. 

In the public sector, on the other hand, the employer can never go bankrupt (except soon in Greece and maybe the United States) and so there is nothing restraining employees from asking for more and employers from giving more. Each wage negotiation provides some increase in benefits and each increase is based on the previous increase, meaning that public sector wages, like savings in the bank, are compounding every year. 

This is the main reason for the high cost of providing health care in Canada since most health services are in the public sector. With an aging population, this cost factor, and the provincial taxes used to pay for it, will grow even higher, even faster. This is the second cause for tax increases, mostly felt by provincial tax payers, since health is a provincial responsibility.

The third cause of tax increases can be found around your own home. Take a moment now to do an inventory of all the things you've bought in the last couple of years: your shoes, clothes, garden tools, television sets, smart phones, even drywall. Where did it all come from (with one notable exception)?  Who manufactured this stuff?

Well, the easy answer is China. China is now the workshop to the world and has been ever since the Communist government there adopted the Hong Kong (read British) free enterprise model. Their readiness to provide low-cost workers proved an irresistible lure to Western businesses who immediately closed their Canadian plants and moved operations offshore. 

One after another companies like Western Star in Kelowna, Massey Ferguson in Ontario and Sydney Steel in Nova Scotia closed up shop and laid off workers. They were joined by literally thousands of other lesser known companies that closed, or moved, or refocused their operations to Mexico, China, Taiwan, South Korea, Indonesia, Thailand and Vietnam. 

The point I'm making is that when these companies closed or moved, they stopped paying corporate tax, property tax and wages to employees who paid personal income tax and sales tax. The simple truth is that if you destroy your manufacturing sector, you also destroy a major tax base. This destruction has to be made up somewhere and it's made up with two things, higher consumption taxes (the HST) and higher federal taxes. 

So what's the solution to all this?  Where do we start to fix the mess the governments at all levels have got us into?

The first step is to curb immigration to 50,000 people (or less) per year. Anything over that is economically unsustainable. 

The second step is to get the government to end collective bargaining in the public service. We need to take on the unions like Margaret Thatcher took on the miners.

And the third step is to vote for parties willing to impose higher tariff walls around Canada and to break our international obligations under the General Agreement on Tariffs and Trade. Canadian industries need protection against the low-wage world.

Let's face it folks, free trade is another way to say you want Canada to be a service economy paid for by raw material exports.

Your taxes are going up because generations of politicians have made poor decision, have acted weakly in the face of the unions and have bought into the Liberal and Progressive dream of multilateralism and globalization. 

Now the dream has become a nightmare from which we can't wake up.