by Errol Black and Shauna MacKinnon
In a recent review of income inequality in Manitoba, we compared Manitoba to Canada. The comparison showed that in 2010 “Manitoba was the most equal province before taxes and the third most equal after taxes.” In sum, Manitoba compared favourably with Canada as a whole and also other provinces.
That said, we argued that in the interests of improving economic and social conditions the federal government needed to take steps to reduce income inequality, including measures to strengthen trade unions, expanding the Canada Pension and Employment Insurance plans to provide greater income protection for retirees and unemployed workers, and establishing a national program to create improved labour market outcomes for Aboriginal peoples.
As well, we noted that there was more the Manitoba government could do to increase equality through changes to the tax structure and committing more resources to existing programs. We recommended specifically that the government add two additional tax brackets at the upper end of the personal income tax structure, which would, other things equal, increase equality, and raise taxes to generate increased revenues.
Unfortunately , however, legislation passed by a Progressive Conservative government in 1995 and subsequently carried forward with some amendments, by NDP governments, limited the ability of the government to make significant changes to its fiscal programs. Amongst other things the legislation requires the government to balance the budget over a four- year cycle and to hold a referendum to get approval for changes in the four major taxes – personal income, corporate income, sales and payroll.
Since we now have a situation where this legislation is an obstacle to addressing serious economic and social problems in Manitoba, we propose that the government either repeal the legislation, or, failing that, hold a referendum on gaining approval for increases in personal income taxes so that we can have an informed debate on the relevant issues.
There may be other options for getting rid of the current legislative encumbrances on government fiscal action that we are not aware of. If there are, we would like to hear about them.
What do you think about the relative merits of repeal vs. a referendum?
The fact that a referendum is necessary to increase, but not decrease, taxes shows the real ideological drive behind this supposedly reasonable legislation. It also prevents the government from using fiscal policy to maintain high levels of employment. Full employment tends to improve income equality because the tight job market increases the incomes of lower wage workers.
Repeal it. Experience in the United States suggests that referenda on tax increases rarely pass, even when they are desperately needed–not just to alleviate debilitating social and economic problems, but even to avoid full-on fiscal crisis. Even more rarely do such referenda lead to informed, reasonable debate on the costs and benefits of increasing tax rates. More frequently, they degenerate into a war of political caricatures. It is also worth pointing out that countries with higher tax rates and public sectors that spend heavily on education and training, health, infrastructure, income security (the Nordic countries are the classic examples) don’t suffer from lower growth, but they do perform better on measures of equality and well-being.
What I would add to the argument that the countries that tax and spend – like the Nordics – not only have better social indicators and equality but do not suffer with respect to economic growth-they do everything as well or better than those countries with inequality and austerity.
I, of course, think the government should have the guts to repeal the legislation – We get what we pay for and governments also have a major responsibility to minimize inequities in society thru the tax system. I watch the growing gap between the rich and the poor and I supported this government on the basis that they would bring some measures to close this gap.
Also do “changes require a referendum” or do only increases require a referendum?” The government has made many changes that benefit a few but impact the majority negatively when they reduce taxes and of course there seems to be no referendum required then. This is most unfair.