By Molly McCracken and Jim Silver
Previously published in the Winnipeg Free Press October 31, 2024
The cumulative impact of decades of regressive tax cuts has created the severe social, economic, and environmental problems seen daily in Manitoba. Tax cuts are not free money. They take dollars from the public realm where they would otherwise have been invested in health, education, and other essential public goods. Yet corporate and wealthy interests continue to lobby governments for more and more tax cuts.
During the most recent provincial election, Wab Kinew jumped on the tax cut bandwagon.
Once elected, the Kinew government has accepted $1.4 billion in annual revenue cut by the former government, after taking into account changes to education property tax rebates and the basic personal amount introduced in their first budget. His extended gas tax holiday will cost Manitoba another $340 million in revenue in 2024.
Kinew has modeled himself after former NDP Premier Gary Doer. Doer cut corporate, personal and property taxes, removing $1.67 billion real annual dollars from public coffers in Manitoba during his time in office. The benefits to higher income earners are shown in the gap between the rich and poor during the Doer years. The lowest 10 percent of earners in 2000-2003 lost income. Poverty in the Doer years grew faster in Manitoba than the National rate, going from 14.4 percent of Manitobans below the poverty line in 2000 to 15.3 percent in 2009.
A former senior advisor to Doer described their strategy with regard to the tax cut lobby as “inoculation.” The NDP government inoculated itself against its traditional opponents—the corporate and business community and higher-income individuals—by meeting their needs, especially for tax cuts. Only after those needs were satisfied, thus in effect buying their support, would the former Doer government respond to the needs of its traditional supporters, including those with the lowest incomes.
The Doer government was inspired by Tony Blair’s UK New Labour governments. In his first two budgets, Blair cut corporate taxes, bringing them to what was then the lowest level in British history. Inequality soared to even higher levels than under Margaret Thatcher. Blair’s Conservative Party successors continued that tax-cutting strategy, and Britain is now in deep fiscal trouble. Food bank usage and homelessness are at record highs. Poverty is widespread.
Tax cutting started in Canada 75 years ago. In the 1950s, the federal corporate tax rate was just under 50 percent. Today, the net federal corporate tax rate is 15 percent and the provincial corporate tax rate is 12 percent, making the combined federal and provincial corporate tax rate 27 percent. Regarding income tax, the top Manitoba individual tax rate for those making over $100K is 17.4 percent. Federally, those earning above $111,733 pay 26 – 33 percent (depending on where they fall in the two upper tax brackets above this). Combined, the federal and provincial combined brackets for high earners are 43.4 – 50.4 percent. The taxes cut have not “trickled down” but has gone to pad the pockets of the wealthy, while the cumulative impact of these deep and long-lasting tax cuts has been to take hundreds of billions of dollars away from public goods like health care, social services, education and infrastructure.
Wealthy individuals and corporations have reaped the benefit. In 2022, the latest year for which such data are available, Canada’s top 100 CEOs earned an average of $14.9 million each. That is equivalent to $7162 per hour. Meanwhile, the latest Canadian Centre for Policy Alternatives-Manitoba study found that 171,072 workers, approximately 25 percent of all workers in Manitoba, survive on less than Manitoba’s $19.21 per hour living wage.
The Globe and Mail Report on Business reported in September 2024 that “middle-class” Canadians earn the same today, in real terms, as they earned in 1976. That’s almost 50 years of stagnant incomes. Meanwhile, the profits of the big banks and grocery and oil and gas companies have soared, as have the incomes of the very rich.
This is what economist John Kenneth Galbraith, writing 65 years ago in 1958, called “private affluence, public squalor.” We see now how accurate that phrase was. People struggling with homelessness line our streets; public transit deteriorates even while climate change demands improved transit; public health care is stretched to the limit. This is the product, in large part, of decades of tax cuts.
By comparison, Nordic countries invest in public services that support and encourage people to work, such as child care, elder care, transportation, and education. These investments build healthier, happier, more economically secure societies. Their taxes pay for these benefits. People in Nordic countries believe that the tax system is a means of sharing the benefits of their work. A fair, progressive tax system here in Canada would be our gift to each other and future generations. This gift returns benefits to families in the thousands of dollars.
A good starting point would be for the Manitoba government to stop and reverse damaging tax cuts and invest in public services we all rely upon.
Molly McCracken is the Manitoba Director at the Canadian Centre for Policy Alternatives. Jim Silver is Professor Emeritus at the University of Winnipeg and a Research Associate with the Canadian Centre for Policy Alternatives-Manitoba.
*The corporate and income tax rate paragraph was revised on December 27, 2024 to disaggregate the federal and provincial amounts. The top marginal rate was revised to note the marginal rate for those earning above $100K provincially and $111K federally, and the rates paid by the top earners federally.
