Opinion

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DEMANDING “A LITTLE BIT MORE” FROM TOP EARNERS WILL COST EVERYONE

MARK MACDONALD W hen I heard NDP Finance Minister Carole James state her government was going to have BC’s top earners pay “a little bit more” while an nouncing the provincial budget, I did a double take, and experienced a little acid reflux.

Why, wasn’t it only recently that the federal Liberals were de manding that the “one-percenters” would have to pay “a little bit more” prior to the last national election?

A couple of quick questions: Do they have the same speech writers? And do those who spout such low er-income vote pandering statements really not understand the ramifications of the income class warfare they’re propagating?

Study after study shows that when governments tax upper-level income earners, it backfires fi nancially. The Conference Board of Canada has released fact-based studies demonstrating that when taxation levels climb above 50 per cent, that it becomes counter-pro ductive and actually reduces tax revenue. And now, due to Canada’s predominant tax-and-spend poli cies, top earners will now pay 52 per cent of their income to various levels of government.

If the ill-conceived federal tax overhaul of two years ago would have been implemented, profes sionals in Ontario would have faced tax bills of 72 per cent. Think about that for a second. For every dollar they would earn, they’d get to keep a paltry 28 cents.

It’s immensely perplexing why socialists and non-business groups never stop to analyze what ex cessive taxation of the so-called rich accomplishes at the end of day. They never seem to grasp the connection and the obvious link between high levels of taxes and lower levels of government revenue.

Maybe they don’t believe it. Perhaps they just don’t care. Or maybe, just maybe, they know they don’t need to listen to the business community or investors to get elected.

That’s where we sit today in North America. Left-of-centre parties have learned that all they need to do to form government is cater to their support base, which includes the vast majority of the not-working and those that de pend upon, government assistance. Which is paid for by those that work and invest in businesses and employ people.

Lobby groups and third party political entities have that figured out. After all, 40 per cent of Can adians DO NOT pay income tax. That is an astounding figure

If they just get the people who are totally dependent on government, plus the vast majority of public sector union members whose jobs are tax reliant, to the polls, they’re in.

Add to that the fact that public sector unions are intimately in volved in elections through funding, advertising, and providing workers to campaigns, it’s an al most unbeatable combination.

When I campaigned in a recent election, I was astounded by direct questions from voters in public forums, who asked straight up: “What will you give me?” Were they saying that if they were to be given $50 more a month in welfare or income assistance, they would vote for them? Isn’t that social bribery – and equally as despicable as any party that would promise contracts for their companies if elected?

Imagine the outrage if a rightof-centre party, or any politician, promised government contracts to certain companies in return for their support. The outcry would be deafening, Anyone that did that would never get elected, and would be labeled as corrupt vote-buyers for the rest of their lives.

But isn’t that exactly what the left-of-centre parties are doing to their support base? Catchy phrases like “tax fairness” and “the rich don’t pay their fair share” resonate resoundingly with their support ers, and they are bought off with free this, and free that – without any of them realizing that nothing is free. Somebody, somewhere is paying. But if it’s not them, who cares?

Well, we should all care. The “them”, the “rich”, and the “one percenters” are an identifiable group. They are called by other titles: Investors. Entrepreneurs. Business owners.

These are the individuals who are already paying for most of every thing we enjoy and use. Hospitals, roads, government services – all expenses paid for by businesses and investors who dare to put their own money on the line in hopes of earning a decent return.

Excessively taxing them doesn’t get what naïve government of ficials hope – more revenue. It results in less because when gov ernments eliminate hope of return, or incentive, those prospective risk takers keep their hands in their pockets and close their wallets. Why would they invest where there is no, or little, hope of a de cent return?

They don’t, and with money be ing increasingly fluid in a global economy, they move it elsewhere. Investment and entrepreneur ship doesn’t blossom where it’s not wanted.

So, as provincial and feder al governments continue to flag the “rich” as the bad people who don’t “pay their fair share”, it’s disingenuous at best, and a colossal failure to acknowledge that they’re already paying for everything.

And left wing supporters decry tax cuts, saying it doesn’t help 40 per cent of the people. Which is correct, because they’re already contributing nothing to the public purse. What do they expect? Give them another handout as con gratulations for paying no taxes? Nevertheless, it resonates with their supporters, and keeps getting them elected.

Hopefully, one day, they will realize that punishing the “doers” by redistributing their wealth to those who “don’t” is costly for everyone, including their support ers. That’s because the revenue streams that dry up when investors stop investing or move to where they’re welcome are what makes the entire system run.

Without them, there are no ser vices or social programs.

TECK DECISION UNDERSCORES INVESTMENT CRISIS IN CANADA

FRASER INSTITUTE

NIELS VELDHUIS AND ASHLEY STEDMAN

Canada has massive investment potential. We have an abundance of natural resour ces, one of the most highly-educated populations in the world, and reside next to the world’s most successful economy.

We’re also among the freest coun tries in the world, with freedom of religion, assembly, movement and trade.

We’re the kind of country that investment should be flocking to in droves.

Instead, investment is fleeing our country. And the cancellation of Teck Resources’ $20-billion Fron tier oil sands mine is unfortunately just the latest example of invest ment flight.

On Sunday, just days before the federal government of Prime Min ister Justin Trudeau was expected to approve or reject the project, Teck CEO Don Lindsay sent a letter to federal Environment and Climate Change Minister Jonathan Wilkin son saying the company was officially withdrawing its application. For investors, this is more evi dence of how politicized the regulatory process for major projects in Canada has become.

The blame lies at the feet of the federal government, which recent ly created the Impact Assessment Agency of Canada (IAAC) to review major energy projects. This has in jected significant subjective criteria into project analyses, including ‘social’ impact, gender implications and potential climate effects. And it has further politicized the process by placing final decisions on ap proval or rejection in the hands of the federal cabinet.

The government has also created mass uncertainty with unsustain able federal budget deficits, tax increases on high-skilled workers and entrepreneurs, and more bur densome regulations.

As a result, the government has made Canada less competitive and less attractive for entrepreneurs and investors. Canada has plummeted in competitiveness report cards such as the World Bank’s Ease of Doing Business report, where we dropped from fourth place in 2007 to 23rd in 2020, or the latest World Economic Forum’s Global Com petitiveness Report, which ranks Canada 14th compared to secondplace United States.

Also worrying is the hard invest ment data.

According to Statistics Canada, inflation-adjusted business invest ment in Canada has declined by 5.3 per cent over the past five years. If you remove residential structures and business investment in ma chinery and equipment from the equation, investment in intellectual property and non-residential struc tures has decreased by 13.2 per cent. This isn’t just an oil and gas story. There’s been a significant drop in investment across 10 of the 15 major sectors of the Canadian economy, including agriculture, mining, util ities, professional and technical services, manufacturing and retail. Clearly, investors – foreign and Canadian – are fleeing our coun try for more favourable investment climates. In total, $150 billion has left Canada from 2014 to 2018. And while final numbers for 2019 aren’t yet available, data from January to September indicates another $23 billion left in the first nine months of last year.

This has left our investment per worker rate in Canada ($13,078 in 2018) well below the U.S. number ($22,270). It also puts us below the average in the 16 developed Organ ization for Economic Co-operation and Development (OECD) countries where data is available ($17,026).

Given that investment provides the resources for new equipment, innovation and ultimately sustain able and prosperous employment for Canadians, this is bad news for Canada’s economic prospects.

Canada is viewed by Canadian and foreign investors as an inhospitable place to invest. When a country or jurisdiction fails to offer a com petitive investment environment – or when the rules and policies are uncertain and unstable – business owners, entrepreneurs and invest ors look elsewhere.

That’s the tragedy of Canada and the latest decision by Teck Re sources. We’re a country with all the natural advantages one could dream of, yet we’re destroying our potential.

Niels Veldhuis and Ashley Stedman are economists at the Fraser Institute. The op-ed was coauthored by Milagros Palacios, a Fraser Institute economist.