“The sky is falling!”
That line, famously tied to Chicken Little, could just as easily be linked to politicians and business leaders when talking taxes.
We’re living, still, in an era dominated by neo-liberal economics, an ideology that calls for limited government, privatization of services, de-regulation, and low taxes. In fact, it’s so ingrained in our society that any politician that would dare proclaim they supported raising taxes would simply be laughed off the stage by citizens and the media alike. Of course, business groups and economists, with their primal focus on wealth and jobs, reinforce this notion that all taxes are a drain on private capital and productivity.
The rhetoric is extreme with their claims that any tax increases would destroy the economy and put untold numbers of workers out of employment. Ironically, in recent times, the political leaders of this campaign in BC have eaten crow twice for reversing course.
When Christy Clark became Premier, she pledged to raise the minimum wage from $8 an hour, one of the lowest in the country and not raised in over a decade, to $10.25, more in line with other major provinces. For years, the Liberals claimed that raising the minimum wage would destroy jobs in low margin industries like restaurants. Their claims were backed up by economists and local business groups that said the economy would grind to a halt if the government dared raise the floor on wages.
Yet, Clark moved forward, and increased the minimum wage, through three escalating steps over the course of two years. The economy has not crashed and burned, McDonald’s and White Spot are still employing people, and the world went on.
Situation number two. The HST was able to head to a provincial referendum and the Clark government decided to sweeten the deal if British Columbians decided to keep the tax – if a majority supported it, the HST would be lowered to 10%. How would the government make up the lost revenues? Well, it would just increase the corporate tax rate.
Yet, this completely contradicts the rhetoric from the Liberals for a decade that corporate taxes were driving away investment from the province. Corporate taxes were demonized as inefficient; nothing more than a hidden cost passed onto the consumer. Of course, the HST was voted down, and thus the corporate tax rate was never increased, but for a government that vehemently decried the tax for years to suddenly flip flop shows the real holes in its ideological economics.
What these two examples prove to me is that, despite all the cries that the sky would fall if we raised taxes, in reality the effects are minimal. While a huge spike or drop in taxation no doubt would either hinder or help investment, changes around the margins don’t make a significant difference to business. They adapt and life goes on.