MARK MACDONALD
BRITISH COLUMBIA – It is politically expedient to float “tax the rich” schemes, particularly when the vast amount of voters are “have-nots”, or “not rich” that typically draw more from “the system” than they contribute.
Tax the rich, they cry. They have lots. Take a bit more. There are many different flavours to these sound-bytes.
But at the end of the day, do the rich actually pay more taxes when those new policies/promises are implemented?
More and more, it seems that these proclamations, too, may only be politically-charged statements that serve as warning shots to those that have, to reach out early to their accountants and lawyers and avoid any coming economic apocalypse.
After all, the rules are made by accountants and lawyers, so enlisting the services of these professionals is critically important if one hopes to avoid paying even more into government coffers. To not have them on one’s team is perilous for those facing the buzz-saw that is the Canada Revenue Agency.
So perhaps what is really happening when politicians are politicking is that, while they’re tickling the ears of lower income voters – many of whom don’t even pay tax because they don’t make enough money – they are also sending up signals to the “haves” to make sure they move/hide their income from the taxman. There are always ways to do that.
Politicians of all persuasions realize it would be suicide to have major plants and businesses – operated by “haves” – in their jurisdictions shutter. The loss of jobs and ancillary damage of supporting businesses and people would surely bring about their demise at the next trip to the ballot box.
So one might conclude that politicians have stumbled upon a method to have their cake and eat it too. They can cry about the wealth of the rich and announce punitive tax measures, which earns them cheers from the lesser wealthy. At the same time, these early virtue signals give those targeted ample time to adjust their income levels and investments so they don’t lose much, if anything at all.
No group is better at this than the federal Liberals. Little wonder that a healthy percentage within the business community supports them, despite their increasingly left-leaning social policies. Liberals are renowned for play the subsidy game to favourites, but they quietly also provide announcements that provide valuable time to hide assets and investments.
Paul Martin, whom a presenter at a recent Fraser Institute seminar referred to as Canada’s best-ever finance minister, was a master. He’d float bad news of large tax hikes, which, predictably, got people howling. He’d then cross the country to get feedback, “listen to Canadians”, and announce that through prudence and various austerity measures, the tax increase would be minimal, or at least much less than earlier projections. And the country would swoon over Martin’s deft touch and sensitivity.
Contrast that with Prime Minister Stephen Harper’s clumsy double-cross elimination of Income Trusts in 2006. Despite promising he wouldn’t touch them in the previous election campaign, Harper and finance minister Jim Flaherty suddenly announced they would end them by 2011 in what became known as the “Halloween Night Massacre”. The news meant the income trust sector immediately lost about $35 billion of its market value.
Despite Harper’s other successes, including the successful navigation of the 2008 recession, many who paid dearly in losses of retirement and investment income never forgave him for that.
Liberals don’t go down that road. Maybe they’ve learned from Harper’s about-face. Investors and businesses are given ample time to adjust to what the government says is coming, and many do so, successfully.
The flip-side of these socio-economic political promises can almost be viewed as cruel. While the presentation that having the rich pay even more may be good news for the non-rich pay less (even though many don’t make enough money to even pay income tax), it is always the poor that end up paying in the end.
They support governments that promise them the sun but give them the moon. These administrations hike the $15 per hour minimum wage, but the resulting inflation and price-of-everything costs more than devour the raises that businesses are mandated to give them.
The point is, even left-wing governments make promises to their supporters that they either don’t keep, or never intend to. The simplest example is the minimum wage hike, applauded by non-skilled employees and labour groups, who fail to realize that all it’s done is make hamburgers and beer prices jump. Businesses pass those costs on to their customers. It’s the only thing they can do if they want to survive.
If left-wing governments truly cared about their low-income supporters, instead of trifling with the minimum wage to reward unskilled labour with more temporary money before inflation catches up for doing exactly the same job, there’s a better way. Increase training opportunities for skilled trades, of which there is such a dire need, so they can make more money.
Promising to punish the doers, the rich, the corporations, the owners, the investors, can discourage them from investing further. Then, if they need to be encouraged to re-invest, or continue with shelved plans, new government subsidies for wage or technology investment miraculously makes it worth their while to re-engage.
In reality, these loud signals get lawyers and accountants busy, finding ways to shelter investments from coming economic storms and keep what they have earned.
Mark MacDonald is President of Communication Ink Media & Public Relations Ltd. and Author of the book “It Worked For Them, It Will Work For Me: The 8 Secrets of Small Business I Learned From Successful Friends”, which can be obtained by reaching him through: mark@communicationink.ca
