Enough With The Tax Credits

June 1st, 2018 | R. Rados
enough tax credits

The Conservative version of identity politics is boutique tax credits. These are special tax credits that only apply to special people, in special places and for special reasons. Bus drivers, mothers, students, farmers raising special kinds of cows, people who ride donkeys to work—anyone who can be broken down and marginalized to the most microscopic sub-class gets a break with boutique tax credits. Conservative tax credits are designed around focus groups that break people down into small samples in order to help Conservative strategists target certain segments of the population. It's an election strategy similar to the ethnic and gender oriented strategies of Liberals and New Democrats. It's an election strategy that has proven effective in the past but is as annoying and discriminatory as anything Trudeau and Singh have to offer.

The Harper government loved boutique tax credits, especially around election time. It looks like Scheer's Conservatives are taking the path of least resistance by recycling old tactics, instead of experimenting with a new vision that includes all Canadians. Rather than beat a new path in the grass, Andrew Scheer is going down the path left behind by Stephen Harper. You know, the same path that took us to a massive Liberal majority led by a part-time drama teacher and snowboard instructor. Instead of promising to make life affordable for all Canadians, Scheer's Conservatives have promised to make life more affordable for new parents—using a giant tax credit that would cost the federal government over $600M. If this is a sign of things to come, Andrew Scheer better start packing his bags.

What about the rest of us?

Andrew Scheer's parental tax credit is likely about politics and appealing to existing first-time parents. It's a vote grab, nothing more and nothing less. It's somewhat similar to Trudeau's apologies to every identity group in Canada and his incessant need to appropriate the culture of every country he visits. How the rest of us see Trudeau's tactics is how normal Canadians see Scheer's tactics. No one is being fooled and average conservatives are getting annoyed.

If Conservatives want to kick the crap out of Trudeau in 2019, they'll need to start presenting policies that help all Canadians. Enough with the boutique tax credits that were born out of focus groups. Conservative voters and ordinary Canadians want policies that will help everyone, across a broad range of identities and sub-classes. We want lower taxes, a lower cost of living, more freedom and fewer bureaucrats breathing down our necks. These are the things we really want.

The onus of winning is as much on Scheer's shoulders as it is on the shoulders of unaffiliated, grassroots conservatives and libertarians. We should all support Andrew Scheer, but if he strays too far from these ideals, he will lose.  

Cut Taxes And Spending For Everyone

Instead of targetting specific blocks of voters, Conservatives should be targetting the vast majority of right-leaning Canadians who think taxes are too high. If there is one thing all conservatives can agree on, it's that taxation is theft.

Bureaucrats who spend taxpayer money on ineffective policies and social programs are the enemies of all conservatives. In four years, Trudeau's government will have done more damage to our grandchildrens' retirements than a second great depression. In twenty years, our children will be paying more taxes to pay for the debt we're acquiring right now. If there is one thing first-time parents should be worried about, it's bankrupting their own children. By cutting taxes and spending, a Conservative government could undo the damage this Liberal government has done.

Continuing to increase taxes will lead to more taxes. The more money we give them, the more ways they'll find to spend it. When they run out, we'll pay more. Over time, we become desensitized to taxation and we accept more of it until we're bankrupt and paying more for less. Unfortunately, cutting and eliminating existing taxes isn't enough. A future Conservative government will need to pass laws that limit deficit spending and tax increases. If the money isn't there, running a deficit and increasing taxes shouldn't be the first options.

If Conservatives wanted to get serious, they could call some provincial leaders and get a majority together to sign a federal tax charter. They could all get together and create a charter that imposes federal tax and spending limits across the board. Most conservatives would agree that federal (and maybe even provincial) income tax limits would be nice.

If Conservatives wanted to keep it simple and less serious, they could slash income taxes across the board for everyone. If they wanted to take on a more populist tone, they could reduce income taxes to zero for anyone making less than $30,000 per year and increase it for anyone making over one million. The options are limitless, but as long as they include tax cuts for a majority of Canadians, they would be good options for Conservatives.

If none of this sounds appetizing to the Conservative ilk, cutting the GST down to 3% might be enough.

Abolish Existing Tax Credits, Simplify Taxes

When I say enough with tax credits, I mean enough with tax credits. Tax season causes more stress than it should and puts the burden on the taxpayer when mistakes are made. Despite having a horrific number of misinformed and useless employees, the Canada Revenue Agency expects Canadian citizens to correctly claim their tax credits and report their incomes to a federal government that already has the information it needs to assess a majority of taxpayers.

In most cases where a person is employed by an employer and is issued T4 slips, the CRA has all it needs to determine how much the person owes or is owed. Yet, that person is still required to submit their taxes and claim their GST credit, or any other credits that depend on information the CRA already has. Of course, the CRA does this to give taxpayers the opportunity to claim any undocumented income, but the process would still be more simple without the need to claim credits.

A majority of Canadians are employed by someone else. This means that a majority of Canadians would have a fairly basic tax return without the current, messy array of tax credits and loopholes.

Tax credits are great in theory, but in practice they're a logistical nightmare for everyone. If a mistake is made, someone at the CRA has to fix it. If something is filed incorrectly, it causes problems and costs taxpayers more when the CRA is forced to hire an excess of employees to fix and mitigate the problems. If a tax credit is ambiguous and poorly advertised, millions of Canadians lose out on claiming it—which is sometimes the intent.

Complexity wreaks havoc on everything. The more complex a system becomes, the more prone to errors it becomes. From software and biology to civilization—complexity causes problems. A simple tax code could save taxpayers millions, which in turn could lead to lower taxes and a smaller government.

Simplifying tax laws is more conservative than creating new tax credits.

A lot of the existing tax credits came from past Conservative governments. The current Liberal government was right to axe some of them, including the Children's Fitness Credit and the Family Tax Cut (income splitting). They added needless complications to people's tax returns and probably cost the federal government more than they were actually worth for taxpayers. Furthermore, these tax credits put the burden on taxpayers to claim them, which in and of itself is total nonsense. It makes more sense to cut taxes for all of us without making us do all the work.

TFSAs Are Stupid

I'll come out and say what I've wanted to say for a long time: Tax Free Savings Accounts are a cheap, weak Conservative idea. TFSAs can be used for interest accounts and stocks, limiting people's savings to a certain amount that grows each year. It sounds nice, but what Conservatives should have done was abolish taxes on savings and capital gains all together.

With that said, everyone should open a TFSA immediately. In an ideal world, Conservatives would have had big enough balls to abolish taxes on savings across the board. Instead, they created a way for us to save on taxes by making us do the work. If you want to save taxes on your savings, you need to do the work. If you want to save money on income taxes with a tax credit, you need to do the work. The Conservative habit of making taxpayers work to keep more of their own money is getting old.

As taxpayers, we don't owe the government more time and effort. They owe us.

If the Harper government had bigger balls, we wouldn't need a TFSA to save on the interest and gains we earn from investments. The amount we can save wouldn't have limits and Canadians of all classes would be saving more money. Since that's not the case, we should all have a TFSA to protect our money from sticky-fingered bureaucrats. It's another Conservative election ploy designed by backroom strategists, but until we have a masculine Conservative Party, the TFSA will have to do.

The way TFSAs are designed allows them to bleed more revenue out of government coffers each year. This seems like a clever way to slowly starve the beast, but when Liberals and New Democrats come into power, we just end up with new taxes to replace the loss in revenue. We have a carbon tax now, soon we'll have a junk food tax and an endless array of new taxes to fill the growing void created by TFSAs and RRSPs.

The Harper government was understandably careful when they conceived the TFSA in 2008, but it didn't count for much by the time the 2015 election rolled around. The Conservatives didn't want to run massive deficits by cutting revenue, so they found a way to create another slow bleed that would force Liberals and other future governments to either create new taxes, increase existing taxes or repeal credits and benefits—none of which are popular options. Again, it sounds clever, but the payoff for the rest of us is minuscule. In some cases, like with a carbon tax and beer tax that increases annually, the payoff isn't a payoff at all.

The same would likely happen if Conservatives abolished taxes on savings, but at least all Canadians would have an opportunity to benefit for a few years, in between shitty Liberal governments. If we're going to get the same result, we might as well take a swing at the most expensive china in the cabinet.