Monday, December 27, 2010

M&M's CFAX Top 10 for 2010

Every Monday morning, usually right after the 10:00 am news, Maureen Bader and CFAX 1070 host Murray Langdon talk about tax policy and government accountability (or lack thereof) issues. Much of what we discuss flows together, but I've tried to separate the issues as much as possible to make a top 10 issues for 2010 list. 

10. Olympics
Although this was the biggest news story for 2010, we barely talked about it because all I would have done was remind people about the legacy of debt and higher taxes the limitless spending would bring -- a big downer during a big party. As a December 2010 PricewaterhouseCoopers report showed, the games produced $2.5 billion in GDP. That's nice, but they cost upwards of $10 billion, so that means $7.5 billion in other opportunities were lost. Even worse is the loss of an important lesson -- government monument building projects are great for politicians and bureaucrats, but taxpayers get stuck with a legacy of debt and higher taxes.

9. Corporate Welfare
Governments love picking winners and losers and the film business is a good example. It is a popular target for government largess -- and not just in B.C. Across North America, politicians line up to throw other peoples' money at Hollywood millionaires, even though other people might have other ideas about how to spend their money. In 2010, the B.C. government gave the film industry a bunch boutique tax credits that are nothing more than corporate welfare. Why? Because film companies don't have to actually pay any taxes to get these 'tax credits' -- all they have to do is spend. For example, if a film company applies for a tax credit of $10,000, and doesn't owe any income tax, it still gets a refund of $10,000. That's a handout.

8. Government spending, the deficit and debt
Spending in B.C. has been out-of-control for a while now. B.C. government spending hovered at about $30 billion per year between 2001 and 2004 then started to ramp up in 2005 as that dreaded second-term spending disease infected politicians looking to buy their way to re-election. Spending soared to $39.3 billion in 2009 and is expected to hit $41 billion in 2010 and $42.3 billion in 2012.
Meanwhile, the B.C. provincial debt sits at about $48 billion now and is expected to rise to about $57 billion by 2012, almost double what it was in 2006. All we need to do is look at what's happening right now in Europe to see where living beyond our means leads -- fiscal austerity programs and even riots in the streets.

6. Health Care
We've discussed unsustainable health care spending a fair bit because health care spending is already the biggest single spending item in the budget and is spiraling out-of-control. In 2001, health care spending totaled $10.6 billion, or 34.8 per cent of all government spending. It now totals $16.5 billion and will climb to $17.9 billion by 2012, or 42 per cent of government spending. Without reform, the health budget could eventually take up all the government budget.

The government has convinced a lot of people that the health tax, or MSP premium, will somehow help pay for this. The B.C. government, in its 2010 budget, took some hated taxes, like the HST and MSP and rebranded them as “health taxes.” This was a tacit admission that MSP has always gone into general revenue, not to pay for health care. That's because the MSP is a poll tax – a per-person tax charging a fixed amount per individual. This health tax went up by 6 per cent in the 2010 budget and if it continues to increase at this rate, it will double over the next nine years, forcing families to pay a health tax of  $2,736 per year.

5. Crown Corporations
We discuss different Crown Corporations, but the one we talk about the most on this program is BC Ferries. Our BC Ferries discussion is often related to the Freedom of Information and Protection of Privacy (FOI) Act.

BC Ferries was partially denationalized  a few years back but still operated as a government monopoly and still got millions of taxpayer's dollars every year. Because of the partial denationalization, it was no longer subject to the FOI Act. That meant we couldn't find out what the executive or board salaries were. After it was revealed that BC Ferries CEO made over $1 million per year, and a report by the Comptroller General that found the Board of Director's pay was 3-5 times higher than allowed under Treasury Board rules, BC Ferries was brought back under the act. It is possible to bring accountability back to Crown Corporations.

4. Other Taxes
Property Transfer Tax (PTT). The PTT was brought in by the Vander Zalm government in 1988 and became such a fantastic cash cow that no government since has eliminated it. Yet, the B.C. government knows the PTT is a bad tax. A motion at the BC Liberal Convention in 2006 moved that the government abolish the PTT.  The resolution was passed with overwhelming support and is part of BC Liberal party policy. It's time for them to follow through.
New tax cut cancelled - In a last ditch attempt to bolster his popularly, Premier Gordon Campbell announced a 15 per cent reduction in personal income tax. When that didn't work, he just cancelled it, then announced his resignation. I hope the new Liberal leader brings that back because the Premier's rationale for the tax cut - leave money in the hands of the people it belongs to, because they are able to make the best spending decisions with it - was right.

3. Environmental Policy
It seems the government may be jumping off the global warming bandwagon, and not a moment too soon. Climate change started dropping off the world agenda late last year when the Climategate revelations showed that some climate scientists were playing fast and loose with the data.

Under Premier Gordon Campbell, B.C. brought in a carbon tax and joined the Western Climate Initiative (WCI), a regional cap and trade scheme. The carbon tax now sits at 4.5 cents per litre and will rise to almost 7 cents per litre in 2012. This is nothing more than an attempt to appear to be doing something about global warming. The government never expected the carbon tax to reduce gasoline consumption. In its own budget documentation the year the carbon tax was implemented, it expected gasoline consumption to go up. Meanwhile, the carbon tax has had little if any effect on GHGs. According to the Ministry of the Environment, B.C. GHGs went up by one per cent between 2007 and 2008.

Interest in the WCI, the regional cap and trade scheme, is waning. One member, Arizona said it would not participate in the scheme, and legislators in Utah are urging the governor to drop out as well. B.C. must do the same. 

The BC government has also given tax dollars to private companies in an effort to create a type of corporate welfare of another colour. But as the example of Spain shows, government subsidies to the green energy sector kill jobs in the productive sectors of the economy. Unemployment in Spain now hovers around 20 per cent. 

Governments around the world are cooling to global warming. Experience in Europe shows how energy taxes kill jobs and leave seniors shivering in the dark. Denmark, for example, imposed high carbon taxes, and the result was manufacturing job losses and some of the highest energy costs in Europe. With the price of oil heading back up to $100 per barrel, it's time to stop the global fooling.

Choosing between number two and number one was really difficult, but in the end, the number two most discussed topic was:

2. Municipal Issues
We talked about a wide variety of municipal issues this year. The biggest was the steady increase in property tax rates driven by non-stop municipal spending hikes driven by big salary entitlements for municipal workers. Municipal pay hikes are going on in some communities even while the biggest private employer, and largest single property tax payer, teeters on the brink of closure. For example, the mill in Elk Falls, near Campbell River, was shut down after Catalyst Paper was unable to come to an agreement with the municipal government and the union local. This means a residential property tax rate increase in Campbell River of 14.5 per cent in 2010.

We discussed how people can fight City Hall and Win. Dawson Creek, Victoria and West Vancouver are but three examples of municipalities where citizens have organized to get spend-happy municipal governments under control. People in other municipalities should be empowered by these efforts. We must ensure our children and grandchildren are not left with a legacy of debt and higher taxes.
And now, it should come as no surprise, that the number one issue discussed during our time together in 2010 was:

1. HST
We talked a lot about the HST, but our discussion didn't focus so much the tax itself. It focused more on the No-HST group's successful use of the Recall and Initiative Act. This Act was designed to ensure no group would ever be able to bring an issue forward for either a vote in the legislature or a referendum. Much against expectations, the No-HST group was able to get enough signatures on its petition to force the government to act.

The success of the No-HST campaign makes it clear that people are tired of politicians who say one thing before an election and do something else after. It's time for change, so although the No-HST campaign may not be able to get rid of the HST, it has created the opportunity to re-think how political decisions are made. People want more control over political decision making the way forward is obvious  – it's time for direct democracy in B.C.

Thursday, December 16, 2010

Energy taxes kill jobs and leaves seniors shivering in the dark

In my article in the Province newspaper today, I talk about Denmark's experience with the carbon tax. Denmark imposed high carbon taxes and the result was manufacturing job losses and some of the highest energy costs in Europe.

The Danish government started taxing energy with a carbon tax in 1991. By 1998, manufacturers started closing because of high energy prices. Danish carbon tax revenues declined, as did the number of manufacturing jobs.

By 2001, economic growth had slowed to almost zero. Danes making over CAD$50,000 paid 59 percent of their income in taxes and also had to cope with record high electricity prices.  That year, the sitting government was thrown out of office. The incoming government promised a tax freeze, followed by tax reductions – including reductions to the carbon tax.

All the hardship did reduce Denmark's greenhouse gas emissions, the purported goal of carbon taxes.  Overall, emissions fell by 10 percent between 1990 and 2005, but the country’s manufacturing employment dropped by 25 percent.  So while a carbon tax can reduce emissions, it is at the cost of jobs and a population struggling to pay its heating costs.