In selling out the overwhelming majority of Americans with their tax reforms, U.S. Republicans have also set the stage for a renewed call for lowered taxes in this country.
Not that there’s anything inherently wrong with lowering taxes. There is everything wrong with Trump-style reforms that, true to form, provide the most benefit to Donald Trump, wealthy politicians and the corporations who own them. (The latter an explicit admission from Republicans who knowingly hurt their constituents in order to satisfy donors.)
In the version of tax reform approved this week, all of the permanent cuts – lowering the corporate tax rate to 21 per cent from 39, a 37 per cent top rate instead of 39.6, provisions the benefit owners and shareholders over even high-income earners – apply to the wealthy and corporations. All of the small tax cuts for the middle- and lower-classes expire over time. Moreover, the resultant $1.5 trillion in additional debt will trigger cuts to the already less-than-generous social safety net, including Medicare and Social Security, programs not used by the group that benefits most.
The GOP budget is unpopular across all public lines. That didn’t stop Republican politicians from approving it, however – their bank accounts outweigh the public interest, every time.
Beyond the budget being a disaster for Americans, as with many Trump policies, there’s a real impact on Canada.
Trump is already pushing for revisions to the North American Free Trade Agreement (NAFTA) and has instituted protectionist measures with implications for Canadian businesses. Given that the U.S. is our largest trading partner, what happens in Washington ultimately ripples through our economy.
Already, we’re hearing rumblings about having to match some of the provisions in the Republican budget, especially corporate tax rates. Canada has enjoyed an advantage in having previously provided a large tax break to corporations – the federal rate is 15 per cent, with an additional 11 or 12 per cent tacked on by the provinces. That combined rate was low enough to entice some movement into Canada, including the likes of the Burger King headquarters swap.
Now, arguments are being made that we’ll start to see a reversal of sorts, not only with U.S. companies but even Canadian ones looking to set up shop south of the border to take advantage of the tax climate. Similar cases are being made for the potential brain drain of entrepreneurs and mobile professionals. It’s an issue we’re seeing play out over the Trudeau government’s attempts to close loopholes on private corporations, particularly as used by doctors, for instance.
The “staying competitive” card will be called for even more urgently as the reforms unfold in the U.S.
In the States, the reforms are an attack on government – ideological for some, practical for others with wealth to shelter – that provide immediate benefits to the donor class while promising even more down the road as the safety net they don’t use is eroded.
That’s precisely what we want to avoid here, even if most governments are doing a good jump of proving they don’t deserve our money, let alone our trust.
Nobody appreciates paying taxes, but we do enjoy what the taxes bring us. We want all kinds of services, so we have to pay for them. But what we want to see is good value for our money, which means focusing on what’s essential, and not using our money to benefit a few. A tall order in 2018.