“Income tax has made more liars out of the American people than golf,” said the American humourist Will Rogers.
Indeed, but let’s not stop there. In Canada, debates over taxes, government and civilization lead some journalists and others into the land of make-believe, by setting up straw men to knock down.
For example, consider a recent CBC story headlined: “Not all business people hate taxes — but just try to get them to admit it.”
The reporter set up the straw man by noting that taxes are necessary, noting that some people are anti-tax, then knocked it down by mentioning essential functions like courts or cops that only governments can provide.
The general notion that taxes are necessary was followed by an interview with a former civil servant who said “tax” is not a four-letter word, and generic clichés about taxes and civilization.
The reporter even managed to sneak in the bizarre assertions that the Fraser Institute and Canadian Taxpayers Federation are anti-government and “anti-tax.”
Others have claimed that to question some government priorities and particular tax levels undermines civilization. The list includes Naomi Klein, Olivia Chow and Calgary Mayor Naheed Nenshi. So, too, Linda McQuaig, who set up a straw man of her own once when she asked her readers to imagine the “complete removal of government” — as if anyone serious suggests this scenario.
The healthy preference for moderate government, including moderate taxation, has existed throughout human history. In the English world, it has been a constant since at least the Magna Carta, which put a limit on the king’s ability to overly interfere with one’s property. And one’s money, for the record, is property.
In Canada, pre- and post-Confederation politicians asserted the role of government was to protect the citizen from government and to provide basic services, albeit defined rather narrowly.
For instance, a 1940 royal commission described Canadian views after Confederation this way: “Government was thought to have met its purpose when it provided for adequate defence, the enforcement of the general law through the equal administration of justice and maintenance of a few essential public works. Within this framework of order provided by public authority, individuals were expected to work out their own destiny.”
But here is the more functional argument for limited government and moderate taxation: governments that attempt too much often do little well. Instead of zeroing in on how to make education, health care and pensions sustainable, political attention is fragmented in a thousand directions.
And there is empirical proof of how bigger government rarely produces better government. My colleagues at the Fraser Institute recently looked at the literature on the optimal size of government. They found after 30 to 35 per cent of the economy is reached, government spending has minimal effects on economic and social outcomes — you’re pushing on a string.
This is not a surprise for students of politics. Vested interests (government unions and above-market compensation, or businesses and subsidies, to use two examples) often swallow up extra taxes.
“Taxes are the price we pay for civilization,” wrote U.S. Supreme Court justice Oliver Wendell Holmes Jr. in 1927. Back then, direct and indirect taxes in Canada amounted to about 13 per cent of the economy. Now, the figure is 38.6 per cent. Taxes as a percentage of GDP have been higher, up to 44 per cent in the late 1990s.
But anyone who thinks Canadians should be taxed more has no historical conception of their relative high rates or their relative ineffectiveness at present levels.
Most Canadians know that a functioning country requires courts, judges and police to protect persons and property, social workers to try to rescue children from awful situations and governments to carry out other functions. All that requires taxes.
But here’s a thought: Switzerland is civilized. That alpine country has universal health care, an educated population and a safety net. The taxes-to-GDP ratio in that country amounts to 33.4 per cent, five points below Canada.
After some basic level of taxation, more taxes do not buy more “civilization.” They simply buy you more government. And the two are not the same thing.
Mark Milke is a senior fellow at the Fraser Institute.
