Tax Me I'm Canadian ! A Taxpayer's Guide to Your Money and How Politicians Spend It

Praise for Tax Me I’m Canadian!

If this book gives you the ammunition to embarrass just one politician into rethinking scandalously profligate policies, it’ll be worth the price.

Don Cayo, Vancouver Sun

Milke’s book is a powerful argument that the conditions of civilization are the rule of law, a sound currency, secure borders and free markets – not ever-escalating taxes to support a super-state. It is solid research, yet sufficiently paced and anecdotal to make light reading of a gloomy subject. It’s one of those rare books which you will enjoy as it makes you mad. And mad you should be.

Calgary Herald

It’s Milke’s tax history lesson that offers the most brilliant inspiration: Let’s take back our heritage. Let’s go back to our Canadian roots. No more ‘American-style’ taxes on everything that moves. Let’s embrace the tax freedom Sir Wilfrid Laurier and others held dear.

Toronto Sun

On Mark Milke’s other work

Mark Milke is a skilful researcher who uncovers information governments would prefer to keep hidden.

Toronto Star columnist Carol Goar,

on the author’s corporate welfare reports

While we await the exhaustive 26-volume chronicle of these abuses of power, we’re unlikely to be treated to such a comprehensive, solidly researched book as Mark Milke’s, certainly not written with as much style and wit: A must for the thoughtful, and a stimulus for the forgetful.

Former Vancouver Sun editorial page editor Trevor Lautens,

on the author’s first book, Barbarians in the Garden City

From Tax Me I’m Canadian!

The American origins of Canadian tax:

When Canadian politicians imposed additional and higher taxes in the late nineteenth and early twentieth centuries, they invariably did so only after the Americans acted first. As well, there were direct legislative influences on Canadian tax laws both federally and provincially. Think of almost any modern Canadian tax: federal income, gasoline, property and corporate; almost all have American origins.

On early Canadian statesmen:

Beyond the debts that plagued pre-Confederation colonies, farsighted legislators envisioned a larger country that would create a more prosperous British North America and benefit everyone. In economic lingo, it was a laissez-faire argument for how to pay for needed services and capital improvements and yet keep the tax burden reasonable: expand the economy, and government spending and debt becomes less costly per person as the overall economy grows.

Subsidies to business:

It is sometimes difficult to sort out the supposedly capitalist CEOs from the normally anti-business union leaders. A few years after the Chrysler-GM bailout and in an astonishing display of chutzpah, Chrysler CEO Sergio Marchionne spoke of the wealth gap and denounced corporate greed…. Apparently Marchionne saw no irony nor greed in how just two years previous, Chrysler’s executives and union leaders demanded money from the public purse at the expense of other businesses and taxpayers across the country.

The problem of Aboriginal isolationism:

Advocacy for greater pureness of culture and demands for separateness, isolation, and sovereignty based on a mythologized approach to one’s ancestors, is no more healthy for native Canadians or helpful to remote reserves now, than when such notions animated the American South in the 1870s. Such harmful and divisive ideas are propelled ahead ad nauseam by some native leaders, sycophantic politicians and academics who are either too daft to know, or too deceitful to admit, that they advance a profoundly anti-liberal agenda.

Tax Me I’m Canadian!

A taxpayer’s guide to your money

— and how politicians spend it

New edition

By Mark Milke

Thomas & Black

Tax Me I’m Canadian!

The taxpayer’s guide to your money—

and how politicians spend it

New edition

ISBN 978-0-9687915-2-3 (print)

ISBN 978-0-9687915-4-7 (ePub)

ISBN 978-0-9687915-3-0 (mobi)

Published by Mark Milke at Smashwords, 2014

All rights reserved. No part of this book may be reproduced or transmitted in any forms or by any means, electronic or mechanical, including photocopying recording, or by any information storage and retrieval system, without permission in writing from the Publisher.

Thomas & Black Publishers

Calgary

Book design: Dean Smith

eBook conversion: Human Powered Design

Illustrations used with permission from

Koko Press/Adrian Raeside; Cover image used under license from Getty Images and with permission from the Royal Canadian Mint; Photographic images of John A. MacDonald and Pierre Trudeau courtesy of Library and Archives Canada; Glarus, Switzerland photo courtesy of Adrian Sulc, Wikimedia Commons; Photographic image of John D. Rockefeller used under license from the Collections of the Henry Ford Historical Museum

Retailers: Distributed by Sandhill Book Marketing

www.sandhillbooks.com

1-(250) 491-1446

Canadian Cataloguing in Publication data available from Library and Archives Canada

Foreword

In October 2006 then federal director for the Canadian Taxpayers Federation, John Williamson, appeared before the House of Commons Finance Committee to present recommendations for the upcoming federal budget.

Much of John’s presentation centred on areas where the government could reduce its spending, this to free up room for debt repayment and lower taxes.

This was enough for one rookie Member of Parliament on the committee to stop the proceedings to seek a clarification: Mr. Williamson, I am confused. You’re standing before this committee asking that the government spend less?

A perplexed M.P. would later explain that his staff tracked requests brought before the committee which totaled, to date, an eye-watering $600-billion. The entire federal budget that year was $220-billion.

And so it is the story of government. People with tremendous moral rectitude stand before politicians and wax eloquent on how other peoples’ money should be spent … well, usually on something to do with themselves. As the great nineteenth century French economist Frédéric Bastiat put it: Government is that great fictitious entity where everyone endeavours to live at the expense of everyone else.

That is certainly the lesson the world has learned looking in on countries like Greece, but should we be so smug to think these same lessons don’t apply to us in Canada?

Mark Milke’s new edition of Tax Me I’m Canadian is, in the broadest sense, about how much of the Western world, along with Canada, moved from a welfare state to an entitlement state, where everyone feels they are entitled to a handout or a guaranteed income or a perfect life courtesy of other people.

And it doesn’t matter if you are General Motors, a government employees’ union or even a level of government different from the next (the political class has yet to figure out there is only one taxpayer).

When Mark published the first edition of this book in 2002 it was the definitive summary of your money and how politicians spend it. A tour de force from the first taxes levied on beaver pelts and early policy that sought to keep taxes below our high tax neighbours to the south, to the explosion of our welfare state and mass redistributionist policies. It showed how billions of tax dollars whether redistributed to native bands in isolated communities, or have not provinces through equalization, actually made the recipients worse off, not better. The people who pay those bills were no better off either.

The author has kept the best elements of the first book (including a chapter on nutty tax conspiracy theories) but added reflections on developments of the past decade.

In 2002 the National Debt Clock was happily in retirement; today it once again makes its way across the country and onto the steps of provincial legislatures. Mark picks apart the failed notion of Keynesian economics, the idea that we can borrow our way into prosperity; he details how most of the federal government’s much ballyhooed stimulus spending took place after the recession was over in 2009.

In 2012 provincial and federal government collectively borrowed—wait for it, $118-million a day. But that only tells part of the story.

The economic downturn coupled with volatility in the stock markets has drawn increasing attention to unfunded liabilities. In a nutshell, unfunded liabilities are a promise to pay someone without the money to do so. For example, the author dedicates a chapter to the escalating cost associated with topping up government employee pension plans. These defined benefit plans, which are largely found in the government sector, provide a guaranteed income for life, regardless of the amount saved and invested. The shortfall—you guessed it, largely comes from the rest of us who have watched our own retirement savings over the same period barely stay afloat.

Unfunded liabilities are broad. In the foreword to the first edition of this book, Elizabeth Nickson wrote that in ten years, the largest generational cohort in human history will begin to retire. When one considers the trend of an aging population (read: more retirees and fewer taxpayers), the promise to maintain current levels of health care and retirement program spending is staggering. Yet, instead of addressing these matters and preparing for the unfolding demographic tsunami we blithely turn a blind eye. In the absence of change, the upward pressure on taxes and increased state rationing of services for our children and grandchildren is undeniable.

Another new chapter in this edition discusses the New Left which has become increasingly radicalized through movements like Occupy and what Mark aptly calls the anti-prosperity brigade (they call themselves environmentalists). Mark explains that the Occupy movement is mistaken about not only about who pays taxes, but how wealth and taxes are created. Protestors demand government fund everything under the sun but then issue ultimatums for an end to any and all resource development which pays for those same multiple demands.

The author poignantly summarizes the lunacy thus: At least Marxists claimed their theories would create wealth and prosperity for all. Today’s economic Luddites believe they can skip the energy-financed revenue ‘cake’ but later eat from it somehow anyway.

Mark remains an optimist though and provides many examples, not just in theory but in practice, that provide a roadmap forward: Singapore addresses the demographic bubble by requiring its citizens save for their own health care and retirement with government limited to catastrophic support; closer to home, the 1970s-era NDP government of Allan Blakeney in Saskatchewan implemented responsible reforms in the 1970s that phased out the requirement of taxpayers having to endlessly top-up government employee pension shortfalls; Switzerland obligates citizens to buy health insurance but with private sector choices rather than the Canadian fixed-price, wait-list monopoly (in which choice is restricted to those who can afford to purchase care outside the country). Mark also finds inspiration in the Swiss system of referendums where citizens have a direct say in the laws that govern their affairs.

This book could easily be longer, but its brilliance rests in both its timeliness and conciseness. It is a handbook that addresses wealth creation, the folly of borrowed time and borrowed money, and the destructive path the entitlement culture leaves in its wake. The lessons that Tax Me I’m Canadian detail and the path it puts forward matter to our prosperity today and to what we leave for future generations tomorrow. To again quote Frederic Bastiat: Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone. That truth, and this book, is a lesson for the Commons Finance Committee and for every Canadian who cares to understand.

Troy Lanigan

President, Canadian Taxpayers Federation

Victoria, British Columbia

August 2013

Introduction:

Taxes and the Age

of Entitlement

We deliberate not about the ends

but about the means.

~ Aristotle, The Nichomachean Ethics

The good life, taxes, and opportunity

The taxes Canadians pay and the art of politics are inextricably linked and originate in choices, choices fashioned by core beliefs about the best way forward to a happy and good life. It is a question that preoccupied the ancients who, as with most people except for the insane and the evil, assumed a good life was a desirable end. We quibble, as Aristotle asserted, not on whether the good life is desirable but on how to attain it.

The possibility for a good life is inevitably affected by those around us. As few are hermits, human civilizations inevitably require some skeletal organizational structure—some government, and for a variety of reasons. That reality has both beneficial and ill consequences. Problematically, some reflexively assume taxes and civilization are intertwined to such a degree that any new tax is equal to a higher form of civilization. As I will explain throughout the book, this is hardly the case; and no matter how much wealth a country creates, and whether its tax rates are 10 percent or 90 percent of its economy, choices will still have to be made about how to apportion resulting tax revenue.

Thus, this book is meant to inform the average Canadian about the various choices proposed by many, or blithely assumed, to lead to a good life: public, political, those from narrow interests, and the consequences of the same upon the wellbeing of families, individuals, and the wider society. Problematically, when the link from demand to outcome is unclear, or when ordinary citizens cannot stop narrow interests from exercising undue influence, demands multiply, often at the expense of not only taxpayers today but of subsequent generations.

This book is also about history. Canadians should know that their ancestors were not always enamoured with government for its own sake, or as the presumed cure-all for every private problem, but once believed that a limited, moderate state was preferable to the overtaxed, over-governed rebel (!) colonies south of the border. While Canada’s size of government in the twenty-first century should not necessarily resemble the Dominion of Canada in 1867, neither is government as it exists now beyond possible improvement, which in many cases also requires a less interventionist tack. Many politicians, egged on by self-interested groups, attempt too much and as a result waste tremendous amounts of time and money; Auditor General reports testify to such on an annual basis. Chapters 1 through 3 attempts to provide context for Canadians who wish to understand the tax views of the Fathers of Confederation, who drew inspiration from thinkers such as John Locke, Adam Smith, and various British and French politicians who believed the best governments were those reluctant to intervene too often. They never conceived of the notion that Canada should be a collectivist, groupthink nation. Instead, they presumed that individual responsibility and initiative, friends and family, and private attempts to provide desired ends were not opposite a civil society as some mistakenly assume but the very solid foundation for it.

From the welfare state to the entitlement state

Beyond the history—necessary to grasp how not every generation thinks every good thing must be delivered by recycling money through government, the reader will see snapshots of current political priorities. Chapters 4 through 8 illustrate today’s entitlement age. Subsidies to business are a clear example and obvious in present-day budgets. Other items may not show up for decades, i.e., largely unnoticed deals with public sector unions on defined benefit pension plans which are costly and increasingly unlike the reality in which much of the private sector operates. Such delayed fiscal time-bombs also result from the age of entitlement.

If it seems that almost everyone is in on the subsidy game, that perception is not far off the mark. The provinces, municipalities, and reserve governments alike demand ever-higher transfers and thus more taxes from the citizenry. Politicians and at least a few voters seem to think market failure is so rampant that every entity from multi-national corporations such as Pratt & Whitney, General Motors, and Chrysler, to ice cream shops, gas bars, and hot dog stands must be subsidized with tax dollars. Canada, in the twenty-first century, is a long way from the debates of the late-nineteenth century and early-twentieth century over whether pensions and education should be universally provided. Now, everyone is ostensibly guaranteed a grant from government—which raises the question of who will pay for all of it.

Answer: You, and subsequent generations. Tax levels, down slightly from their late-1990s highs, are still high by historical standards and above the OECD average. The result is that the public is rightly reluctant to ante up more tax cash to governments when those in charge of governments transfer money to government unions, unaccountable reserve governments, and business. Thus to finance part of current spending, most governments have returned to the spend-now, pay-later pattern (if they ever left it), with the bill for present spending again partly deferred to today’s children and their children.

In chapters 9 through 12, I engage in some myth-busting exercises by looking at the entitlement state and its illusory existence, courtesy of borrowing from the future (government borrowing being perhaps the ultimate Ponzi scheme). These chapters also include a look at one end of the radical spectrum: those who claim federal income tax is unconstitutional; and then the other: those who believe any new tax and every government intervention is another step towards a human utopia. I dissect the nonsense from both extremes.

The contradictions of modern-day Luddites

Speaking of extremes, one new version has become more pronounced in the twelve years since I wrote the first edition of this book: those who desire ever-more revenues for the large governments they think necessary but who also oppose economic development that could provide that extra revenue. That includes those who seem to oppose every instance of oil, gas and mineral extraction in remote areas of Canada where relatively few people live and where the environmental consequences are slight.

Such extremes do not help us with the eternal human question introduced back when Greek philosophers were traipsing about Athens: what is the good life and how do we construct it? For my druthers, I side not with Plato, who thought one could start with an idea and force people into it, the source of much top-down tragedy in human history. I instead side with Aristotle who asserted all such questions must begin with a look at reality on the ground—how human beings behave and what works and then, and only then, should one begin to construct one’s life and one’s civilization on such solid ground.

Present-day tax and spend patterns often result from political choices that attempt to escape reality. Politicians in Ottawa and Queen’s Park rescued General Motors and Chrysler in 2009 (the second rescue for Chrysler in three decades) rather than let the two