Addressing Poverty and Inequality during a Time of Prosperity
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Economic growth is supposed to benefit everyone, right? That’s not the case right now in Saskatchewan but it doesn’t have to be that way, says the Canadian Centre for Policy Alternatives, which released its Alternative Provincial Budget today.
“Despite the positive indicators coming out of the Saskatchewan economy, there is a growing gap between rich and poor and a persistent lack of social and economic security for the most vulnerable residents of this province,” says Dr. Jim Mulvale, CCPA Research Fellow and head of the Department of Justice Studies at the University of Regina.
With Saskatchewan’s history as a social policy innovator our provincial government has an opportunity to lead a national debate on how to achieve an integrated and cost-effective set of national programs to guarantee economic security of all Canadians, says Mulvale.
“Saskatchewan should initiate this process by implementing new programs under provincial jurisdiction and acting as a model and catalyst for a new system of economic security,” says Mulvale. “One such initiative is a Basic Income Program.”
The CCPA is also calling on the government to do a more substantial examination of the corporate tax regime beyond the parameters of the 2006 Business Tax Reform Committee.
“This review should also include a study of how to extract the optimum level of economic rent from each resource sector, proper royalty and taxation rates and the proper division of revenues between Saskatchewan citizens and private industry,” says economist Dr. Marion Jones, CCPA Research Fellow and Associate Professor in the economics department at the University of Regina.
Jones says there is a need to change the tax system to get the incentives right.
“Non-profitable organizations clearly should not be taxed. However, a number of loopholes exist that allow corporations to avoid paying their fair share of taxes and it is clear that during a time of unprecedented demand for oil and gas we should be collecting more revenue from this sector.”
Jones also says that Saskatchewan’s corporate tax structure must be reformed in order to continue the diversification of our provincial economy.
“A new tax structure must include a shift to a progressive corporate income tax system that helps small and medium sized businesses with lower rates, particularly in their first 5-8 years of establishment, and with increased rates for the largest corporations. This would be supplemented with a new system that would provide significant tax relief to good corporate citizens who invest in physical, human and social capital.”
Jones said this means that well-established large corporations that are doing nothing to build productivity and community will be penalized with higher taxes. Corporations that are investing in physical, human or social capital would get tax relief in line with their investments.
Jones said there is also the need to investigate the possibility of having a negative income tax for people with incomes below a living wage, which would provide tax relief for the working poor and provide a seamless incentive for people to seek employment and replace social assistance without fear of a large drop in their quality of life.
“While we await the possibility of a negative income tax system, it is very important that future tax cuts are disproportionately directed towards the lowest income groups,” said Jones. “In the interim we recommend that a new tax credit program be specifically designed for people who, after gaining employment, are in a transition period between social assistance and total independence.
Jones also stated that the sales taxes burden those at the bottom end of the income scale indiscriminately. Because of this, she suggests that the PST be harmonized with the GST, at a lower combined rate of 10% for both. This would reduce the double taxing on production that is embedded in the PST, and would reduce the total amount of tax on consumption. Failing this move to sales tax harmonization, it would be best to reduce the PST half a percentage point this year, and a full percentage point as soon as possible.
In its Alternative Budget the CCPA also provides comprehensive recommendations to:
- Reform social assistance programs and raise rates by $100/month, eliminate the controversial Transition to Employment (TEA) program and provide a Basic Income Supplement of $137/month to all adults aged 18-64 below the Low Income Cut-off Line;
- Improve the quality of life of Aboriginal people;
- Grow our rural economy and address environmental concerns;
- Retain and attract Saskatchewan youth;
- Support municipalities by offsetting regressive education property taxes;
- Reduce the number of VLT’s in the province to 3,000 and introduce a moratorium on any further expansion of gambling;
- Establish a Provincial Food Charter and support local food security initiatives.
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