April 2006: Taxing Our Credulity

Mad about paying taxes? OK, but is your anger well-directed?
April 1, 2006

April is tax-paying month and many low- and middle-income Canadians labouring over their tax-forms will be fuming and swearing at the governments they are compelled to endow with their hard-earned money.

Filers who derive their much higher incomes from stocks and investments, on the other hand, are not upset at all. They may even be smiling, since the tax amount they have to pay--if any--is proportionately a lot less. The income tax system is riddled with loopholes that effectively let them pay as much or as little as they choose.

But average working Canadians are denied that option. Unlike the more affluent business and financial high-earners, who usually collect all their income before deciding how much to share with government, workers have most of their taxes deducted from their pay-cheques. Then many have to pay even more when they fill out their tax-forms.

So it’s understandable they are not favourably disposed to their political rulers at this time of year.

Their acrimony, however, is largely misdirected. Yes, they should be upset with governments that have made the income tax system less fair than it should be. But they should be much angrier with the élite minority whose wealth and political influence enable them to grab a disproportionate share of the national income.

The trouble is that this seizure of the lion’s share by the owners, investors, and shareholders is not evident to the majority who have to divvy up what’s left. Completely lost in the tax-paying process is the fact that employers are taking far more from workers than governments are.

Most Canadians are now working longer and harder than ever to maintain a decent standard of living for themselves and their families. Most are grossly underpaid for the value of the goods and services they produce, working an average of 1,900 hours a year for not much more than $30,000. The result of this unfair distribution of the fruits of labour is apparent in the huge increases in corporate profits. As Jim Stanford points out in his column on the opposite page, corporations have been amassing almost $60 billion in surplus profits--seven times the average annual federal budget surplus since 1997--and now have the huge sum of $280 billion socked away in their corporate coffers.

Of course, it wasn't only from underpaying their employees that business executives can now wallow in such excess cash. They have also benefited enormously from the hefty tax cuts lavished on them. Federal corporate income tax cuts have been reduced by 25% since 2001, enabling companies to hold onto another $10 billion or so each year that could more constructively have been used to improve public programs and services.

Most Canadians, however, don't seem all that outraged about the tax holiday given to big business firms and their owners, investors, and shareholders. Instead, as they fill out their tax forms, their wrath is directed almost entirely at a political operation they believe (having been told so incessantly by the media) is mired in waste and corruption. They resent paying even more for such malfeasance.

The fact that they are in effect giving up even more of their earned income to their employers than to the government is lost on them. The forgone higher wages their bosses divert into profits, dividends, and big CEO salaries and perks don't show up on the T-4 slips. There's no box for it. But when the worker has to pay 20% or more of his remaining income to the government, that loss is up-front and painfully obvious.

Undoubtedly some of the worker’s tax payment is mismanaged or wasted. But most of it goes to build all the schools and roads and parks and other public facilities that we need, and provide the health care, public pensions, UI, police, firefighting, garbage collection, and other essential services of a civilized society.

And what do the owners and major investors do with the much larger share of workers’ earnings that they take? They buy another mansion or yacht, or add it to the millions they’ve already socked away in offshore tax-havens safe from the Canada Revenue Agency. They can do this with impunity because they control both of the country’s largest political parties.

Unfortunately, most of the working people toiling over their tax-forms this month will only be cursing the politicians, while the affluent corporate élite that is really responsible for an unfair tax system and a disgracefully inequitable distribution of wealth go, as usual, unnoticed.

Frank Vanderwal, one of the characters in Kim Stanley Robinson’s Forty Signs of Rain, explains this blinkered behaviour as something hard-wired into humans by our evolutionary development.

“It’s a matter of what you can see,” says Frank. “You see your boss, you see your pay-cheque, it’s given to you. You have it. Then you’re forced to give some of it to the government. The only things people understand are sensory. We’re hard-wired to understand life on the savannah. Someone gives you meat, they’re your friend. Someone takes your meat, they’re your enemy. Abstract concepts or statistics just aren’t as real as what you see and touch. People are only good at what they can think out in terms of their senses. That’s just the way we evolved.”

If Frank is right, we can only hope the next stage of our evolution is not delayed much longer.

(Ed Finn is the CCPA's Senior Editor.)