Taming the Tax Man
In a recent article in the Calgary Sun, Frank Atkins and Marcel Latouche dismiss the idea of a penny tax as “a very strange proposal.” They see it as yet another tax grab on the part of an already bloated public sector that is just a hair’s breadth from communism.
In reality, it’s a rather straightforward idea and one that puts major tax decisions into the hands of ordinary citizens rather than the cabal of insatiable politicians, bureaucrats and elitists Atkins and Latouche see lurking around every corner.
The first thing you need to know about the penny tax concept is that the people decide if they want the tax and what the tax would be used for rather than elected officials or bureaucrats. It’s not just taxation with representation, it is taxation by direct vote of the people.
The Calgary group promoting debate about the idea has suggested that adding a percentage point to the existing GST (increasing it from 5% of purchases to 6%) could be used for cultural projects or recreational facilities, but these are only two possibilities. The additional revenue could be earmarked for all sorts of infrastructure that is not going to get built within existing municipal budgets.
For those who feel that we should have no additional tax money in the system for anything and, in turn, that we can get by with less government spending or that governments just need to find more efficient ways of providing services, the penny tax concept is anathema. If you think that the City of Calgary has a spending problem, the last thing you want is for it to have more of your money.
But, for those who feel that there are specific projects on which new public money should be spent and are willing to see if the members of the public who have to foot the bill agree by way of a referendum, the penny tax has great appeal.
Under the penny tax formula, money is raised for a specific project, in a transparent way, with clear lines of accountability and a sunset clause that ends the tax when the project is complete. If a majority of Calgarians would rather keep the money in their pocket or feel that the money can be found elsewhere in the budget, the new tax would not be implemented. Voter approval is required.
The penny tax is based on the premise that if you want something you have to pay for it. It’s a way of addressing the age old problem of people not wanting to pay taxes but demanding, expecting and happily using the things taxes pay for.
The reality is that, even if the City finds ways to deliver all the services Calgarians want at lower cost, there is going to be demand for more than what current revenues will cover. A penny tax throws the ball back into the public’s court. Rather than a general increase for a fuzzy list of potential priorities, the penny tax spells it out precisely and puts the question bluntly: if you want this, here’s how you can pay for it.
Can we spend tax dollars more wisely? You bet and the penny tax is one way of doing so. Will it solve every municipal revenue and expenditure issue? No. But it can solve some.
For a more detailed explanation of the value-added local sales tax concept, you can download the Canada West Foundation’s report on the penny tax by clicking here.
Robert Roach is the Vice President of Research of the Canada West Foundation. Canada West Foundation is the only think tank dedicated to being the objective, nonpartisan voice for issues of vital concern to Western Canadians. Visit us on-line at www.cwf.ca.