Okay, so the price of oil tanked.
This could be good for the environment if mega extraction projects are cancelled and, ironically, good for folks putting gas in their environmentally unfriendly vehicles. But it could be much better if the government took this opportunity to look good and hard at where else they get their revenue from. If the income from oil revenue is sliding it is more than past time to look at other, more reliable, sources of revenue.
Our society is one of the most unequal in Canada. The gap between the richest 10 per cent taking home 31.5 per cent of all available income and the poorest 50 per cent living on less than $30,000 is the biggest in the country. While there are people lining up at half empty food banks and living in inadequate accommodations, or not purchasing the drugs they need, the corporations and the top tax brackets are doing just fine.
There is no denying that our tax system is heavily skewed in favour of the wealthy, and as a result, the government of Newfoundland and Labrador has no room to garner near what it should in revenue.
The missing money
Newfoundland and Labrador captures just over nine per cent of our GDP in revenues, while the share of our growth that goes to corporate profits is double that of the Canadian average. In 2014, by their own admission, the government passed up on $500 million via tax cuts. Most of the benefits went to those who already had healthy incomes. Reversing these cuts would go a long way toward addressing the projected $916 million deficit which the government forecasts will result from the drop in oil prices.
Letting corporate taxes escape
There is also room for the government to levy more tax dollars from corporations. Our corporate tax on larger businesses is currently 14 per cent and successive governments have buckled under the threats by the St John’s Board of Trade that corporations will pull out if the tax regime is less generous. But Nova Scotia and PEI charge 16 per cent, and Norway’s corporate tax rate is 28 per cent with a whopping 50 per cent rate on top of that for petroleum products.
Several countries, such as Australia, also make use of a ‘windfall’ tax on profits in excess of a stipulated maximum. If we had taxed corporations operating in this province more vigorously (and fairly) it would have allowed us to build up a cushion against a fall in oil revenues.
Letting rich taxpayers off the hook
The numbers and the wealth of the richest few people in Newfoundland and Labrador are increasing but the rest of us are not getting to share in that prosperity because our tax regime is so lax. Some calculations indicate that by 2013 the province had forgone possible tax revenue of $2.7 billion—yes, that is billion—more than enough to make up for low oil prices and provide a better life for the less well-off citizens of the province.
Tax brackets and inequality
But the big hole in our government’s tax strategy lies in the tax brackets that the government uses to collect personal income tax. We have just three tax brackets, with the top bracket starting at taxable incomes of $68,508 and over. Contrast that with Quebec and New Brunswick, which use four tax brackets like our federal government; Ontario and Nova Scotia, which have five tax brackets, and British Columbia, which has six levels of personal taxation.
In provinces where there are more tax brackets, the tax system tends to be more progressive because the richest sections of society pay more tax. In provinces like Newfoundland and Labrador and Prince Edward Island (which also only has three tax brackets) the top few percent of people with incomes of many millions will pay the same rate as relatively modest income earners.
I am not an economist, but this is not rocket science. Of course I am not the first to suggest that the rich should pay more in taxes. It was that neoliberal icon, Adam Smith, who wrote:
“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
The province needs to see the current deficit more as a revenue issue and less as a spending issue. Corporations have got off much too lightly and need to pay their share right now. And the richer people in our society must accept their obligations and pay their fair share of tax.
If we did that, not only would we weather the oil price storm but we would end up with a fairer, kinder, and probably richer society.
This article is part of an ongoing series produced by members of the Social Justice Cooperative Newfoundland and Labrador in collaboration with The Independent.
Editor’s note: If you would like to respond to this or any article on TheIndependent.ca, or if you would like to address an issue we haven’t yet covered, we welcome letters to the editor and consider each of them for publication in our Letters section. You can email yours to: justin at theindependent dot ca. Not all letters will be printed, but all will be read.