Raise the Hammer

From 2000-current, provincial spending on education has gone from $11.5B to $21.4B, an increase of 86%. In that same period of time, the Ontario economy has grown from $429.5B to $614.4B, or 43%. Regardless of where you think the tax level should be, the fact remains that government has NOT been rewarding rich people at the expense of average people.

As for the level of debt we have, from 2000-08, as governments cut tax rates (primarily out west, but also federally), interest charges to all levels of government fell from 7.11% of GDP to 3.89%, a reduction of 45.2%. In contrast, from 1991-2000, when tax rates went up (partially through not indexing for inflation), interest charges only fell from 9.31% to 7.11%, a decrease of 23.6%.

In other words, by lowering tax rates, the government ended up getting more money for program expenditures. In fact, from 1991-2000, non-interest expenditures by government only increased by 18.8%. However, from 2000-08, non interest expenditures grew by 55%.

By cutting tax rates, the government has NOT gotten less money for program expenditures, it has gotten more.

If the argument is over particular tax cut preferences, say reducing the GST versus tax savings accounts for rich people, then maybe there is a debate. But there is really no debate regarding tax cuts in freeing up money for average people. Even the U.S. which does have high levels of debt relative to GDP, is actually paying less in interest charges than in 2000, when they had a surplus and a booming economy. In 2000, debt charges in the U.S. were 3.64% of GDP, while today they are only 2.80%. The debt may be higher, but the actual debt burden is 23% lower.

It's not a coincidence that the highest taxed provinces in Canada also have the highest debt. When you tax economic activity, whether that is working, spending, or investing, you get less of it. Ask yourself this, would you work harder for someone that is nice to you, or for someone that is constantly berating you? Dalton McGunity has followed the latter route and has turned one of the fastest growing economies in Canada into one of the slowest.