A taxing effort

Earlier, I mentioned that I'd try to wade into the question of what policies the NDP should be pursuing in its next election platform. I'll start today with an area that the party generally stays away from, namely that of tax policy.

The current tax policy is found at p. 60-61 of Platform 2004. There are some great ideas there: full indexing, removing the GST from essentials, increasing the child tax benefit, imposing an inheritance tax, closing loopholes and refusing tax treaties with tax havens.

While I like these ideas, some of the other included elements are plainly in the wrong part of the platform, including imposing proper environmental fines on corporations and removing the tax-deductible status of those fines. Especially with the next election due to occur just after the Gomery report, there's going to be a heavy emphasis on accountability, both in government and elsewhere. These proposals should be defined and pressed as an issue of corporate accountability, not placed where they can be seen as an unfounded tax grab.

More fundamentally, the current tax platform seems to dance around the edges of the taxation system more than it demands substantive change. In my view, that's a mistake. Taxes are an inherently unpopular necessity in government, and there's much political hay to be made by validating popular frustration on this point. By defending the status quo in any significant part, the NDP ends up on the wrong side of the frustration.

There's no reason for that to be the case. Instead, the NDP should leave the Liberals to try to defend all the iniquities and complexities in the current tax system, and put forward a proposal for an overhaul and simplification of the federal tax system.

The first step should be a clause-by-clause analysis of the Income Tax Act, scrapping any deduction that doesn't have a demonstrable positive effect. This scrutiny has already been applied to social programs as part of the '90s budget cuts; why shouldn't it apply to tax breaks as well?

After that analysis is applied, tax rates should be set so as to remain roughly revenue-neutral, but with a slightly more progressive slant. The end result will be a lot of people not only paying less taxes, but also having to put in less effort to do so (since the Act will then be simpler to apply). The tradeoff will be relatively slight increases at the top end, as well as an end to pointless deductions.

Alongside that theme, all of the ideas included in the 2004 platform can then become part of the reform package. In particular, concepts such as closing loopholes and imposing an inheritance tax should seem a lot more palatable when the NDP can put forward concrete examples of how most people will see reduced taxes.

I understand that some voters might cringe when the words "NDP" and "tax" are put together - and I'm sure that's a large part of the reason why tax policy was buried in page 60 of the platform. But in order to ever present itself as a future government, the NDP has to tackle that problem head-on, and there may not be a better time for it. With Bush's call for U.S. tax reform, the issue is already somewhat in the public eye, and the Cons will surely make their usual call for a flatter tax structure.

In that context, somebody needs to point out that tax reform doesn't need to involve giveaways to the top end. No other Canadian party can plausibly combine a reform position on taxes with a progressive one; the combination should be a winner for the NDP.