It’s tax time again in Canada, which makes it a good time to think about politicians’ comments on taxes. Many politicians, especially conservative ones, have talked about tax relief, offering all kinds of tax cuts and rebates for everything from fitness to children’s art programs. Oftentimes, they also guarantee that these tax cuts can be paid for without reducing frontline services or major programs. If anything, they also talk about other kinds of spending, whether taking the fight to ISIS in the Middle East, getting tougher on crime, and upgrading the military’s equipment.

In all the talk about taxes, though, nobody seems to ever want to discuss what an acceptable minimum for taxes might be. If conservative politicians think that taxes are too high, then what is an acceptable minimum tax rate that people should have to pay? Conservative political programs and goals cost tax dollars too.

Unfortunately, this never seems to come up. Author Alex Himmelfarb, in his book Tax Is Not A Four Letter Word, talks about the ‘free lunch’ mentality that has taken root in a lot of modern political talk. We can supposedly have all the tax credits and cuts we want, without ever having to give anything up in terms of essential services. Rob Ford exploited this with his claim of “no service cuts, guaranteed”, while Jim Flaherty claimed that the Harper Conservatives “did not balance the budget on the backs of Canadians”. Both these claims turned out to be lies, but they illustrate the point well.

Many of the conservative projects mentioned above are good and important ones. We should be contributing to the fight against ISIS, the army deserves better equipment than the antiquated junk they’re often stuck with, and the longer violent criminals stay behind bars, the better. However, they cost money, and it’s not always clear where the money will come from if the tax base is constantly and endlessly reduced.

Say what you will about progressive politicians and parties, but they at least have some sort of idea where the money to finance programs and projects will come from when they talk about tax increases. On the other hand, when conservatives continually promise more tax cuts and spending on their own programs, all while promising to keep the books balanced, one is left to wonder where the breaking point is.

Back in the 1990s, conservative politicians like Ralph Klein, Mike Harris and Preston Manning showed a lot of courage with the blunt honesty they gave to Canadians. They were up front about the fact that the results of the cuts needed to keep Canada and the provinces from going broke were not going to be pretty. Politicians like Rob Ford and Stephen Harper lack much of the same courage, having played to the ‘free lunch’ mentality described above.

There’s obviously a limit to how high taxes should go, and that limit will change from time to time. But doesn’t that also mean that there should be a minimum level of taxation?
And if so, what is it?

What Is The Right Amount Of Tax?

I seriously pushed a proposal during the election of 2006. My idea was to treat the federal debt as a mortgage, pay the whole damn thing off, then once it's gone completely abolish federal personal income tax. EI and CPP premiums pay for those programs, so the premiums would have to stay. (for Bart, that's Canadian equivalent to Social Security) Provincial tax is under authority of provincial governments, so anyone who wants to change that would have to talk to their provincial politicians. Some provinces have a health insurance premium, that's also under authority of provincial governments. In fact, if you look at your pay stub, look at the box that says "Federal Income Tax". That's the only thing that would be gone; all the other boxes would remain the same.

If we did this in January 2006, we wouldn't have had to increase any taxes or cut any spending. We would have had to freeze both GST and corporate income tax at the level they were at that time. Corporate capital tax and corporate surtax could be abolished, but corporate income tax itself would have to be frozen. In fact Liberals had passed a law to abolish corporate capital tax just before the 2006 election. The effective date was after the election, they weren't expecting the election that soon, but it was passed into law.

Spending didn't need a cut either. New spending promised from the November 2005 fiscal update would have to be postponed by about 3 years, but only postponed, no cuts. And that was January 2006, so that spending would have happened by now. According to the May 2006 budget, the first budget by Conservative finance minister Jim Flaherty, the "status quo" surplus for 2005-2006 was $17.4 billion. The Canadian federal government's fiscal year is April 1 - March 31. And "status quo" meant if Conservatives hadn't messed with it, that's what the budget would have been. I could rant about reckless spending by Conservatives, but first my point.

Apply that $17.4 billion surplus to the principle of the debt. Then take the total of that payment to principle plus interest charges, make that total a fixed total every year. As we pay down the debt, interest charges will come down. For every dollar of reduced interest, increase the payment to principle by the same dollar. That's how the mortgage of a house works. So treat the debt as a mortgage. If we started in January 2006, it would have required 15 years to pay off the debt. That means effective January 1st, 2021, no federal income tax deducted from your paycheque. You would have to file an income tax in 2021 because that would be for year 2020, but that would be the last tax return you ever file.

Unfortunately that didn't happen. Harper got elected. He ran us further into debt. Now the debt is much bigger. If we started with a $24 billion surplus effective January 1st of this year, it would require 18 years. That means no federal income tax effective January 1st 2034. But Trudeau Liberals are running up the deficit. So that means more years of income tax.

To do this today