Freeman

PERSPECTIVE

Economic Warnings from Canada

If Americans Adopt Canadian Policies, We Will Get the Same Results

JANUARY 01, 1994 by K. L. BILLINGSLEY

Filed Under : Socialism, Health Care, Taxation

Promoters of “free” national health care constantly urge Americans to look north of the border for answers. That is indeed a healthy exercise, as long as you extend the investigation beyond health care.

Consider, for example, the province of Ontario, the hub of Canadian manufacturing and finance. In 1990, when Eastern Europeans were casting off their socialist chains, the people of Ontario elected a government of the New Democratic Party (NDP), a member of the Socialist International.

The NDP quickly announced plans to raise an additional one billion dollars a year by establishing a “minimum tax” for “big business.” In the best Orwellian tradition, the socialists established the “Fair Tax Commission” to study the move. But their major initiative, also popular in the United States, was to reclassify the middle class as “the wealthy.”

In May 1993, the NDP announced the largest single tax increase in Ontario’s history: $1.6 billion in new levies. The socialists also slapped a sales tax on automobile insurance, a mandatory big-ticket item for most citizens.

Ontarians pay a provincial tax rate of 58 percent of their basic federal income tax. But there is a catch. Because the increase, up from 55 percent is retroactive to January 1, the rate for the rest of 1993 was a stiff 61 percent. Further, for those earning over $51,000 a provincial surtax recently rose from 14 percent to 20. For those earning over $67,000 there is an “additional tax-on-tax” that rises to 10 percent from four.

All this comes in a time of recession, when government perks remain high. Remo Mancini was elected to Ontario’s Provincial Parliament in 1976. In July 1993 he retired at the ripe age of 41 with a $48,000 annual pension for the rest of his life. Meanwhile, the province’s bagmen were looking for still other pockets to pick.

Also in July, the NDP began hinting that the province would start taxing charitable contributions at a rate of five percent. The news provoked Cries of outrage from some Canadians, who generally like big government but are now beginning to realize its cost and alter their behavior accordingly.

There have been several regional tax revolts, and some predict a national grassroots push like that of California in 1978. Instead of cash increases, Canadians are beginning to ask for more vacation time and other non-taxable benefits.

As noted in the Canadian newsweekly, Maclean’s, the Toronto-based BarterPlus connects people interested in swapping services. In two years, the organization has more than doubled its membership. “Everything the province does to slow the economy seems to make our phones ring all the more,” said BarterPlus president Michael Caron. True to form, the government has imposed a tax on barter services.

Some Canadian economists peg the country’s “underground economy” at up to $100 billion a year. Canadians increasingly shop in the United States, where their dollar goes farther, even with an unfavorable exchange rate.

“The effects of a steadily higher taxation is a disaster for the middle class and a potential disaster for society,” Nicole Morgan, professor of public policy at Queens University in Kingston, Ontario told Maclean’s. With the middle class being depleted by taxation, said Morgan, “you can already see the trends to an increase in violence. It doesn’t take that much for the social fabric to crumble.”

By all standards, Canada should be one of the world’s premier economic powers. It is the largest country in the world, with a highly trained workforce and broad industrial base, with every conceivable mineral and natural resource, abundant hydroelectric power, an excellent transportation system, warm-water ports, on both coasts, a tradition of domestic tranquillity, and no foreign policy entanglements. But instead of growing prosperity Canada currently suffers from recession, high unemployment, and a deficit worse than that of the United States on a per-capita basis. The lessons for the United States could not be clearer.

The Canadian experience confirms that state greed remains insatiable. It is that greed that surely underlies many of our own social problems and increasing violence. Statism and its inherently high taxes can reduce even naturally rich countries to economic basket cases. To use a socialist term, the state is guilty of “parasitism.”

Canadians often complain that they are being Americanized but in some key areas the reverse seems true. Canada has long maintained government ministries for multiculturalism and has practiced official bilingualism for decades. These are the very policies which the forces of political correctness are pushing for America, along with statist health care and national service.

If Americans adopt Canadian policies they will surely get the same results: recessions, frustration, and increased social tensions. Americans should reject expensive and failed statist models and return to their proven tradition of the free market, limited government, and individual initiative.

—K. L. Billingsley

Sincere Tyrants

Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.

—C. S. Lewis

The Consent of the Governed

To commit violent and unjust acts, it is not enough for a government to have the will or even the power; the habits, ideas and passions of the time must lend themselves to their committal.

—Alexis De Tocqueville

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January 1994

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