Debt Reduction and Poverty

October 11, 2012 @ 12:18 pm

Posted in: Leader's Blog

Debt reduction is critical in ensuring that progressive policies and programs will be well funded and sustaining. Nova Scotia is paying out almost $1 billion each year to manage our debt; that is $1 billion we do not have to care for our citizens and shift our economy into the 21st century. Reducing our debt is paramount to good governance.

Greens favour a steady economy, maximizing meaningful work and economic health.  The highs and lows of booms and busts may be bearable for those with lots of chips to gamble away, but are brutal for the average citizen.

Now that we are in the business of increasing deficits to end the recession, we have to be very mindful of how we get out of a deficit.

Economists warn of creating a “structural deficit.”  Greens are very concerned about this risk. A future structural deficit could threaten our health care system and other indispensable government-funded programs.

As long as we are in deficit, we cannot find the resources to pay down the debt. Being indebted to external creditors also makes political decision-makers vulnerable to pressures from outside our country. If we had no debt, we would no longer be beholden to the IMF and global credit rating agencies.

The Green Party believes in living within our limits, ecologically and fiscally. Sustainability isn’t about standing in front of logging trucks. We are committed to a balanced budget and to reducing the debt. It won’t be easy. To pay down the debt while supporting programs that meet immediate social, economic and environmental needs, we must maintain a healthy and fair level of taxation and we must ensure that Canadians get good value for their tax dollars.

Most Canadians don’t like paying taxes, especially if they think that the taxes are unfair or don’t deliver good value for money. People don’t like wasteful spending by an over-bureaucratized government. Fair enough. However, about half of Canadians say that they would not mind paying more taxes for a cleaner environment, better health care and education, and to support people in need. It’s not that the money isn’t there, it just isn’t prioritized correctly.

Taxation and spending policies shape society by sending signals about which sectors of society governments think are important. Over the past several decades the traditional old-line parties have used our tax system to benefit large corporations, reducing federal corporate taxes by almost 8 per cent even as corporate profits hit record highs. Shifting from taxing corporations’ net income to taxing their retained earnings will prompt companies to reinvest their profits in the communities they serve, rather than pay themselves bonuses. We are at the highest level of corporate retained earnings ever and yet the same corporations are not investing in hiring. Meanwhile, the cost of living has increased. Canadians save less, carry more debt and work more hours for the same money. Even before the current recession hit, people were having a harder time providing for their families and paying for a decent place to live.

The Green Party believes in reforming our tax system to make it fairer and more in tune with Canadians’ desire for a healthy environment, a sustainable economy and a vibrant, caring society.

It makes no sense to subsidize the wealthiest corporations on Earth – the oil companies. We must remove these perverse subsidies immediately, not in the slow, “grandfathered” approach of the old-line parties.

The Green Party will reduce taxes on things we all want, like income and employment, and we will increase taxes on things we do not want – things that harm people and our environment.

Our “green tax cuts” will be progressive, with a schedule that gives industry time to gear up or down. And it will be revenue neutral because a tax shift is not a tax grab. Income and payroll taxes will decline and the changes will help not hurt, less fortunate members of our society.

To set the right prices, we have to change to a “true” or “full-cost” accounting method that incorporates economic, social, and environmental costs and benefits in the national accounts. Using this method, products and services are taxed, and thus priced, according to the positive or negative impacts caused throughout their lifecycle. We have already done this with tobacco products. Such taxes help consumers make more rational choices.

There are other ways to put taxes to work improving our society. Our tax system must be designed to reduce poverty, encourage environmentally-beneficial activities, and generate more wealth for the 90 per cent of Canadian families who are currently working harder without getting further ahead.

The Greens’ fiscal plan is straightforward: gradually reduce our debt, give clear tax signals that enable companies to pursue profits on a level playing field, and shift taxes to ensure that both revenue streams and expenditures meet social, economic and ecological goals.

The Green Party supports good business practices and encourages businesses to realize the profit potential in shifting to sustainable models. We believe supporting these businesses is an investment with an ROI realized in more and better jobs. Supporting unsustainable businesses is strictly an expense with no stable ROI and a drain on our economy.

Too many small businesses go bankrupt, while major industrial sectors such as manufacturing and forestry struggle to stay afloat. Meanwhile the auto sector has received giant bailouts from provincial and federal governments without committing to protecting Canadian jobs or making the transition to green technology.

This generation has the potential to capitalize on the single biggest business opportunity in human history – the shift to a low-carbon economy.  Whether this is driven by the need to end the recession through economic stimulus, high energy prices, dwindling oil supplies, strategic geopolitical threats to foreign oil, the climate crisis, or all of them combined, let’s stop arguing about who is at fault and commit to the idea that the country that mobilizes resources to develop and commercialize low-carbon technologies (e.g. alternate fuels, renewable energy and energy efficiency) will survive the price shocks of fossil fuel’s last gasps and emerge with a thriving economy.

All levels of government need to advance this green economic approach through effective tax and policy measures and appropriate skills and trades training at the secondary and post-secondary levels.

The Green Party will gradually and progressively shift current consumption taxes onto products and services that harm people and the environment while reducing taxes on income, products and economic activities that do no harm. Greens do not support tax increases. As pollution taxes increase, other taxes, such as income and payroll, decrease. This approach is called being “revenue neutral.”

By moving to “true” or “full-cost” accounting, whereby products and services are priced according to the positive or negative impacts they cause throughout their life cycle, our society can make rational market choices that will guide the economy toward environmental sustainability.

We are already falling far behind the European Union and are fast committing ourselves to becoming importers and consumers of new technology rather than innovators. Again, this is an expense and not an investment and an example of 20th century thinking that is not consistent with the realities we will face in the 21st century.

And poverty? Don’t get me started. OK, too late.

The ranks of the unemployed are expanding, but access to the insurance system designed for times such as these has been shrinking. Meanwhile, we are among the most overworked citizens in the industrialized world. A report from the Canadian Centre for Policy Alternatives (CCPA) states that the richest 10 per cent of Canadians are the only ones not working longer hours. The report concludes that, despite being better educated and working harder, Canadian families are now “running faster just to stay put and the bottom half is actually falling behind.”  They will eventually require access to programs funded by our taxes instead of contributing to the tax base. An expense, not an investment.

This is unacceptable.

The National Council of Welfare has estimated that over 15% of Canadians are living in poverty — about 4.9 million people.  In a wealthy country such as ours, this is unacceptable.  Eliminating poverty while supporting healthy communities will pay for itself in reduced health care costs, as poverty is the single largest determinant of ill health.  Eliminating poverty will pay for itself in reduced crime rates.  Failure to eliminate poverty will cost our society far more than a civilized program to make poverty history.

The Green Party believes it is time to re-visit a major policy initiative — the use of a negative income tax, or Guaranteed Livable Income (GLI) for all.  The use of a GLI could eliminate poverty and allow social services to concentrate on problems of mental health and addiction. The essential plan is to provide a regular annual payment to every Canadian without regard to a needs test.  The level of the payment will be regionally set at a level above poverty, but at a bare subsistence level to encourage additional income generation.  No surveillance or follow-up is required.

Unlike the current provincial welfare and federal Employment Insurance (EI) schemes, additional income is not “clawed back” until a higher level of income, above subsistence, is achieved.  The incentive to illegal, under-the table economies is vastly reduced. Additional income is to be declared until the wage-earner becomes a taxpayer. For higher-income Canadians, the amount of the GLI is merely taxed back in whole.

Through policy coherence, municipally, provincially and federally, significant savings can be realized, while simultaneously reversing the negatives of a shame-based system that perpetuates poverty. To be cost-effective, however, government will require time to negotiate a coherent program with the provinces/territories and other levels of government.  Various “poverty-industry” programs of welfare, disability pensions, seniors’ benefits, unemployment insurance, would all be collapsed within one simple single payment system, administered through taxes and a reduced bureaucracy.

The Green Party believes it is time to advance bold ideas such as this. Citizens often talk about wanting change but continue to vote for the same tired policies that created the malaise in which we are wallowing. Continuing this voting pattern is like asking the foxes to renovate the henhouse, and will make the inevitable need for systemic change that much more difficult to achieve, the longer we put it off.

I don’t know if you agree or disagree, in whole or in part, with what I have been saying but I do believe that concerned citizens know that things need to change. We may debate the how and when, but not the why or what.

You know where I stand.

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