It's more or less an accepted truism that the governments can't do anything right - that their appetite for tax revenue is insatiable, that they squander our hard-earned incomes on boondoggles and pork barreling, and that markets could allocate our money much more efficiently.
We resent paying taxes - income tax, sales tax, property tax, levies, duties and fees. Pro-business lobby groups, think-tanks and astroturf coalitions exploit this resentment tirelessly in their ongoing drive to push down tax rates and scale back public services.
I still recall an old Reform Party PR scheme from the 1990s in which Preston Manning handed a working woman in the East Coast a cheque for the amount that her taxes would go down if the Reform budget were to pass in the House of Parliament. Journalists dutifully recorded her listing off the things she could buy for her family with that extra money.
What they didn't record are the services she would have to start paying for out of pocket if the government could no longer afford to provide them: public education, health care, transportation infrastructure, workplace safety, consumer protection, and so on.
A new study just published by the Canadian Centre for Policy Alternatives, titled Canada's Quiet Bargain: The Benefits of Public Spending [PDF link], has sought to quantify just how much value Canadian citizens get from the taxes they pay.
Overturning received wisdom, the study concludes that the public services Canadians receive would be far more expensive if they had to pay out of pocket.
A family earning the median family income in Canada receives a public benefit that would amount to $41,000 if they had to pay for it - an amount equal to 63 percent of their total income and far higher than the total cost of the taxes the family pays.
(Note: the median income is that amount at which half the national incomes are higher and half are lower, so it's a more accurate way of average than the mean income, which is the total income divided by the number of people and is skewed upward by an unequal distribution of income to the very wealthy.)
Even income earners in the $80-90,000 range, or just below the richest fifth, receive a public benefit equal to half their income, again higher than the taxes they pay.
If citizens had to pay out of pocket for education, health care, infrastructure and so on, they would receive less value and have less disposable income than we enjoy today.
This does not even take into account the efficiency and productivity gains that attend universal education, health care and education. Since all three constitute positive externalities - goods in which some of the benefits accrue to society as a whole - everyone benefits when they are more widely available.
The opposite is also true. Tax cuts, far from automatically benefiting the public who keep the cuts, can actually leave citizens worse off if they reduce the government's ability to provide public goods efficiently and effectively.
The report notes:
[A]n astounding 80 percent of Canadians would have been better off if the Harper government had transferred money to local governments to pay for more and better public services instead of cutting the GST by 1 percent.
Similarly, 75 percent of Canadians would have been better of if their provincial governments had invested in public health care and education instead of administering broad-based income tax cuts in the late-1990s and early-2000s.
And had the federal government invested in improved federal public services instead of cutting capital gains taxation by one third in the early-2000s, 88 percent of Canadians would have been better off.
Public investments in education, health care and infrastructure more than pay for themselves in increased quality of life for the citizens who are able to enjoy them. They represent a better bargain than markets could provide.
The ugly fact is that despite the tax cuts of the past fifteen years, the median incomes and living standards of Canadians have stagnated and the difference in living standard between the wealthy and the poor has widened.
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