The Chair in Taxation and Public Finance (CFFP) recently published an update of its survey1 on the perception that Quebecers have of taxation. Some of the study’s conclusions were widely reported in the media.
Posted yesterday at 1:00 p.m.
One of the proposals that the Chair, and more particularly its director Luc Godbout, has been putting forward for many years has received a favorable response from several journalists: reviewing Quebec’s tax mix in order to make greater use of taxes consumption and less in income tax.
Before seeing in it a consensual solution which would only present advantages, which the population would ardently wish for and which should be adopted in fourth gear, it is essential to make a few observations.
First, it is regrettable that the authors of the study chose to compare two tax tools — taxes and consumption taxes — without evaluating them using the same questions.
Thus, respondents were asked on the one hand if they consider that they pay “too much tax”, and on the other hand if they are in favor of an increase in the QST in the event that “the government dedicates this increase for a specific purpose” (better financing public services, reducing taxes, repaying the debt, etc.).
However, such a formulation introduces a flagrant bias in the questionnaire in favor of taxation. With such methodological choices, we can also ask ourselves whether, by asking the opposite question (do you consider that you pay too much QST and would you be open to paying more tax if this were accompanied by various benefits? ), we would not also have obtained the opposite answers to the findings of the CFFP.
perceptions and reality
Other data from the study raise questions. How to explain that more than a third of couples with children earning less than $40,000 consider that they pay too much tax when they pay none (or very little)? What did these respondents understand from the question they were asked? This shows at the very least a great ignorance of the functioning of taxation and indicates that perceptions are not necessarily based on real facts.
Then there is the issue of escalation. Commenting on the study, several analysts explained that there was no need to fear the regressive effect — that is to say when the poorest are harder hit than the richest — of consumption taxes since would suffice to send a check – for example by improving the solidarity credit – to compensate for this effect among people on low incomes. However, proponents of changing the tax mix want to reduce taxes and replace them with increased consumption taxes. In doing so, even if they make this tax perfectly neutral through transfers, the tool that most promotes the progressivity of the tax system, taxes, will see its scope reduced.
In other words, there is no escaping it: the proposed change in the tax mix would have a negative effect on the progressivity of Québec’s tax system and would contribute to increasing already indecent inequalities.
Other ideas have been put forward by various commentators to praise the measure put forward by the CFFP study. It is claimed that the rich will pay more taxes, which is true in absolute amount, but false when considering the proportion of income. Similarly, there is no reason to conclude that the measure will result in an incentive to stay at work longer: in some cases, contrary to what the old orthodox economics claims say based on theoretical market mechanisms (but not shown), if a person sees his disposable income increase following a tax cut, he could just as well choose to work less, because he would reach the desired income more quickly. This is what happened with doctors, for example, when their remuneration was increased.
In short, the demonstration indicating that the measure would be favorable to the population has not been made. And the one that the population is in favor of it either…
Before adopting what here takes the form of a false good idea, we should consider more carefully two facts that are difficult to dispute: since the beginning of the neoliberal shift in the 1980s, on the one hand, the tax burden has had trend to fall, and on the other hand, inequalities have grown in the Western world. The two phenomena are linked. We can also hypothesize that the degradation of public services that accompanied neoliberal reforms undermined public confidence in institutions and fueled a variety of anti-system movements that foster political instability.
Consequently, before adopting yet another reform concerned with reproducing market mechanisms in order to achieve efficiency gains that are at best uncertain, it is important to favor policies that guarantee the redistribution of wealth necessary for social cohesion, especially more than many studies show that lower inequality promotes growth.
On this very specific issue of the tax mix, the CFFP, and Luc Godbout — who in 2015 chaired the Quebec Taxation Review Commission which recommended the new tax mix in question — both by the methodological choices and by the excessive use to the unscientific metaphor of “tax burden”, shows that they campaign more than they seek to enlighten the debate.