Death and taxes. The only things you can count on, so the joke goes.
But if my experience is any indication, talking publicly about taxes now means you are likely to attract nasty notes from people wishing you harm. That’s not funny, and it’s counterproductive when governments of all ideological stripes run deficits outside a recession – such as the federal Liberals, Ontario Progressive Conservatives, the B.C. NDP.
Deficits generally are no longer partisan or ideological. They reflect a structural problem in government budgets. Unfortunately, the vitriol that often accompanies talk of taxation impedes the genuine dialogue required to fix this problem, inclining politicians to shy away from speaking hard truths about the fiscal reckoning we now face.
Older affluent voters, we need your help to address this problem.
The most comprehensive public analysis of taxation in Canada’s history – the Carter Commission – was completed when you were young in the 1960s during the era of sex, drugs and rock ‘n’ roll. That commission did lots of important work. But it didn’t result in governments implementing tax policy that prepared adequately for your retirement income and medical care.
That’s why we need to make talking taxes sexy again. Your use of taxpayer-funded programs is peaking at a time when you also have more wealth than others age groups, including housing equity. You are at a stage of life where legacy matters, and you don’t want it to be unpaid government bills, or too little investment in your grandkids.
But, Paul, some will say. We don’t need to talk taxes. We need to talk about productivity, so that our economy generates more revenue for governments.
Sure, productivity is part of the answer. That’s why I’ve urged governments to rely less on real estate for economic growth, by incentivizing a shift in lending and borrowing away from mortgages and toward business loans. The latter are much more likely to accelerate prosperity, versus bid-up prices for existing homes.
Others will say, forget the tax talk. Let’s focus on slowing spending. Sure. Have you read my rationale for why we shouldn’t be growing medical-care spending as fast as we are, or how we need to be more judicious in our approach to funding old age security?
What about just taxing the uber-rich more, and leaving the rest of us out of this conversation?
Sadly, it won’t work. By his own party’s numbers, NDP Leader Jagmeet Singh’s proposal to add a 1-per-cent tax on net wealth more than $10-million would raise $13.1-billion a year. That’s not even half the value by which Old Age Security (OAS) alone is projected to grow between now and 2028.
Productivity, spending restraint and taxing the uber-rich will not be enough because governments face structural deficits caused largely by the fact that administrations decades ago didn’t prepare adequately for the aging of baby boomers.
The B.C. government acknowledged as much in the budget it released last week.
“Continuing to provide high-quality medical care is one of the fastest growing costs facing us collectively, primarily due to our aging population,” explains the province in its Strategic Plan. “In the 1970s, there were seven working-age adults for every retiree. Now, there are only three. That made it easier in decades past for the province to cover the medical-care costs of our aging loved ones.”
I’ll be looking for the next federal budget to include a similar observation, because this change in the ratio of retirees to workers also makes it harder to pay for OAS, which is by far the fastest growing part of Ottawa’s spending.
We all have aging loved-ones counting on medical care and OAS. No deficit hawk, not even Conservative Leader Pierre Poilievre, will be able to prevent spending on retirements from increasing for the foreseeable future – at least not without dramatically cutting programs on which many boomers count. More than 80 per cent of the federal deficit can already be accounted for by spending on OAS and medical care for retirees. This fiscal pressure will persist no matter who wins the next election.
So affluent boomers, we need to harness your wisdom, self-interest and love for your offspring to help make it fashionable to talk taxes once again – just like it was in the sixties. Bring it to your book clubs, wine events, pickleball tournaments and especially to your politicians.
Because your generation’s retirement income security, medical care and legacy all depend on fixing the structural deficits that no government can avoid, regardless of party stripe.
Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on Twitter, Facebook and subscribe to Paul’s Hard Truths podcast.
