10 March 2015

Gimme that Old-Time Religion #nlpoli

Kim Keating is the president of the St. John’s Board of Trade this year.

In her Telegram column on Saturday, Keating offered some advice to the provincial government about the upcoming budget and taxes.  “As the voice of business, the St. John’s Board of Trade does not support tax increases.”

Funny that.

A couple of years ago, the Board of Trade enthusiastically supported a new tax called Muskrat Falls. The whole scheme is premised on raising electricity rates in the province to pay for the deal and to generate sizeable profits for the companies involved.  The profit for Nalcor is supposed to go to the provincial government to help pay for government services.

So maybe what Kim said wasn’t entirely inside the Ring of Veracity.  The Board of Trade likes some taxes. Like say ones where its members can make crap-loads of money from government procurement.

”The inherent ability of business is its capacity to reinvent itself,”  Keating wrote.  That’s absolutely true.  In the case of the Board of Trade and its members, they have reinvented themselves  as a group opposed to taxes and in favour of responsible government spending.

Just before now, starting in 2003, they enthusiastically supported chronic, deliberate overspending.  They cheered wildly for a massive tax hike from Muskrat Falls.  And let’s not forget that, with Muskrat Falls’ ban on competition in the domestic electricity market,  the Board of Trade became the only business organization in North America to openly oppose free enterprise..

You could not make this stuff up if you tried.

Keating did not stop at arguing against taxes.  She allowed the Board and its members would possibly stand still for a tax hike but only on one condition:  In exchange, the Board “would like a commitment that any changes to the tax regime [would] be repealed once the province’s finances are stable.”

Words are important.

Those words from the president of one of the most influential business groups in the province are especially important. 

Keating did not merely oppose an increase in taxes.  She sent a very powerful message against progressive tax reform.

Keating and her members know that the government is studying a change to the tax structure that would add a new tax bracket at the upper end of the income range. The people most likely to wind up paying the new tax are people in households who make more than $100,000 a year. 

The top one percent of income tax filers in the province had a gross income of more than $184,000 in 2012.  That was almost $40,000 more than in 2008.  There are fewer than 5,000 earning that much in the province, but you can bet your bottom dollar a great many of those people are closely tied to the Board of Trade. Two thirds of tax filers in this province make less than $35,000 a year before taxes.

What Keating said in precise words is that she and her members want a promise from government that if the government adds a new tax bracket this year,  they want it repealed as soon as possible.  If ever anyone doubted the fundamentally blinkered and self-interested nature of the crowd at the Board of Trade, there it is.

Things haven’t changed much

Like many countries,  Newfoundland introduced a tax on income to help pay for the Great War.  Newfoundland abolished its income tax during the 1920s around the time the country was having serious financial problems. 

Historian Mel Baker described it this way: “ While [Walter Monroe’s] administration in 1925 gave the franchise to women 25 years and over, many of its other measures proved self-serving to the mercantile class in general and some members of the administration in particular. For instance, the government repealed prohibition in 1924, a measure most beneficial to Colonial Secretary John R. Bennett who was a major brewer.

”It abolished the income tax and rearranged the customs tariff, which incidentally benefited major members of the government. Specifically, in 1925 the government increased the import duties on such items as cigarettes, tobacco, rope, twines, fishing nets, butter, and margarine.

“While Prime Minister Monroe had a large financial interest in the Imperial Tobacco Company and the Colonial Cordage Company, Sir John Crosbie invested in the construction of a margarine factory after the tariff changes were made. Disenchanted with such policies, the political maverick Peter Cashin in 1925 resigned from the government accusing the Prime Minister of enacting ‘class legislation of the rankest kind.... The Income Tax had been expunged, and in its place we have a new tariff that will bleed the people white...’ (quoted in Noel, Politics in Newfoundland, p. 182).”

The better part of a century later, the business crowd in St. John’s advocate much the same thing. Apply a whopping great tax burden on the majority of the population.  And for the handful in the top income brackets, oppose a tax that would bring a few extra bucks when the government needs it. 

The Board will insist that they meant all new tax measures. That would include a hike in the HST as well as any other increases in income taxes the government might have to make to help balance the books. Nice as that sentiment is,  the members of the board who make considerably more than the average tax-filer in the province would get a disproportionately huge cut if the government accepted their deal.  While the rest of us would see a modest decrease of a few percentage points, the people making more than $100,000 a year would wind up saving considerably more in every respect by having the new tax bracket eliminated entirely.

What’s more, the Board members would also profit from public spending if the current administration carries through with its commitment to turn public services over to the private sector either in whole or in part, through so-called public-private partnerships.

With all that, the least the Board could do is endorse progressive income tax reform.

Everyone should pay his or her fair share.