Tax Spending Archives

CCPA: Canada's Long Road to Economic Recovery

The Canadian Centre for Policy Alternatives (CCPA) has released a report contending that Canada's economy is still mired in recession. According to the CCPA, Canada's economy is still a long way from recovery, despite months of "green shoot" speculation. Canada's Long Road to Economic Recovery , by Jim Stanford and David Macdonald, examines key economic indicators and concludes more public investment will be key to Canada's recovery.

For more information, see the CCPA web site at:
ttp://www.policyalternatives.ca

CCPA video on Canada's growing income gap

Over the past two years the CCPA has released numerous reports about the growing gap between the rich and the rest of us. Now the CCPA has launched a video that draws on these reports to tell the story of Canada's income gap.

For more information, see the CCPA web site at:
http://www.policyalternatives.ca

Harper’s Challenge

We forget the tremendous progress Canada has made to its economic standing over the last 20 years. We were a high-taxed, heavily regulated nation and government had become too large, too bureaucratic and too wasteful. Our turnabout has been more dramatic than that of any of the G7 advanced industrial nations.

Canada began the 1970s with total government spending accounting for 36% of the country's economic output. The United States stood at 32.3% and the G7 average was 32.6%. Yet, the ravenous appetite of the state grew and grew, taxes increased and deficit spending became routine. By 1992, government activity in the U.S. accounted for 38.5% of all economic activity and 42% in the G7, increases of 19% and 29% respectively.

The growth of government in Canada meanwhile was even more stunning. Total government outlays at home devoured an astounding 53.3% of GDP. The state had grown by 48% and, rather than playing a helpful role in the economy, had instead become the problem. In 1992, Ottawa's deficit was $39-billion and one third of all federal tax revenues were spent on interest payments. The Wall Street Journal subsequently declared Canada an "honorary member of the Third World in the unmanageability of its debt problem" in an editorial entitled "Bankrupt Canada?"

Canada got serious about cutting government spending, selling Crown assets, eliminating deficits, limiting government involvement in the economy and eventually lowering taxes. By 2006, government's take of the economy was 39.5%, a decrease of 13.8 percentage points, and is now less than the G7 average of 40.4%. It is also only 3.1 percentage points higher than the size of the U.S. government relative to its economy, which today stands at 36.4%. Back in 1992, government in Canada was 14.8 percentage points larger than government in the U.S. (The spread between all government revenues remains higher at 6.2 percentage points because Canada is running surpluses and the U.S. funds spending with massive budget deficits.)

Government is still too big and consumes too many tax dollars. But the hard work is paying dividends as government has improved its balance sheet and loosened its grip on taxpayers, businesses and the economy. Today, unemployment is low, inflation contained, the dollar strong, and homeownership high. It has been an era of greater prosperity and opportunity.

At a campaign rally this week Prime Minister Stephen Harper told Canadians our country will remain a bastion of economy strength. This is true, provided Ottawa does its part and does not again muck-up the economy by growing and spending excessively. So where might be Canada going?

Taxpayers are already aware of the Liberal's proposal to lower income taxes on business and personal income but impose a carbon tax on traditional energy sources. Opposition leader Stéphane Dion calls his plan revenue neutral because "every dollar raised by the carbon tax will be returned to Canadians in tax cuts." But this is not accurate. A revenue-neutral tax plan matches a tax hike with a dollar for dollar reduction in other tax rates.

Mr. Dion will instead levy a $15-billion carbon tax on traditional energy sources. The revenue will be used to lower personal and business income taxes by $9.5-billion. Low-income families will receive payments totaling $4.5-billion and the remaining $1-billion spent on research and development. In other words, for every $2 in income tax relief there will be $3 in additional taxes and another $1 in spending. This plan will grow the size of government, drain more resources from the economy, and make middle-class families poorer.

So what about the governing party? Unlike the Grits, they have yet to release a platform. The Conservatives' first campaign promise was a small, but agreeable $600-million reduction to the federal tax on diesel. Whatever else they offer on the campaign trail many taxpayers will evaluate the Conservatives on their tax and spending record. That review is decisively mixed.

First the good news: taxes. The Conservative government got off to a rough start in 2006 by providing tax relief with a one point GST reduction but took much of it away by raising personal income taxes. A series of micro tax cuts in the 2006 and 2007 budgets – such as tax credits for regular transit riders or for tradesmen that purchased tools – benefited some, but certainly not all taxpayers. Then came the decision in October 2006 to reverse its guarantee not to tax income trusts. Although it was the correct policy prescription, it nonetheless hurt the government's standing among investors – anger that was somewhat dampened by allowing seniors to split pension income for tax purposes.

Finance Minister Jim Flaherty finally found the right track in the fall of 2007. His mini-budget eschewed boutique tax cuts and delivered significant broad-based tax relief. The GST was reduced along with business and personal income taxes.

Each one-point reduction leaves $6-billion in the hands of consumers. The Tories have chopped the hated tax by two points and transferred $12-billion a year to consumers, fulfilling a marquee campaign promise. The minister also reversed his income tax increase of 2006 by lowering the first tax bracket back to 15%. This was an acknowledgement from Mr. Flaherty that it was a mistake to raise this tax in the first place. The government reserved his boldest policy with a 32% cut to the corporate tax. The rate will tumble to 15% in 2012 down from 22.12% in 2007. The reduction will help Canada's competitive position and help ensure more good jobs are created here.

Finally, the 2008 budget included a novel tax-free savings plan. Beginning this January Canadians will be able to invest up to $5,000 of after-tax income each year. Future investment gains will not be subject to tax nor will earnings trigger clawbacks on government entitlement programs that are income-tested. This new tax-free savings account is pro-growth policy that will encourage Canadians to save, rewarding individuals and benefiting the entire economy.

Government spending, however, is another story. Voters were initially assured a Conservative government would be fiscally responsible. They have instead been reckless by embarking on a spending binge that hamstrings their ability to lower personal income taxes and reduce debt in the future. They have even managed to best Liberal Paul Martin's spending levels.

While in office, Mr. Martin grew Ottawa by 14% over two years. The first two Conservative budgets increased the size of the federal government by 14.8%. This makes the Conservatives even bigger spenders. While the 2008 budget promised to moderate spending growth to 3.4% this fiscal year, it seems bribing voters with their own money remains a higher calling. The department of finance reported last month that expenditure receipts swelled an eye-popping 8.4% in the first three months of the year. This is two-and-a-half times the 2008 budget plan.

Although they continue to claim they will hit their 3.4% expenditure target, the Conservatives have proven throughout their term in office that they cannot control spending. Consider the government's first budget. It called for Ottawa's expenditures to grow by 5.4% in fiscal 2006/07. At the end of that year government receipts had jumped by 7.5%. The 2007 budget plan announced an additional 5.6% spending hike. The real amount in 2007/08 was a 6.9% increase. So much for responsible budgeting.

Mr. Harper is likely going to win this election on the weakness of the opposition. Yet, the governing party is squandering an opportunity to further advance our position in the world. A lower taxed, better governed country than other G7 nations, including the U.S., would be a magnet for investment and skilled workers. For that to happen Ottawa will need to control expenditures and cut personal income taxes, which remain the highest of all G7 nations.

It remains to be seen whether Mr. Harper will be a transformative leader that keeps Canada out in front on the road to growth and prosperity or if he instead reverses course and ushers in a new era of big government. Canada's standing could easily fall.

If this seems preposterous consider how George W. Bush grew spending at twice the growth rate of his predecessor, blew the surplus and ballooned Washington's budget deficit. U.S. government spending has already increased by 59% this decade. That is an annual average of 8.4%. Over the same period Ottawa increased its expenditures by 54%. That is a yearly growth rate of 7.7%. If Mr. Bush’s fiscal diet consists of a supersized Big Mac, fries and a Coke, Canada is similarly gorging itself only downing it with a diet Coke. If Prime Minister Harper is to preserve our country’s fiscal advantage over G7 nations, he’ll need to trim spending the day after the election is over. Based on his record today, the likelihood of that happening is not promising.

John Williamson is federal director of the Canadian Taxpayers Federation. He will be leaving the watchdog organization today to undertake graduate studies at the London School of Economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

Federal spending ballooning to unsustainable levels

Conservative government to taxpayers: We’ve given up trying to control spending

OTTAWA: The Canadian Taxpayers Federation (CTF) reacted today to the announcement that the federal government’s spending is ballooning to unsustainable levels. The finance department reported today in their June Fiscal Monitor that Ottawa’s expenditures grew by 11.1 per cent in June, and program spending swelled by an astounding 8.4 per cent in the first three months of the fiscal year. This increase is two-and-a-half times the 2008 budget’s spending estimate, which called for a 3.4 per cent boost to spending.

“Many Canadians were encouraged by the Conservative's apparent new restraint shown in their third budget that limited spending growth to 3.4 per cent this fiscal year. Well, so much for that. In the first three months, spending is instead up two-and-a-half times what these so-called fiscally responsible Conservatives in Ottawa budgeted it to be," said CTF federal director John Williamson. “The Conservatives continue to claim they will still hit 3.4 per cent in spending growth for the year, but they’ve proven throughout their term in office that they can’t stop themselves from spending.”

The Conservative government’s first budget called for Ottawa’s expenditures to grow by 5.4 per cent in fiscal 2006/07. At the end of that year government receipts had jumped by 7.5 per cent. The 2007 budget plan announced an additional 5.6 per cent spending hike. The real amount in 2007/08 was a 6.9 per cent increase.

Canadians were initially assured a Conservative government would be more disciplined. On November 23, 2006, Finance Minister Jim Flaherty scolded the previous Liberal government for spending tax dollars recklessly, telling Canadians, “The government is committed to keeping the growth of program expenses below the growth of the economy over the medium term.” In Parliament he repeated, “...our new economic plan proposes to keep the growth rate of program spending on average below the rate of growth in the economy.”

And why is this important? The minister provided the answer when he said, “To the extent spending growth is kept below the growth in the economy, this will contribute to further reductions in public debt and in taxes given the commitment to dedicate interest savings to tax reductions.”

Williamson concluded, “The message is clear. Tax and debt reductions are conditional on spending restraint. The Conservatives have gone on a spending binge that hamstrings their ability to lower personal income taxes and reduce debt.”

Please note that after six good years with the Canadian Taxpayers Federation, I will be resigning as federal director on Sept. 12, 2008, to undertake graduate studies in economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

Jim Prentice, Canada’s Presumptive Finance Minister?

It is no secret in Ottawa that Industry Minister Jim Prentice wants to be Canada’s finance minister. Before the last Cabinet shuffle there was a quiet but steady effort to publicly highlight Mr. Prentice’s managerial talents and disparage Jim Flaherty’s reprimanding of high-taxed Ontario to change policies or risk becoming a have-not province. If Minister Prentice had his way he’d be running finance and Mr. Flaherty would be punted to a second-tier ministry, like industry. It didn’t matter that many mainstream economists agreed with Mr. Flaherty, Mr. Prentice was offering himself as a kindler, gentler Conservative.

Last week, the industry minister took another run at Mr. Flaherty by wading into budget territory. He told reporters the federal government has not determined how to allocate proceeds from the recent auction of wireless licences that resulted in an unexpected $4.25-billion windfall. Mr. Prentice said the cash might go to tax cuts, debt repayment or even spending programs. If Mr. Prentice is determined to audition for the finance minister’s job he might want to first reflect on the state of Ottawa’s finances. Because there should be no confusion in Conservative ranks about what to do with the revenue.

The finance department reported last Friday that Ottawa posted a deficit of $517-million in the first two months of the 2008 fiscal year. This news is worrisome even after a decade of Ottawa lowballing its surplus projections. It was no surprise that tax revenues dropped by 4.1% since the Conservatives cut the GST another point and lowered the tax rate on businesses. If Ottawa’s financial position is worsening it is the result of poor management and over-spending, not modest tax relief. The 2008 budget claimed Ottawa would limit spending growth to 3.4% this year. Yet, expenditures in April and May grew by 7%. If this continues, Ottawa will be on track to overshoot its budget target by an astounding 100%.

Do Mr. Prentice and his colleagues believe the federal government should increase spending further this year? And how important is reducing the federal government’s monster debt? Since 1997, the debt has been cut by $106-billion. That’s a good start. But each year $34-billion is still spent on interest charges to service Ottawa’s outstanding $457-billlion liability. That amounts to $93-million each day. There is clearly more work to do.

It is folly to suggest a one-time revenue gain – such as the $4.25-billion generated by the wireless auction – be used to increase spending. Whatever new program might be created will live long after the cash raised from the auction is spent. As Milton Friedman said, “Nothing is so permanent as a temporary government program.”

Whenever a government sells an asset – in this case wireless spectrum rights – the additional income should be used to reduce the country’s debt liability. Ottawa has the option of allocating the auction revenue at once or spreading it over a decade. The latter move would boost revenue by $425-million a year, however leaving this money on the table increases the likelihood that some of it will be spent instead of going against the debt.

Applying $4.25-billion to the debt will reduce interest payments by approximately $225-million every year. Under the Conservative government’s new tax-back guarantee law, all debt-interest savings are used to reduce personal income taxes. This is another good reason why the auction revenue should be used to retire the debt now. Debt relief today will result in lower taxes tomorrow.

Minister Prentice deserves tomatoes from taxpayers. He opened a discussion on increased spending where none is necessary and offered more evidence the federal government doesn’t tax to collect the revenue it needs but that politicians always find ways to spend whatever money is collected. Taxpayers can expect spending to spike unless the real Finance Minister, Jim Flaherty, is ready to overrule his Cabinet colleague, reduce debt and keep a lid on spending. If he does not, it won’t matter much to taxpayers which Jim is the finance minister after the next shuffle.

John Williamson is federal director of the Canadian Taxpayers Federation

END

Please note that after six good years with the Canadian Taxpayers Federation, I will be resigning as federal director on Sept. 12, 2008, to undertake graduate studies in economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

So much for spending restraint

The lazy, hazy days of summer are here and Conservative MPs are crisscrossing the country and showering it with money. According to news stories, the federal government has announced some $3-billion in spending priorities since Parliament recessed for the summer less than a month ago. That is roughly $100-million a day or more than $4-million every hour. Weren't the Conservatives elected to root out waste in government and spend tax dollars judiciously?

Conservative partisans will insist these funding announcements were made adhering to all the proper rules and guidelines. Of course, these would be the very same oversight measures they loudly protested in opposition when the then-governing Liberals of Jean Chrétien and Paul Martin spent wildly, hoping to buy votes. Another favourite Conservative talking point is Canadians are getting more value for their tax dollars because Ottawa is better managed today. Taxpayers therefore shouldn't fret over a few billion dollars in spending. But there is little evidence of this improved management. In fact, it is no contest between the Harper government's spending and that of Mr. Chrétien's government. The Grits exercised greater fiscal discipline.

Perhaps this judgment is unfair since Mr. Chrétien governed with a House of Commons majority and Stephen Harper does not. So how does the Prime Minister match up with Mr. Martin, another minority leader? Mr. Martin's fiscal recklessness grew the size of government by 14% over two years. This certainly qualifies him as a big spending Liberal. The Conservatives have controlled the government purse strings since early 2006. After their first two years, Ottawa had grown another 14.8%. This is higher than Mr. Martin's appalling record, making Mr. Harper a bigger spending Conservative.

Many Canadians were encouraged by the Conservative's apparent new direction shown in their third budget that limited spending growth to 3.4% this fiscal year. So much for that. It now appears bribing taxpayers with their own money remains a higher calling for them.

Of the $245-billion Ottawa collects annually in taxes an astounding $26-billion is allocated to grants, contributions and subsidy programs. According to the finance department, the government's total grant/subsidy budget accounts for just over 11 cents of each tax dollar spent. Even if government MPs argue this level of spending is necessary, it is not credible to assert politics does not influence who gets the cash. Canwest News Service discovered many of the recent announcements were targeted to regions where the Conservatives hope to pick up seats to gain a majority. Meanwhile, little money flows to ridings that loyally vote Tory or are reliable Liberal seats. For example, Ottawa confirmed that Quebec-based Bombardier will receive $350-million to build a plane with no confirmed buyers. (According to the Wall Street Journal, air carrier Lufthansa's letter of intent to purchase 60 of the small planes is nonbinding.) Nova Scotia, the lone Maritime battleground province, will receive an additional $867-million in energy royalties. Meanwhile, the Calgary Stampede was handed $432,300 to help Alberta visitors celebrate Quebec City's 400th anniversary.

Fuelling these expenditures is Ottawa's surplus, which comes from the taxes paid by Canadians. Some might believe the high taxes that generate budget surpluses are acceptable so long as lawmakers use those dollars to reduce debt. Yet, Canadians are more likely to witness horses flying than a government capable of exercising restraint while sitting atop a mountain of excess tax revenue. As a surplus increases during a fiscal year so do expenditures because politicians cannot resist spending irresponsibility in an attempt to win votes. Canadians do not yet know the size of this year's surplus, but it is a safe bet that tax receipts are running ahead of the budget's projections.

Unhappily, there is nowhere for voters to turn for reform. Opposition Liberals might decry today's spending levels but these protests cannot be given serious weight. The Liberals in government behave the same.

This summer's spending spree is another reason why taxes need to be cut. It is more evidence governments don't tax to collect the money it needs, instead politicians always find a way to spend revenue that is collected. Cut off the money and government officials will find it necessary to prioritize spending and make decisions about how best to use scarce tax dollars. This would be a laudable project for a government committed to taxpayers.

END

Please note that after six good years with the Canadian Taxpayers Federation, I will be resigning as federal director on Sept. 12, 2008, to undertake graduate studies in economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

Canada Day Brickbats & Laurels

While Canadians celebrated Canada Day on July 1, it was business as usual for government. Taxes were paid, regulations enforced and lawmakers handed out awards. Indeed, the holiday was an unusually active one on public policy issues of concern to the Canadian Taxpayers Federation, which is dedicated to lower taxes, less wasteful spending and government that is accountable to voters.

On Taxes – Brickbat to Higher Energy Taxes

British Columbia taxpayers are paying more for gasoline and most other energy sources as a result of Liberal Premier Gordon Campbell’s introduction of a carbon tax. The levy went into effect on July 1 and gasoline taxes increased by 2.34 cents a litre (the additional tax paid by consumers is actually 2.46 cents/L when the GST tax-on-tax is factored in). Vancouver, which today has the highest taxes on gasoline, saw pump prices jump to over $1.50. The province’s carbon tax will also hit natural gas, propane, diesel and jet fuel. It will rise again on Canada Day over the next four years unless high energy prices and voter furry prompts Premier Campbell to rethink his policy.

Canada’s Official Opposition also wants to saddle consumers with a federal carbon tax if they win the next federal election. Liberal Leader Stéphane Dion’s plan will not add a new tax to pump prices because, the opposition rightly says, gasoline is already heavily taxed by Ottawa. Instead, the Liberal proposal will see taxes on other energy sources – like home heating fuel – rise to the level of taxes applied to gasoline.

On Spending – Laurel to the Department of Indian Affairs

July 1 also saw the introduction of a reform to bring badly-needed accountability to Canada’s native reserves. Indian Affairs Minister Chuck Strahl’s hard-fought proposal to amend departmental funding agreements to include an audit clause went into effect. This change gives Ottawa powers to review how native bands spend tax dollars and is something taxpayers – native and non-native alike – have repeatedly demanded. Ottawa believes adding any audit mechanism will ensure tax dollars are actually spent “for the provision of intended programs and services and that [native reserves] have appropriate management, financial, and administrative controls in place.” Translation: that federal money is spent responsibly and bands account for it. This small, but necessary, spending reform brings the Indian affairs department in line with virtually every other federal department, including health, heritage and the RCMP. It is a long-overdue reform given that every year $10-billion is transferred to native bands across Canada.

On Accountable Government – Brickbats to the Government of Canada & Rideau Hall

Prime Minister Stephen Harper quickly distanced his government from Rideau Hall’s award of the Order of Canada to Dr. Henry Morgentaler this week. Whereas the Governor-General routinely takes advice from elected officials on other matters, Order of Canada appointments are made by an advisory committee without ministerial input. If Canadians are hoping their Prime Minister might have a say on appointments they must look across the pond, to Britain.

Former Prime Minister Jean Chrétien advised the Queen not to grant a life peerage to Conrad Black after the British government recommended him for this honour. Similarly, Canadian Roy Thomson’s peerage was blocked by Lester Pearson. (Both men forfeited their Canadian citizenship to bypass Ottawa’s ruling.) The British honour system includes an advisory committee, but unlike Canada also permits input from the Prime Minister’s office. Canada’s Prime Minister can therefore advise (approve or block) our Queen on the granting of honours to Canadians from London, but he has no influence on honours originating in Ottawa. Only in Canada, you say? Pity, but not surprising.

END

Please note that after six good years with the Canadian Taxpayers Federation, I will be resigning as federal director on Sept. 12, 2008, to undertake graduate studies in economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

Who needs a seat on the Security Council?

Ottawa’s foreign-policy community has been in a tizzy ever since the Prime Minister said the federal government has not decided whether Canada will make a bid for a seat on the United Nations Security Council. The previous Liberal government had announced the country would seek a spot on the UN’s top governing body in 2010, and foreign affairs professionals want that decision to stick.

The choice about whether or not Canada should try to secure a seat shouldn’t be a difficult one for the Conservatives. The protracted globetrotting campaign such a diplomatic effort would necessitate would be costly, and taxpayers would rightly grumble about the bill. Moreover, the logrolling needed to win enough votes in the UN General Assembly could result in votes that contradict principles enshrined in Canada’s foreign and domestic policy.

And even if Canada were to win a coveted two-year term on the council — something the country has previously done about every 10 years — it will expand the international influence of an office that actively opposes the Prime Minister, specifically the department of foreign affairs.

A cocktails-and-canapés campaign for a Security Council seat would cost millions of tax dollars. When Canada last competed for a UN seat, foreign affairs spent $2-million.

The Ottawa Citizen reported in 1998 that Ottawa sent academics and retired diplomats to nearly 100 countries to lobby foreign ministries and heads of government. And, according to the Toronto Star, it became a dirty affair. The competing Greeks sent undecided UN ambassadors and spouses on an all-expenses paid cruise in the Aegean Sea while the Dutch pulled together a concert of Amsterdam’s Royal Concertgebouw Orchestra and an evening cruise on New York’s East River for UN pooh-bahs. Ottawa, for its part, handed out tickets for the Cirque du Soleil at Manhattan’s Battery Park.

Such inducements are par for the UN course, and diplomats don’t apologize for these tactics. Robert Fowler, who was Canada’s longest-serving UN ambassador, takes credit for overseeing our last Security Council campaign. He explains the junket-for-your-vote strategy as routine. “You have to use different ways to get people’s attention,” he said in 1998. “There’s a certain amount of razzle-dazzle and balloons and music, the same as any political campaign.”

Really? If a political party or lobbyist engaged in this type of vote-winning tactics in Canada the RCMP would soon come knocking.

If the price tag alone isn’t enough to halt Canada’s campaign, the Conservative caucus should ask what promises academics and ex-diplomats might make to other governments to win their support. Mr. Fowler and Paul Heinbecker, another former UN ambassador, have argued that Ottawa’s foreign policy must change if we are to win over enough members of the General Assembly. They point to the Conservatives’ decision to target more foreign aid dollars to fewer countries — rather than sending fewer dollars to more countries — as a reason for those governments no longer receiving our tax dollars to reject Canada’s bid. They also warn that our reasonable decision to protect jobs and the economy by ignoring Canada’s Kyoto Protocol greenhouse-gas reduction targets might mean European nations voting against us, despite their own lackluster commitment to reduce carbon emissions. And lastly, we are told, to win the support of Muslim nations, our country’s commitment to our democratic allies must be compromised at the UN — specifically, by abandoning Israel.

The reward, of course, of such policy reversals and wasting buckets of tax dollars will be a seat at the UN’s “high table.” And for what? Representation on a council governed by the five permanent members and often stymied by China and Russia. Taxpayers say thanks, but no thanks.

Even if Mr. Harper decides to go for it and wins a seat, it will be a pyrrhic victory. This is because of all the bureaucracies in Ottawa none is as insubordinate to elected officials as the foreign affairs department. Officials in this department are, of course, happy to follow government direction when their wishes converge with those of the Conservatives. Yet, when there is a policy shift they disapprove of, or a disagreement with their political masters, the system quietly grinds to a halt.

The UN seat will hand officials at foreign affairs a bigger stick to beat the government by undermining its agenda or even contradicting its ministers. Mr. Fowler believes the reason why the Conservatives will not contest the seat is because “the government has no confidence in its own foreign policy.” Actually, the Conservatives have lost confidence in its foreign affairs bureaucrats. Prime Minister Harper should announce Ottawa will not seek a Security Council seat.

John Williamson
Federal Director
Canadian Taxpayers Federation

Goodale’s Gaffe

· Returning surplus to taxpayers is good policy

Following the Bank of Canada’s downward revision of the country’s growth rate in 2008 there is alarm in some quarters the federal budget will soon tip from surplus to deficit. This anxiety is welcome because it signals a public consensus in Canada that did not exist 15 years ago when the norm was deficit financing. Today, voters take a dim view of any politician willing to run deficits, no matter how small. We are a nation of deficit hawks.

The assumption in Ottawa is that a slowing economy might force a deficit because there will be fewer dollars available as a result of recent – and modest – tax relief. This has it backwards since years of spending growth is the culprit.

In October, 2007, Finance Minister Jim Flaherty delivered a $60-billion package of broad-based tax cuts. It put in place a schedule to chop the business tax rate from 22.12% to 15% by 2012; cut the GST an additional point to 5%; and reversed the personal income tax rate increase the Conservative government enacted in its first budget. The surplus was so large Mr. Flaherty didn’t even need to cut back federal expenditures. Program spending increased by $13-billion last year and will go up another $7-billion in 2008.

For the Liberals this is apparently awful public policy. Opposition leader Stéphane Dion recently thundered, “In two years, they destroyed the fiscal framework. They swept the cupboard bare and put us on the edge of a deficit.” Former Liberal finance minister Ralph Goodale similarly went into rhetorical overdrive last week in a column he wrote entitled “How Stephen Harper ruined our national balance sheet.” He lists a number of big ticket items the government should fund but cannot because of “costly” tax relief.

The surplus is the result of overtaxing Canadians and should not be confused with good fiscal management. After the budget was finally balanced in fiscal 1997 the idea of setting annual spending targets in a budget and operating within those limits was abandoned. According to the C.D. Howe Institute a decade of fat surpluses resulted in lawmakers spending more than budgeted “for a cumulative spending overrun of an eye-popping $28.7-billion, a sum almost equivalent to what Ottawa spends on elderly benefits a year.” It didn’t matter how much money was spent provided the budget wasn’t in the red.

Massive surpluses made possible gigantic levels of government spending irrespective of the party in power. If we compare expenditure growth of the two-year Liberal minority to the first two years under Conservative rule, we discover they are virtually undistinguishable. Each party increased the size of government by roughly 14%. Their shared addiction translates to a $47-billion spending increase in four short years.

No doubt returning part of the surplus to taxpayers will make Minister Flaherty’s job more difficult, but given the economic uncertainty facing Canadians it is good the government reduced the tax burden. It places the economic well-being of businesses and families ahead of Ottawa’s limitless spending appetite.

Yet, it will not be difficult for Mr. Flaherty to trim spending to avoid a deficit (or for that matter offer personal income tax relief in the 2009 budget). Under the Conservatives the federal government has already expanded by $26-billion. And what has been the impact of this spending on Canadian taxpayers? Not much according to Mr. Goodale. He says, “Stephen Harper is today the biggest spending prime minister is history, but few Canadians can name a single thing they’ve gained from it all.”

The Conservatives should remember this the next time they cut a program and are immediately denounced by Ottawa’s many special-interest lobbyists. Spending is up and according to former finance minister Goodale it hasn’t made a difference to the lives of ordinary Canadians. It’s unfortunate Mr. Goodale failed to understand that excessive government spending can be wasteful when he was still writing budgets. Finance Minister Flaherty should heed his predecessor’s insight. It is unusual to hear such honesty on Parliament Hill.

John Williamson
Federal Director
Canadian Taxpayers Federation

10th Annual Teddies Waste Awards

Taxpayers Honour Senator Lavigne, former Quebec Lieutenant Governor Thibault, former Toronto Catholic School Board Trustee Nunziata, and The Canadian Tax Code

OTTAWA: The Canadian Taxpayers Federation (CTF) held its tenth annual Teddies Waste Awards Ceremony to honour the best of the worst in government spending and high taxation at a black tie news conference today on Parliament Hill. CTF Ontario Director Kevin Gaudet acted as master of ceremonies. Also on hand was “Porky the Waste Hater” and Samantha, both of whom assisted in this year’s ceremony.

The Teddies are named for Ted Weatherill, a former senior public servant, who was terminated in 1999 for “expenses incurred by him … incompatible with his position as Chairman of the Canada Labour Relations Board,” according to the Office of the Minister of Labour. In the spirit of the entertainment awards season, Teddies are awarded annually to a government, public office holder, civil servant, department or agency that most exemplifies government waste, overspending, over-taxation, excessive regulation, lack of accountability, or any combination of the five.

“Sadly, 2007 has been yet another blockbuster year for government waste,” said Mr. Gaudet. “Politicians and public officials must realize that hardworking Canadians will not tolerate those who use tax dollars to live the high life. Our Teddies are an appropriate way to give them the recognition they so richly deserve.

A longer detailed list of all 11 nominees and the winner of the Lifetime Achievement Award may be found by clicking here: http://www.taxpayer.com/pdf/Teddies2008.pdf.

The 2008 Teddy winners are:

Federal Award Winner:

“And the federal Teddy goes to Senator Raymond Lavigne for ‘Achievement in Use of Extras’ Senator Lavigne had a staffer cut down trees on his neighbour’s property in West Quebec. This is the second year in a row a Senator wins the federal Teddy. Because of investigations stemming from the tree chopping, Senator Lavigne has been ordered to repay $23,500 for travel, been charged with fraud, breach of trust, and obstruction of justice and was punted from the Liberal caucus. He is a walking billboard for Senate reform,” said Gaudet.

Provincial Award Winner:

“And the provincial Teddy goes to Quebec’s former Lieutenant Governor Lise Thibault for ‘Achievement in Tax Dollar Mis-direction’. Her lavish spending would make even an Arab Sheik blush. $700,000 of spending is being questioned by all parties in Quebec and now the police. Her abuses include:

$825 for a suite at the Ritz-Carleton in Montreal;
$59,000 for a garden party;
$4,000 for a family member’s birthday party;
$2,800 for two meals in Quebec City;
$45,000 in reimbursements for gifts with no list of recipients provided;
$2,400 for a 5-night stay at the Mont-Tremblant ski resort; and
$12,000 for taking a Quebec government plane on a fishing trip and a tour of a provincial park.

Taxpayers are safer now that she is out of the job”, commented Gaudet.

Municipal Award Winner:

“And the municipal Teddy goes to former Toronto Catholic School Board Trustee Christine Nunziata for ‘Being Entitled to Her Entitlements.’ For years she has brought wasteful spending to a whole new level with reports of numerous abuses of public money including charging taxpayers for vacations in Cuba and the Dominican Republic (where she got married), daily coffees from Tim Horton’s, lingerie, $12,000 in meals in one year and much more. Taxpayers are now on the hook for the costs of her by-election after she was kicked off the board for having missed too many meetings,” said Gaudet.

Lifetime Achievement Teddy:

Gaudet announced, “And the Lifetime Achievement Teddy goes to the Canadian Tax Code for having grown from 11 pages in 1917 to 2,226 pages 91 years later. The head of the Canada Revenue Agency brags that he has an army of 46,000 people and an annual budget of $4 billion to enforce the Tax Code. What was meant to be a temporary war tax measure is now ridiculously high and immensely complicated. Think of all the trees simplifying the tax code would save us. Even David Suzuki might come on board in support of lower, simpler, and flatter taxes.”

John Williamson
Federal Director
Canadian Taxpayers Federation

A New Tax Savings Plan & Modest Spending Growth

Program spending budgeted to rise 3.4% in 2008/09, but hold the applause – spending has already increased by 14.8% under the Conservatives.

Gone is the promise to pay down debt by $3-billion a year.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacts to the 2008/09 federal budget, which was tabled in the House of Commons by Finance Minister Jim Flaherty this afternoon.

The Tax-Free Savings Account – A Pro-Growth Tax Plan:

The Conservative government will allow Canadians to invest after-tax dollars and any investment gains from interest, dividends and capital gains will not be subject to tax. Moreover, savings will not trigger clawbacks on government entitlement programs that are income-tested, such as pension allowances and child tax benefits. Starting in 2009, Canadians will be permitted to contribute up to $5,000 a year to this new savings vehicle.

“The new tax-free savings account is a pro-growth policy that will encourage Canadians to save, reward individuals and benefit the economy,” said CTF federal director John Williamson. “This is an excellent policy proposal. Canada needs to reward people that save because their investments fuel economic growth and job creation. The big criticism of the GST cut was that it did little to encourage savings. Mr. Flaherty responded to this concern today by proposing a plan that will not punish people that save.”

Finance Minister Flaherty Hasn’t Controlled Spending So Far. Will He Tomorrow?

The budget proposes that program spending will increase to $208.1-billion in the next fiscal year, which is a modest 3.4 per cent rise. Unfortunately, the Conservatives have failed to control spending during their first two years in office. When the Liberals left office total program spending stood at $175-billion (2005/06 fiscal year). In fiscal 2007/08, the current year ending on March 31, the federal government’s annual outlays will – for the first time – break the 200-billion-dollar mark.

The Conservative government’s first budget called for Ottawa’s expenditures to grow by 5.4 per cent in fiscal 2006. Yet, at the end of that year government receipts had instead ballooned an astounding 7.5 per cent. The 2007 budget plan announced an additional 5.6 per cent spending hike. The real amount will be 6.85 per cent.

“Under Mr. Flaherty, the size of the federal government has grown by an astounding 14.8 per cent. How is this fiscally conservative or even ‘responsible,’” Williamson asked rhetorically. “As prime minister, Paul Martin grew the federal government by 14 per cent over two years. Amazingly, the Conservatives have bested Liberal spending. This is a spend-thrift government.”

“The government’s overall expenditure level is disappointing. Spending growth has repeatedly exceeded the minister’s own target, which is the economic growth rate. As a result, Canada will pay down less debt in the future,” said Williamson.

… Less Debt Repayment:

Minister Flaherty will reduce Canada’s $467.3-billion debt by $10.2-billion this fiscal year, which ends on March 31. The government plans to reduce the federal debt by only $2.3-billion next year (fiscal 2008/09) and a trivial $1.3-billion the following year (2009/10). Up until today, Mr. Flaherty had pledged to reduce debt by at least $3-billion each and every year.

“Ottawa needs a more aggressive debt reduction schedule. The Conservatives should not be downplaying the importance of paying off Canada’s debt,” said Williamson. “Debt servicing will chew up $31.5-billion next year, which amounts to $86-million each day. Ottawa should set yearly debt reduction targets, as was done with the deficit, and make those targets the law.”

A Little More Good News – Managing the Employment Insurance (EI) Surplus:

The 2008 budget will establish a Crown corporation to manage the EI fund. Future EI surpluses will be invested until needed for EI payments. At the same time, a new rate-setting mechanism will limit the surplus to $2-billion.

“Ottawa has been using the EI surplus as a cash cow and maintaining higher EI tax rates on workers than necessary. That’s an unnecessary tax on jobs,” noted Williamson. “It is hoped this new agency will reduce the unnecessarily large tax burden and large surpluses. It is unconscionable that Ottawa has accumulated massive EI surplus, tossed it all into general revenue and spent it. EI taxes should fund EI payments, not government largesse.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Jim Flaherty’s Budget Test

Jim Flaherty has done a good job downplaying expectations in advance of the federal budget, which will be tabled in Parliament on February 26th. The finance minister has said there will be no new expenditures nor will he deliver meaningful personal income tax relief. This might be acceptable so long as he delivers on both sides of the ledger.

Suppose Canadians give Mr. Flaherty the benefit of the doubt and accept that his hands are tied. That the economic downturn in the United States will reduce Ottawa’s tax base and the mighty surplus will evaporate. And perhaps many will agree a minority government makes it impossible for the Conservatives to cut government fat and eliminate waste. Maybe a status quo budget is sufficient.

Certainly, taxpayers can take some solace in recent tax cuts. The federal government rolled out a $60-billion package of broad-based tax cuts in October. It delivered substantial business tax relief, cut the GST to 5% and reversed the personal income tax rate increase Mr. Flaherty enacted in his first budget.

BUT … if Mr. Flaherty’s pledge to be fiscally “responsible” is to mean anything he must match his tax relief freeze with a corresponding spending freeze.

Increasing spending while shunning tax cuts will mean the Conservative government has put the interests of the bureaucracy ahead of ordinary taxpayers. And if the size of the federal government expands, Canadians are unlikely to buy the government line that taxpayers must wait for income tax relief.

Voters are hoping the finance minister finally follows through on his budget rhetoric. From the beginning of the Conservative government’s mandate Mr. Flaherty has vowed to control expenditures and spend responsibly. Taxpayers are still waiting.

When the Liberals left office total program spending stood at $175-billion (2005/06 fiscal year). The Conservative government’s first budget called for Ottawa’s spending to grow by 5.4% in fiscal 2006. Yet, at the end of that year government spending had instead ballooned an astounding 7.5%.

The 2007 budget plan announced an additional 5.6% spending hike. Once again spending has continued to creep upward throughout the year. Last month, the department of finance revealed expenditures had increased by 6.7% in the first eight months of the fiscal year (April to November). What fuelled the increase? The department says higher transfer payments, Crown corporation expenses, and operating expenses of departments and agencies. Translation: spending is up everywhere.

An example of lazy management is Ottawa’s recent $1-billion plan to retrain laid-off workers and fund community infrastructure projects. (More federal bocce ball courts and canoe museums anyone?) Rather than reallocate from non-priority spending, like handouts to special interests groups or corporate welfare subsidies, the government decided it was easier to reach into the coffers and drive federal spending to new heights.

Toss in end-of-fiscal-year “March madness” spending and the federal government’s annual outlays will – for the first time – break the 200-billion-dollar mark. How is this fiscally conservative or even “responsible?”

Mr. Flaherty is developing a reputation as being a big spending finance minister. Indeed, it is no contest between Mr. Flaherty and former finance minister Paul Martin over who is more fiscally responsible. It is Mr. Martin, by a long-shot.

Some might argue this comparison unjust since Mr. Martin tabled budgets in a majority government. As prime minister, Paul Martin was less “responsible” to be sure. During his two-year tenure he grew the size of government by 14%. And how much has government grown under Stephen Harper and his Conservatives in the same timeframe? It is – surprisingly – also 14%.

Looking ahead, Mr. Flaherty can continue mouthing empty rhetoric about controlling spending or he can start delivering. After two strikes it is hoped his third budget will finally deliver a dose of fiscal responsibility. If the Conservatives exercise even modest spending restraint they will be able to deliver meaningful personal income tax relief next year. The decisions Finance Minister Jim Flaherty makes in the upcoming budget will determine the size of tomorrow’s income tax cut. He should hold the line on spending, and taxpayers will thank him if he does.

John Williamson
Federal Director
Canadian Taxpayers Federation

A not so private matter

The assertion about “abortion being a private matter between a woman and her doctor” has been made a lot this week, mostly by proponents of the Supreme Court ruling that struck down Canada’s abortion law 20 years ago. It’s a clever jingle, but not entirely true. At least not as far as taxpayers are concerned.

Canada spends generously on things like senior pensions, education and health care. Despite the obvious public support for core spending, Canadian voters remain less willing to fund programs they believe are not providing positive outcomes or helping people in a constructive way.

The most obvious example of this is welfare. With the backing of taxpayers, governments provide a basic minimum amount, recognizing overly rich payments encourage dependence and disincentives to work. One province even offered one-way bus tickets to neighbouring provinces for people unwilling to work. Another was more progressive and enacted a workfare program. It requires recipients to participate in mandatory work activities to ensure the social safety net does not become a comfortable hammock.

A similar logic applies to abortion.

While few Canadians are clamouring for legislative restrictions on abortion, it is doubtful those same voters would support government promoting it. Hence, the pro-abortion lobby employs language that implies the state has little to do with it. They say it’s about the freedom to choose, an individual’s choice, and the state has no business interfering in a private decision. It’s a position that satisfies small-government libertarians as well as those claiming to be both fiscally conservative and socially liberal. Yet, government is more involved in promoting abortion than Canadians realize.

We’re familiar with provincial funding of abortion (with the exception of New Brunswick). Of course, it’s not terribly expensive – it is estimated $50-million a year is spent on the medical procedure from a $100-billion public health budget. Ultimately, it is for provincial legislatures to decide whether or not to fund it under Medicare.

But what might Canadians say about the federal government offering unemployment benefits to women who have an abortion? It is worth asking because Ottawa’s employment insurance (EI) program does just that.

According to EI guidelines, when a pregnancy is terminated within the first 19 weeks it is considered an illness and benefits can be collected. Ottawa does not distinguish between a miscarriage and an abortion. If an abortion occurs in the 20th week or later benefits are paid out under the EI maternity program despite there being no mother or child. According to the federal government, the “birth mother” need only sign “a statement declaring the expected due or actual date of birth.” Illness and maternity benefits are paid for up to three and a half months.

Government support doesn’t end there. Last year, the federal government’s Canadian International Development Agency (CIDA) quietly approved funding to the United Kingdom-based International Planned Parenthood Federation. This organization will collect $18-million over four years from Canadian taxpayers to promote its agenda.

Planned Parenthood acts as a political pressure group. On January 22, the Wall Street Journal reported the U.S. “abortion-rights advocate Planned Parenthood is launching a major effort to elect pro-abortion-rights candidates to Congress and the White House in November.” It will “spend $10-million to persuade voters to elect abortion-rights candidates in the 2008 election.” The Canadian government should not be sending tax dollars to advocacy groups that engage in political activism in Canada or elsewhere.

Early in the Conservative government’s mandate brave attempts were made to limit this type of careless spending. The ideologically charged Court Challenges Program was cancelled as was the ill-conceived prison tattoo program. Ottawa should move to undo its spending policies that either encourage or reward having an abortion. It should certainly not pay out EI illness or maternity benefits when there is no child.

John Williamson
Federal Director
Canadian Taxpayers Federation

Tax Savings in ’07 (Especially for Families) and Dips Down Again in ’08

Taxpayers Hope Next Budget will Cut Rates

Provincial Winners: Newfoundland, Quebec & B.C. The Loser: New Brunswick

Ottawa: The Canadian Taxpayers Federation (CTF) today released projected income, payroll and sales tax changes kicking in on January 1st, 2008. Also calculated are retroactive personal income tax changes – which apply to the 2007 tax year – announced by the finance minister in the fall economic statement that saw the bottom income tax rate fall to 15% from 15.5% and the basic personal exemption – the amount a person can earn before they pay federal income tax – increase by $671, from $8,929 to $9,600.

“Due to retroactive tax changes announced in the fall, coupled with changes that take effect in the New Year, almost all taxpaying Canadians will pay the Taxman less in 2007 and 2008. The exception is in New Brunswick,” stated CTF federal director John Williamson. “Thanks to the broad-based tax relief announced in the economic statement, the average taxpayer’s retroactive tax savings this year will be $223. This will climb to $272 after factoring in changes that take place next year. Families will save even more thanks to a new child credit worth $300 per child and a higher spousal exemption, which were also enacted for the ’07 tax year. Plus let’s not forget the January 1st GST reduction. While harder to quantify, it will save the typical Canadian household between $150 and $200 annually.”

“But taxpayers shouldn’t clap too loudly as Ottawa’s ‘new’ 15% rate simply restores the lowest income tax rate to what it was in 2005 before the Conservative finance minister raised it in his first budget. Jim Flaherty should be working to cut personal income tax rates, not patting himself on the back for returning them to the level they were when he came into office.”

To see the income and payroll tax changes in 2007 and 2008 for various income levels, households and for all 10 provinces go to Chart #1 at: http://www.taxpayer.com/pdf/2008_tax_burden.pdf

Tax Relief in 2008 – Only Modest Gains due to Indexation

Additional tax reductions next year are due mostly to the indexation of the personal income tax brackets. Other specific tax changes include:

Payroll Taxes: Minuscule EI Reduction and Bigger CPP Bite

Effective January 1, 2008, the employee rate per $100 of insurable earnings will be adjusted to $1.73, a reduction of 7 cents from its current level of $1.80. The corresponding employer rate will be adjusted to $2.42, a reduction of 10 cents from its current level of $2.52. The maximum insurable earnings will rise from $40,000 to $41,100 which is the ceiling up to which EI premiums are collected. Employees will therefore pay a maximum of $711.03 and employers $994.62 for a total EI payment of $1,705.65.

“With a $3.3-billion surplus in the EI fund last year, Ottawa should cut rates and match EI revenues to EI payments, allowing for only a modest reserve, and harmonize the employer rate with those of employees,” said Williamson. “Cutting this tax will help job creation and give manufacturers a break at a time when they are struggling with dollar parity.”

Under the Canada Pension Plan, the maximum pensionable earnings for 2008 will be $44,900 (up from $43,700 in 2007) and the basic exemption amount will remain unchanged at $3,500. The employee and employer contribution rates will each remain unchanged at 4.95%. Because the contribution rate is staying the same while the threshold (ceiling) increases, most taxpayers will pay slightly more in CPP payments in 2008. Employees and employers will each pay a maximum of $2,049.30 for a total CPP payment of $4,098.60.

See Chart #2 for EI and CPP tax payments and increases: http://www.taxpayer.com/pdf/2008_payroll_Taxes.pdf

“The net payroll tax bill on workers will increase because the EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments. Average worker will pay $50.43 more in payroll taxes and employers $46.02 more,” said Williamson. “Ottawa is wrong to increase the EI tax ceiling when the program continues to amass surpluses. It is another example of giving a tax break with one hand, by lowering the EI tax rate, and taking it away with the other, by raising the threshold.”

A 5% GST is a $5-billion Annual Tax Savings

The GST will be reduced by a further one percentage point on January 1, fulfilling the Conservatives’ marquee pledge to reduce the tax by two points. This additional cut will save the average household between $150 and $200 annually. “While some have criticized cutting the GST, it is a broad-based tax cut that puts $5-billion back in the pockets of over-taxed Canadians,” observed Williamson. “And given that this is the second point cut, the total household savings will be between $300 and $400 each year. This is good news particularly since $10-billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”

Provincial Income Tax Changes

Three provinces have additional relief coming to its taxpayers in the New Year. Newfoundland and Labrador reduced all provincial income tax rates and has eliminated its provincial surtax altogether. The typical taxpayer will save $420 in provincial and federal taxes next year (plus GST savings). Quebec rates remain the same although the thresholds have increased substantially which will result in the largest tax savings in the country as of January 1st. The average Quebecer will pay $500 less next year (plus any GST savings). The tax savings will increase in each province as incomes rise above $45,000. Meanwhile, British Columbia has cut all of its provincial income tax rates except the top one which also results in additional savings. As such, average taxpayers in Lotus Land save $223 (again, plus GST savings).

New Brunswick’s provincial income tax increase in 2007 means all individuals earning more than $52,700 paid more income tax this year. Individuals with incomes below $52,700 paid less thanks to federal tax reductions, but their savings were smaller than other Canadian taxpayers because of the province’s tax hike.

See Chart #3 for provincial tax rates/comparisons: http://www.taxpayer.com/pdf/2008-provincial_taxes.pdf

More Relief Needed to Eliminate Structural Over-taxation

While the tax relief announced in Ottawa’s annual economic statement was a good start, Canadians remain over-taxed. “More must be done to reduce personal income taxes. It is not sufficient for parliamentarians to only discuss cutting taxes for low-income Canadians. According to the OECD and even Canada’s finance department, our personal income tax burden remains the highest of the G-7 nations. This standing has not changed in almost a decade and means the French and Italians pay less personal income tax than Canadians,” noted Williamson.

“Broad-based tax relief is necessary to ensure all income levels benefit from lower taxes. Ottawa must focus on further reducing personal income taxes in the 2008 budget and we can suggest several options. At a minimum the Conservative government could chop the two middle rates of 26% and 22% a point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000,” Williamson said. “This proposal can hardly be called radical as it was the tax relief model the Liberals campaigned on in the last election.

“Liberal leader Stephane Dion would have a hard time voting against his party’s own tax proposal if Minister Flaherty were to enact it in the next budget. While the Liberal caucus might squirm, it would be a good tax cut for overburdened Canadians. The goal is to lower income taxes and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Cut Taxes to Strengthen the Economy

By Adam Taylor and John Williamson

NEWS ALERT: Finance Minister Jim Flaherty will not table a budget in 2008. At a campaign-style event to draw attention to the Jan. 1 GST cut, Prime Minister Stephen Harper dashed hopes for additional tax relief. “We’re not going to undertake any long-run spending or tax-reduction initiatives unless we feel they are affordable,” he said. Budget reporters zeroed in on the dark economic clouds south of the border and concluded tax relief and spending initiatives are off the government’s agenda. Mr. Flaherty it seems can rest easy, his services are not needed.

Or are they? With a looming spring election, the unreported paradox is why would Messrs. Harper and Flaherty be publicly promoting their tax relief agenda as an economic tonic while simultaneously downplaying the likelihood of additional tax cuts when they will be most needed? That is, in either an economic slowdown or election battle. Are we to believe the Conservative government will throw away its fiscal card and instead fight the election on medicare, climate change and government integrity while financial conditions worsen? That is hardly sound policy-making or, for that matter, a wise re-election strategy.

It is probably too much to hope the next round of tax reductions will match Mr. Flaherty’s fall economic update. It cut taxes an impressive $60-billion by substantially lowering business taxes, reducing the GST to 5%, and reversing the personal income tax increase the government enacted in its first budget in 2006.

Those recent changes are a step in the right direction, but hardly taxpayer nirvana. As a result of the bottom income tax rate returning to 15% from 15.5% and a higher basic personal exemption (what a person can earn before paying federal income tax), an individual’s average income tax bill will fall by $223 in the ’07 tax year. The savings will repeat in 2008.

Families with children fare better. Thanks to a new child credit worth $300 per child and a higher spousal exemption – both enacted in the 2007 tax year – families with two kids, including single parents, save between $800 and $900 a year in income taxes (and keep adding $300 for every additional child under 18 years old).

Lowering the GST by two points will save the average household an additional $300 to $400 annually. Most economists criticized cutting the GST. Globe and Mail columnist Jeffrey Simpson went overboard, calling it “the worst piece of fiscal policy in a quarter of a century.” Worse, readers are to presume, than government policy of carelessly racking up $467-billion in debt over the past 25 years!

There is no reason why the GST cannot be reduced along with other federal levies as Ottawa lessens the tax burden on Canadians. Now that the government has fulfilled its GST promise, the Conservatives should turn to cutting the taxes that matter most – personal income rates.

Over the next six fiscal years, the federal surplus will exceed $50-billion. As such, there is ample room for the government to continue cutting taxes. There is no need for additional spending beyond inflation and population growth. According to the fall economic update, at the end of the 2008/09 fiscal year the three-year spending increase will exceed $32-billion. That is a cumulative increase of 18.5% in the size of the federal government since the Conservatives came to office.

Canadians remain over-taxed: Mr. Flaherty has said so himself, repeatedly. More needs to be done to ease this country’s heavy tax load. According to the Organization for Economic Cooperation and Development (OECD) Canada has the highest personal income tax burden of G-7 nations. Despite the location of a low-tax jurisdiction south of the 49th parallel, Canadians pay more income tax than the French and Italians do!

To correct this problem, Minister Flaherty needs to reduce Canada’s high marginal income tax rates. He should begin by cutting the two middle tax rates of 22% and 26% by one point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000. If this plan sounds familiar it is because the previous Liberal government proposed it in its dying days and campaigned on it in the last federal election.

Politically, the Grits might squirm if forced to vote for or against a tax proposal they authored. But that should not be the primary reason for enacting it. Rather, it is a good tax cut for Canadians and will help the economy. The goal is to lower tax rates and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.

Budget 2008 is the time to offer personal income tax relief. If the economy slows – as experts predict – taxpayers and businesses will be better able to cope paying less tax. The Conservatives should put the economy ahead of government spending and take care to ensure Canada’s wealth creators continue to generate jobs. A federal bureaucracy that has become 50% more costly since 1997 will not keep the economy afloat but the taxes needed to sustain it are an economic drag. In the same vein, Ottawa can do with fewer handouts to businesses and special interest groups.

With or without a slump, the government needs to spend less, spend more wisely and cut income taxes to ensure the country remains strong and our prosperity continues. Mr. Flaherty has his work cut out for him – the next budget will be the government’s most important fiscal test yet.

Adam Taylor is research director and John Williamson is federal director of the Canadian Taxpayers Federation.

Taxpayers Release Top 100 Tory Handouts

OTTAWA: The Canadian Taxpayers Federation (CTF) has compiled a list of the top 100 grants and contributions paid out by the Conservative government during its first budget year. The list tallies handouts for the 2006/07 fiscal year, which began on April 1, 2006, and ended on March 31, 2007.

The 100 largest payments total $3.3-billion and were doled out by 16 different government departments and agencies. These payments represent only a small part of Ottawa’s annual budget of $25-billion spent on grants, contributions and subsidies. (According to the finance department, the government’s total grant/subsidy budget accounts for just over 11 cents of each tax dollar spent.) For the list of 100 handouts compiled by combing the public disclosure of grants and contributions, click here: www.taxpayer.com/pdf/Top100.pdf

“While some public money is spent on legitimate initiatives and activities that fall within public expectations, funds are also spent questionably, inefficiently and in some cases, outright irresponsibly,” stated CTF federal director John Williamson.

Noteworthy Observations on Corporate Welfare, Transfers to Natives, QANGOs & Toronto:

The two largest handouts went to Pratt & Whitney Canada, the first for $213-million and second for $137-million. Other notable examples of corporate welfare include $47.5-million to the Mont Tremblant ski resort (12th overall ranking), $27-million for a soccer stadium in Toronto (34th spot), and Alcan pocketed $19.1-million (#75).

“Money is funneled to native bands despite the lack of accountability to Canadian taxpayers. Canada’s auditor-general is still not permitted to scrutinize those dollars,” stated Williamson. In its totality, the federal government currently provides over $9-billion a year to aboriginal groups across Canada, many of these transfers appear throughout the list of top 100 grants and contributions.

An alphabet soup of international agencies is prominently featured throughout the subsidy inventory. QANGOs (quasi-autonomous non-government organizations) and advocacy groups include: UNFPA (#14), UNODC (#33), OCHA (#41), UNDP (#57 & 58), WFP (#62 & 80), WHO (#63), DID (#64), CCA (#67), IADB (#70), International Planned Parenthood (#89), PAHO (#91), UNICEF (#92), and the World Bank (spots #6, 59, 60, 61, 65, 71, 85, 93 & 94). There is taxpayer-to-government funding as Ottawa transfers money to Mozambique, Burkina Faso, Senegal and Zambia (#56, 68, 69 & 79).

Most cities can only dream of the subsidies sent to Toronto: $120-million to the Canadian Television Fund (#5), the Toronto International Film Festival (#39) collected $25-million, over $24-million was handed to the Toronto Waterfront Revitalization (#42) and another $21-million to the Toronto Harbourfront Centre (#52) [Ed. note: how does a waterfront differ from a harbourfront?], the Greater Toronto Airports Authority (#84) obtained $18-million and $17-million went to Historica Foundation of Canada (#96). Of course, Toronto Mayor David Miller will say it is not enough.

John Williamson
Federal Director
Canadian Taxpayers Federation

Parliamentarians fiddle while RCMP burns

The tragic killing of Robert Dziekanski on Oct. 14 at the hands of four RCMP officers in Vancouver’s airport has upset many Canadians. It was a shameful display of police brutality and a clear message that Ottawa does not have a firm grip on its own police force. So why isn’t it the lead topic in the House of Commons? The governing Conservatives seem unwilling to openly probe an agency they are now responsible for, preferring instead to manage the problem. More disappointing is that Question Period is dominated by the Liberals single-minded obsession with the Mulroney-Schreiber affair. When the Opposition does get around to asking questions about individual rights it doesn’t concern heavy handedness by the police at home, but the plight of terrorist detainees in Afghanistan.

Canadians are rapidly losing faith in the Mounties as one troubling incident after another sullies the force’s public standing. Its leadership and cultural troubles can no longer be neatly swept under the carpet. Accountability cannot be limited to the spending and management of tax dollars. Paramount is how citizens are treated by government and its institutions, no matter how revered. The state is not serving the public whatsoever when careless law enforcement tactics are deployed and police mislead the public after the fact.

Public attention is drawn to improprieties involving tax dollars, big or small. We hear howls of protest from Parliament when a billion dollars is wasted on a useless long-gun registry or when $1.29 – the cost of a pack of chewing gum – is charged to taxpayers. Canadians properly expect the federal government to be accountable for the financial conduct of its officers and agencies.

Yet, it seems Parliament, as well as many proponents of limited and responsible government, are not ready to hold the Royal Canadian Mounted Police to the same rigorous standards expected from other government departments and agencies. This is as much an accountability issue as anything the auditor-general might uncover: Parliament is obsessed with money in envelopes and Taliban prisoners while their police force is killing hapless travelers in Vancouver.

The tragedy in Vancouver is only the latest controversy to hit the national police. The Brown investigation into the mishandling of the force’s pension and insurance fund is piercing. It concluded that the RCMP governance structure and culture are “horribly broken.” The Nov. 26th edition of Maclean’s reveals “one in eight members are now receiving a disability payment” (how is this possible?) and that the RCMP escapes accountability since “unlike other police organizations in Canada, the force remains answerable only to itself.”

There are many questions to be asked: why did the RCMP officers apparently not follow protocol on Taser use, which outlines six procedures to follow before firing. As pertinent, why did guards with the Canada Border Services Agency (CBSA) permit Mr. Dziekanski to languish in its processing facilities for almost ten hours? There are, of course, other matters, but answering these would be a good start.

It also does not sit well that a public inquiry has been called by British Columbia, not the federal government. Why isn’t Ottawa leading the review since the RCMP is in obvious need of reform, and immigration and border security are federal responsibilities? It was good that Public Safety Minister Stockwell Day said this week the four Mounties might face criminal charges. Unfortunately, the RCMP will conduct the investigation on itself.

Say what you want about Washington’s system of checks and balances. When a U.S. law enforcement agency steps out of line that country’s attorney-general faces tough questions from Congress. It happened in the wake of two deadly confrontations involving the Bureau of Alcohol, Tobacco and Firearms (ATF), the first involving white separatists at Ruby Ridge and the second between government agents and a bizarre cult in Waco.

At the very least there is a requirement on our MPs to ask questions of four police officers who killed a lone man with a Taser within seconds of arriving at the scene. The Harper government made a bold move early this year by breaking with tradition and hiring a commissioner from outside the force. But it is still necessary to make the RCMP more accountable to the public through Parliament.

Because the RCMP brass is notorious for its silence precisely when information is most needed, Parliament must demand answers and take responsibility for its police force. CBSA guards will soon be issued sidearms and yet it is not clear which – if any – lawmaking body is responsible for its oversight. This is a troubling omission that needs to be addressed.

There is no need to turn a blind eye to this branch of government. Indeed, lawmakers would be mistaken assuming Canadians want vigilance when safeguarding tax dollars but no action to rein in bureaucratic neglect or overkill from our security agencies.

John Williamson
Federal Director
Canadian Taxpayers Federation

Canada’s rich not contributing fair share in taxes: study

The Canadian Centre for Policy Alternatives (CCPA) has released a study Eroding Tax Fairness: Tax Incidence in Canada, 1990 to 2005 by CCPA-BC Senior Economist Marc Lee. According to the CCPA, the study is the first comprehensive review of tax changes at all levels of government in Canada within the past 15 years. It finds the system is delivering larger tax savings for high income families.

The news release for the study and the full study itself are available on the CCPA web site at www.policyalternatives.ca and www.growinggap.ca.

Canadian Chamber joins Save-the-GST Club

One of the surprising outcomes of the Canadian dollar reaching parity with the U.S. greenback is a renewed attack on reducing the GST a second point. The Canadian Chamber of Commerce last month called on the Conservative government to break its election promise to cut the GST to 5% and instead lower business taxes. The normally somber chamber of commerce has joined the “Save the GST Club.”

Perrin Beatty, the group’s new president, is worried our high flying loonie makes it tougher for Canadian manufacturers to compete internationally. It is a legitimate concern – an increase to business costs vis-à-vis our competitors will squeeze sales and impact manufacturers. His solution: “I would like to see the government put a priority on cutting costs of doing business across the Canada-U.S. border.” He favours accelerating Ottawa’s tax-reduction plan, but “not the GST.”

Mr. Beatty is wrong to link corporate tax relief to scuttling the next GST reduction.

First, both can be done when Ottawa is swimming is cash. The federal surplus was $13.2-billion two years ago, $14.2-billion last year, and has already topped $7.8-billion only four months into the current fiscal year. The federal government has ample room to reduce taxes. It should do so.

Second, Ottawa has a spending problem not a revenue problem. Why does the chamber think it better policy to limit or swap tax relief rather than reign in spending? Even if Ottawa was not accumulating surplus atop of surplus, the objective should be on reducing federal expenditures, which have already increased by a staggering $24.4-billion under Conservative rule.

Does Mr. Beatty think it wise to grow the size of the federal government by 14%? Or is the chamber simply unwilling to make the tougher public case that expenditure growth and the high tax rates that fuel spending is the real roadblock to cutting the cost of doing business, not a measly one point GST cut? It would be a mistake to limit the scope of tax relief for even higher spending levels.

Third, public opinion matters and Mr. Beatty’s idea to cancel another GST cut reinforces the view the business lobby is willing to trade away personal tax gains for its own tax cut. Tax relief should not be restricted to corporate Canada. Business and individuals are overtaxed and should pay less tax. If Mr. Beatty remains concerned Ottawa does not have the fiscal capacity to lower business taxes further, he ought to instead focus on scrapping business subsidies, something Canadians know as corporate welfare.

Since the Conservatives were elected 20 months ago, every argument has been floated to discredit lowering the GST. It is not a “smart tax cut.” It does not help the poor. Now, dollar parity means Ottawa cannot cut this tax. Canadians aren’t having any of it. They understand the surplus means they are overtaxed. As such, many taxpayers are in agreement with Milton Friedman’s maxim that any tax cut, any time, is a good thing.

Mr. Beatty’s chamber of commerce illustrates the problem of lobbyist and elite opinion-makers casually tossing aside important campaign promises. Voters expect key commitments to carry some weight. Most believe it is essential for politicians to keep their word.

Politicians that do not can face significant trouble – if not outright hostility – from voters in the subsequent election. Just look at Premier Dalton McGuinty. Four years ago he told Ontario voters, “I won’t cut taxes, but I won’t raise them either.” Today, they remember this broken promise and Mr. McGuinty is struggling to win a second mandate.

The Harper government has already upset some investors by taxing income trusts. The about-face will certainly cause his party to lose votes in the next federal election. Imagine the firestorm of protest if the Conservatives broke a promise that benefited all Canadian consumers.

Mr. Beatty’s policy proposal is neither necessary nor viable. Politicians should not break their words, and the Canadian Chamber of Commerce should not ask them to.

John Williamson
Federal Director
Canadian Taxpayers Federation

Will Ottawa Now Reduce Income Taxes?!?

· Structural over-taxation results in $14.2-billion surplus in 2006/07.

· Interest savings of $725-million go to future tax relief, but broad-based income tax reductions not on Conservative agenda.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacted today to the announcement the federal government posted a $14.2-billion surplus in the 2006 fiscal year, considerably higher than its two earlier projections. The 2006 Budget (tabled in May, 2006) originally low-balled the surplus at $3.6-billion and the 2007 Budget (tabled March, 2007) increased that estimate to $9.2-billion. Ottawa missed its original target by almost 400% and its second estimate by more than 50%.

The surplus of $14.2-billion will be used to reduce Canada’s debt, bringing it down to $467.3-billion. Today’s debt reduction payment will save approximately $725-million in annual interest savings. Under the federal government’s new tax-back guarantee law the savings will be used to reduce personal income taxes. To date, the Conservative government has not lowered personal income tax rates, instead it has targeted income tax relief with a number of “boutique” tax reductions that favour some, but not all taxpayers.

“Canadians prefer that governments pass surplus budgets rather than deficit budgets, but this level of surplus is ridiculous. A $14.2-billion surplus means Ottawa is over-taxing Canadians by $14.2-billion. There is no excuse left, except political rhetoric, for Ottawa not to provide personal and business tax relief,” said CTF federal director John Williamson. “Annual surpluses represent over-taxation by government and the money should go back to taxpayers by way of income tax relief.”

For the Record – Surprise, Surprise:

Last year, when the Conservative government reported the 2005/06 surplus was $13.2-billion, Finance Minister Jim Flaherty said, “We’re going to budget much closer to the line … No more so-called surprise surpluses at the end of the fiscal year.”

“The government has shot its credibility on the surplus and is budgeting like the former Liberal government,” concluded Williamson. “The Conservatives downplay their ability to cut taxes, like the Liberals did. They sell massive surpluses as good news, just like the Liberals did. Canadians aren’t buying it any more and they recognize they are being gouged by Ottawa.”

Fiscal Outlook:

The CTF anticipates the surplus for the current fiscal year (2007/08) will again exceed $12-billion. The 2007 budget estimated it will be $3.3-billion.

John Williamson
Federal Director
Canadian Taxpayers Federation

Kyoto Update – Nothing the Taxpayers Federation Hasn’t Said, Twice Before

* Federal government report on Kyoto costs mirror earlier CTF predictions.

St. Andrews, New Brunswick: The Canadian Taxpayers Federation (CTF) responded today to the federal government’s Climate Change Plan for the Purpose of the Kyoto Protocol Implementation Act 2007. The Environment Canada statement is required by law under the Kyoto Implementation Act, which was advanced by Opposition MPs and received Royal Assent on June 22, 2007.

According to today’s release, “To meet its obligations under the Kyoto Protocol, Canada would have to achieve an average 33% reduction in annual emissions for each of the next five years.” This is because implementing the international agreement requires Canada to reduce average carbon dioxide emissions to 6% below 1990 levels by 2008-12. Because the country’s output of greenhouse gases has increased by nearly 33% above its target, draconian cuts in energy output are needed in short order.

“It is an impossible target that if we attempt to hit will cause economic suffering to countless Canadian families,” said CTF federal director John Williamson. “The only way to meet Kyoto targets without spending billions of tax dollars to buy ‘hot air’ from Russia is with strong price incentives to slash energy demand at home. This will require raising the cost of energy by way of higher taxes, which will mean lower economic growth and reduced family incomes.”

Since November 2002, the CTF has repeatedly warned Ottawa about the high cost of implementing the Kyoto Protocol. The CTF’s 2002 study, entitled Counting the Costs: The Effects of the Federal Kyoto Strategy on Canadian Households, authored by noted academic Dr. Ross McKitrick, predicted a 5.5% drop in “real” household incomes – $2,700 for the average family – starting in 2010. That figure was updated by the CTF in February, 2005, to $3,000 per family as a result of Ottawa’s early inaction on the Kyoto file.

Today’s Climate Change Plan for the Purpose of the Kyoto Implementation Act 2007 concludes the “Canadian Gross Domestic Product (GDP) would decline by more than 6.5% relative to current projections in 2008 as a result of strict adherence to the Kyoto Protocol’s emission reduction target for Canada. This would imply a deep recession in 2008, with a one-year net loss of national economic activity in the range of $51-billion relative to 2007 levels.” The impact on Canada’s workforce will also be severe as “employment levels would fall by about 1.7% (or 276,000 jobs) between 2007 and 2009” and per capita income will also decline by “about $1,000 per Canadian in today’s dollars.” In addition, “natural gas prices could potentially more than double in the early years of the 2008-2012 period, while electricity prices could rise by about 50% on average after 2010” and gas prices will rise by “roughly 60%.”

Other key findings from Counting the Costs that share an uncanny similarity to conclusions reported by the federal government include:

* Preferences for energy consumption are stable – changing consumption patterns could require natural gas price hikes of 90% and gasoline price hikes as high as 50%;

* Assumptions of a smoothly-functioning international emissions credit market are flawed;

* A drop in real wages of 5.8% along with a 5.5% drop in real net incomes by 2010; and

* Ottawa has not conducted independent reviews of the science or cost estimates behind Kyoto.

“Give the high economic cost and job losses, the federal government has wisely decided not to fulfill the Kyoto Protocol. If the Liberal Party truly believed in the merits of this United Nations agreement, it would have inflicted the economic pain necessary to reduce greenhouse gases when it was in office,” Williamson concluded. “Implementing Kyoto isn’t nearly as easy or pain free as many environmentalists claim. That the once governing Liberals did not enact Kyoto should tell Canadians something about the high economic and political costs.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Three Policy Proposals for Stephen Harper’s Government

Stephen Harper has all but exhausted his policy agenda and his government is adrift. This week, the Conservative caucus landed on Prince Edward Island for a strategy meeting. The Prime Minister should use these discussions to muster a new agenda before Parliament returns in the fall. Without one, the opposition parties will continue to advance their agendas in spite of the 2006 election results.

When Prime Minister Harper seizes the policy initiative, he governs well. Indeed, credit should be given to the Conservative government for implementing most of its five election promises. Those priorities are enacting the Federal Accountability Act, reducing the GST from 7% to 6% and signalling another point chop by 2011; replacing a planned daycare scheme with a universal child care allowance; developing medical wait-times guarantees with the provinces; and advancing legislation to get tough on criminals (the Senate is obstructing passage of the crime bills).

The federal government has also prepared the legislative ground work to make the Senate democratic and promote accountability on native reserves. Conservative bills will limit Senate terms to eight years and authorize voters to elect their Senate representatives. To improve the plight of natives, another bill will expand Canada’s human rights laws to native Canadians. (Aboriginal reserve governments are currently exempt from the Canadian Human Rights Act.)

Although the opposition is blocking these sensible reforms, the government should not yield – it is one thing to tie a bill up in Parliament and an altogether different ball game to explain in an election why senators ought to remain appointed or that aboriginals are not entitled to the same legal protections other Canadians take for granted. The Conservatives are well positioned here, but it will be a protracted campaign.

Mr. Harper’s immediate challenge is to identify taxpayer-friendly goals that resonate with voters. Initiatives like a national securities regulator might improve market efficiency but will not win many votes. The same is true of selling excess government buildings.

While Canada’s second minority Parliament has been productive, it has not generated the results many taxpayers had hoped for. What is most alarming is the unrelenting rise in spending. The Conservative’s two budgets boosted spending by $24.4-billion over two-years. As a result the size of the federal government has grown by 14%.

Evidence of bureaucratic feather-nesting came in July with a government study examining civil servants’ pay. It reported Canada’s bureaucracy is bloated and the mid-1990s budget cutbacks to the civil service have been undone. Public servants are paid an average salary higher than their private sector counterparts and receive rich benefit packages. Since 1999 the cost of the bureaucracy has increased by an astounding 50%.

Agenda item one for the Conservatives should be to cut spending. Item two should be to dedicate savings to debt reduction. Canada’s debt currently stands at $472-billion. Since 1961, debt interest and service charges have cost taxpayers almost $1-trillion. Canadians would welcome a plan to pay off the debt. It can be achieved if Parliament passes a debt repayment law with annual payments of 5% of total revenues. Each year, Ottawa squanders $34-billion paying interest. As the debt is reduced, significant savings will be realized through lower interest payments.

The third policy item is to cut income taxes, since Finance Minister Jim Flaherty is not taxing to collect money to fund programs, but rather finding ways to spend money government collects. Two years ago the federal surplus totaled $13.2-billion. Last year it was $9.2-billion. The spending of surplus dollars is responsible for Ottawa’s 14% expansion.

To moderate demands for tax relief, the finance minister has again underestimated this year’s surplus figure. In July, the department of finance reported a budgetary surplus of $3.5-billion for the first two months of the fiscal year. Mr. Flaherty’s March budget pegs it at $3.3-billion for the entire year. Mr. Flaherty’s surplus denials, “tax fairness” rhetoric, and nominal tax relief proposals have become tedious. Canadians pay too much tax and all deserve relief.

That makes three new proposals for Prime Minister Harper’s team to consider. Taxpayers are unlikely to be motivated for a political party that they see as being little different than the alternative. The Liberals are seriously considering some sort of tax relief policy, perhaps even income splitting. As such, the Conservative government is in danger of being outflanked where they should not.

John Williamson
Federal Director
Canadian Taxpayers Federation

A Midterm Report Card (Part 2 of 2)

A Midterm Report Card (Part 2 of 2) Grading the Conservative Government - Taxpayers' Top 20 Policy Priorities
Part II

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items united longstanding CTF policy prescriptions with Conservative Party campaign promises. Earlier this week the first 10 policies were ranked. The part one ranking is available by Clicking here.

11. Abolish Corporate Welfare
During the 2004 federal election, then-Opposition leader Stephen Harper criticized the general practice of corporate welfare saying it did not serve taxpayers. In a speech to the Toronto Board of Trade, Mr. Harper vowed to cut business subsidies and use the savings to lower business taxes. "I won't lower one without lowering the other. This is what I mean by low-tax solutions rather than high-spending solutions," he said.

Once in government, however, the Conservatives breathed new life into Technology Partnerships Canada (TPC) -- Ottawa's flagship corporate welfare program -- and continued to provide handouts to businesses, particularly in Quebec and Ontario. Recently, Industry Minister Maxime Bernier replaced TPC with the Strategic Aerospace & Defence Initiative (SADI). While this new program has a reduced budget (40 per cent less than TPC), and comes with stricter repayment and accountability conditions, it is still corporate welfare, which the CTF has continuously pointed out is failed 19th century industrial policy and a colossal waste of taxpayers' money.

Grade: D

12. Gas Tax Reform
Again in Opposition, Mr. Harper had plenty to say about high and unfair gas taxes. In August, 2005, he blasted the Liberal government for refusing to reduce gas taxes as prices soared. "There's no reason for the federal government to profiteer when consumers are hurting," he said, urging the former government to give motorists a break. Mr. Harper went further, suggesting the government "could knock the GST off of the excise tax. They could knock the GST off of gas above a certain price level."

In government only six month later, the Conservatives went into full retreat from pledges to cut gas taxes. The Prime Minister now says that high gas prices are here to stay and that paying them is something motorists will just have to "get used to."

Motorists have faired better on the Conservative commitment to spend gas tax revenues on roads and highway infrastructure. The government has dedicated 36 per cent of fuel tax revenue on roads bridges and highways, up from 7 per cent under the Liberals. This is a positive step and one the CTF welcomes.

Grade: C

13. Voting Reform - Establish a Citizens' Assembly on Voting Reform
This is not a Conservative government promise and there is no movement on the file. However, the electoral system chosen in the Conservative government's Senate reform bill is province-wide single transferable vote, which is a form of proportional representation.

Grade: C

14. End Party Subsidies
Repeal the federal government subsidy that pays political parties $1.75 per vote received in the last general election. Bring charitable tax credits for political parties in line with what is offered for other charitable organizations

On April 4, Elections Canada -- the agency responsible for overseeing federal elections -- released the 2007 first quarter subsidy payments made to Canadian political parties. Every political party that obtains 2 per cent of the national vote or at least 5 per cent of the vote in each riding it ran a candidate gets $1.75 per vote, each year. This amount is linked to inflation so the amount jumped to $1.8725 per vote for the most recent payment. It will be $2.00 this fiscal year, $2.14 in fiscal 2008 and rise again to $2.29 in 2009.

Meanwhile the political parties continue their independent fundraising activities. During the first three months of 2007, the governing Conservatives collected $5.2-million from its supporters. Do the Tories -- and opposition parties -- really need to be digging into the pockets of taxpayers?

Grade: F

15. Reform Foreign Aid
Whereas the Chrétien Liberals were prepared to engage in quiet diplomacy when dealing with China's abysmal human rights record, Prime Minister Harper has taken a different approach. "I think Canadians want us to promote our trade relations worldwide. We do that, but I don't think Canadians want us to sell out important Canadian values, our belief in democracy, freedom, human rights," he said last year. As such, the federal government has committed $1-billion to Afghanistan over 10 years.

Yet, according to the Canadian Coalition for Democracies, the government has not always directed Canada's foreign aid budget to promote democracy, the rule of law, press freedom, and responsible government. Indeed, China receives $54-million a year from Canadian taxpayers in aid. Other repressive governments also collect foreign aid dollars from Ottawa. Canada's total foreign aid budget is $4.1-billion this year.

Grade: C

16. Cut Employment Insurance Premiums
Ottawa's employment insurance program has amassed a $51-billion surplus thanks to ongoing over-taxation of workers and employers. Auditor-General Shelia Fraser noted in her 2004 annual report the federal government "has not observed the intent of the Employment Insurance Act." The auditor-general also criticized the fact that the EI surplus is automatically transferred to the government's general revenue because employee and employer premiums are supposed to cover benefits for the unemployed, not pay for other programs.

Conservative opposition MPs called the over-taxation "highway robbery" and a "raid" on the wallets of working Canadians. Their hypocrisy knows no bounds: the governing Conservatives are using the fund just like the Liberals, to pad the federal budget.

The government reduced the EI tax rate on January 1 for both employees and employers but it also raised the income threshold the tax is applied to. (It was the first increase in a decade.) In other words, the Conservatives gave tax relief with one hand and took most of it back with the other. The seesaw tax changes means the tax bite is only 1.3 per cent lower from 2006 levels.

Grade: D

17. Institute Recall and Referenda Initiatives
Not a Conservative government campaign priority.

Grade: F

18. Lower Taxes
Some progress in the 2006 Budget with the one-point GST cut and implementation of a new employment tax credit. The government also enacted an assortment of targeted tax relief measures that benefit some, but not all taxpayers. Disappointingly, the Conservatives also raised the bottom personal income tax rate by half a percentage point.

On March 19, 2007, Minister Flaherty stated during his second budget speech the taxes Canadians pay is excessive. "I hear it at the hockey arena, I hear it at the coffee shop, I hear it from people on the street, taxes in Canada are way too high," Mr. Flaherty told the House of Commons. Yet tax rates will not be reduced by the Conservative government.

The 2007 Budget failed to deliver the relief Mr. Flaherty had talked about, specifically tax relief for all Canadians. Instead, boutique tax relief was aimed primarily at senior couples, low-income earners, and families with kids. Missing was broad-based income tax relief and the next GST reduction will not happen until January 2011. Moreover, Canada's tax code is more complex and cumbersome thanks to the various targeted tax measures.

Grade: C

19. Control Spending
The Conservatives are quickly becoming "the Party of Big Spenders." The government's spending restraint melted away as the federal surplus ballooned. Last year, for example, Mr. Flaherty missed his original 2006 budget target of a 5.3 per cent spending increase. Instead it was 7.9 per cent, which is 50 per cent more! Had the Conservative government not embarked on its end of year spending, it is estimated the $9.2-billion surplus would have exceeded $14-billion. As excess money poured into Ottawa, the surplus was "spent down" instead of returned to taxpayers.

Federal government expenditures are rising dramatically. In the 2006 fiscal year -- the first year of Mr. Flaherty's watch -- spending ballooned by $13.8-billion, rising from $175.2-billion to $189.0-billion. This is the second biggest jump since the budget was balanced a decade ago. In other words, several Liberal budgets were more prudent than Mr. Flaherty's work. The outlook is not better this fiscal year with spending set to jump another $10.6-billion, levelling off at $199.6-billion.

The government's two-year binge will total $24.4-billion. That is a 14 per cent increase in the size of government!

Grade: D

20. Accountability and Transparency
The Harper government's biggest legislative accomplishment was enacting the Federal Accountability Act. The anti-corruption bill was signed into law in December 2006. The rules surrounding political party donations, lobbying, appointments, government contracts and advertising are now subject to clear rules and greater transparency. It represents a step forward although some elements are missing.

After the last election, the CTF detailed a "60 Point Accountability Report Card." It combined the 54 pledges from the Conservative Party's platform on accountability with 6 points from Judge John Gomery's recommendations stemming from the sponsorship scandal. Of the 60 points, the government included two thirds of them in its accountability law. The biggest disappointment was stripping the bill of access to information reforms. Access to information -- also called freedom of information -- is the taxpayers' best defence against abuse of tax dollars and secretive government. Other measures were truncated, for example the promise of a procurement officer is at the discretion of cabinet.

Overall the Federal Accountability Act is a step forward. It enforces new transparency laws, meets much of what the Conservatives campaigned on, and provides an accountability framework on which to build and improve.

Grade: B-

Conclusion
The CTF midterm is a snapshot evaluation and will be updated to reflect the Conservative government's improvements or regression. Improved grades might be achieved by limiting the federal spending power in areas of provincial jurisdiction, reducing corporate welfare or cutting gas and EI taxes. On the other hand, failure to reduce the national debt, cut taxes or enact reforms to make reserves more accountable to taxpayers and native band members will reduce the ranking.

Prime Minister Harper has made some progress, but he has also fallen short of his own stated objectives -- particularly on tax and spending policies. The Liberals are not ready for a return to government, but if the Conservatives opt to be "Liberal lite" voters will not be to blame for choosing the real thing. The CTF hopes Mr. Harper will instead return to Parliament in September with an invigorated taxpayer-friendly agenda.

A Midterm Report Card: Grading the Conservative Government - Part I

Taxpayers' Top 20 Policy Priorities
Part I

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items culled longstanding CTF policy prescriptions with taxpayer-friendly promises made by the Conservative Party. Together, they represent a bold wish list to strengthen the Canadian economy, ensure tax dollars are spent more wisely, restore government accountability, and give Canadians a louder voice in Ottawa.

Taxpayers recognize Stephen Harper did not win a majority of seats in the House of Commons. Nonetheless, that does not mean the Conservative Party should abandon its agenda or reject good ideas not included in its election manifesto, such as reducing personal income taxes. As Opposition leader, Mr. Harper said he was a friend to taxpayers. But opposition parties do not write budgets or pass legislation. In office, Canadians expect Prime Minister Harper and his caucus to deliver much-needed reform to the federal government. So how are the Conservatives progressing so far? Here is the CTF evaluation of its first 10 policies priorities. (The next 10 will be released later this week.)

1. Limit Cabinet Size and Reform MP Benefits
Prime Minister Harper was applauded for limiting the size of his inaugural cabinet in February 2006 to 26 members. The Conservative's streamlined executive was down significantly from 37 under former Prime Minister Paul Martin and taxpayers were told the smaller cabinet would save $48-million over two years. However, on January 4, 2007, six secretaries of state were added to various ministries. Even though these junior ministers do not attend cabinet meetings, each is entitled to political staff and an office budget. Despite this setback, Mr. Harper has maintained a smaller cabinet and not overloaded the executive.

There has been no reform of parliamentary pay and pension benefits.

Grade: B-

2. Reform Appointment Process of Supreme Court Judges
Implement a multi-partisan Supreme Court nomination process and secure multi-party support when naming the heads of Crown corporations, agencies and other top government jobs

On February 27, 2006, the door of judicial accountability in Canada opened -- but just a crack. For the first time in history, a nominee for the country's Supreme Court had to face cameras and questions from an all-party Parliamentary committee. However, MPs were told the nominee, Justice Marshall Rothstein, could not be quizzed on any matter on which he might potentially render judgment. This ruled out questions of substance. The Prime Minister should allow greater latitude, and allow MPs to vote on the choice of nominee -- as members of his caucus requested.

Creating a new public appointments commission to provide more transparency in federal appointments was sidetracked after opposition MPs rejected Gwyn Morgan, the government's nominee. The former EnCana Corp. executive was not rebuffed because of his qualifications, but due to partisan mudslinging. The PM responded by shelving the commission, vowing to reintroduce it should he win a majority government.

The Conservative government made "substantially fewer patronage appointments" during their first year in office compared to the previous 12 months under Liberal rule, the Ottawa Citizen reported. The newspaper found between Feb. 2006 and Feb. 2007, the Conservatives appointed 410 people whereas the Liberals made 686 appointments in the same period the year before.

Grade: B

3. Enact a Legislated Debt Retirement Schedule
The Conservative government reduced the federal debt by $13.2-billion in the 2005/06 fiscal year. It anticipates an additional debt reduction payment of $9.2-billion in fiscal 2006. So far so good. Looking ahead, the 2007 Budget establishes an annual debt repayment of $3-billion in 2007 and 2008. Yet this is part of the budget framework and not set in legislation to guarantee debt repayment in future years.

Of particular interest to taxpayers is the budget's tax-back guarantee, which promises to reduce taxes using interest savings that occur naturally when government debt is reduced. Ottawa's debt stands at $472.3-billion and annual debt interest payments are more than $34.1-billion or $93-million each day. Should Ottawa make debt reduction a priority, the tax-back guarantee will be a boon to taxpayers.

Grade: C

4. Reform Fiscal Federalism
Ottawa is involved in too many areas of provincial responsibilities and the result is jurisdictional overlap that does not permit taxpayers to hold politicians accountable for how tax dollars are spent on health care and education. Who should voters hold responsible when medical patients sit in waiting lines rather than receive immediate care -- the provincial or federal government?

The Conservative government has opted to administer Canada's spaghetti federalism rather than untangle it. The 2007 Budget announced Ottawa will spend an additional $39-billion over the next seven years -- some of this amount will go to areas of federal responsibility and some to provincial areas. The payments to the provinces will be made through an enriched equalization and per capita education transfers. Ottawa will keep taxes high and continue to interfere in provincial affairs with the federal spending power.

Grade: F

5. Reform Federal Child Care
The Conservatives cancelled the daycare scheme that required parents to put their children in an institutional program. That program, developed by the Liberal government, provided no help to parents who raise their kids at home. It was replaced by a universal $1,200 child care allowance to permit parents -- not bureaucrats -- to choose what daycare option is best for their family.

Yet, the 2007 Budget revealed Ottawa will send $250-million per year to provinces and territories for government daycare spaces. In other words, the Conservatives revived the Liberal daycare program they had just cancelled! No wonder program spending has exploded under the Conservative government. Ottawa is funding two priorities -- the Conservative child care plan and the old Liberal daycare plan.

Grade: B-

6. Medicare Choice
Respect the Supreme Court of Canada's Chaoulli v. Quebec decision. Allow provinces to experiment with medicare delivery reform, including the use of private health care

Although the Conservatives are rhetorically committed to single-tier delivery, they earn marks for not ordering provinces, like Quebec and British Columbia, to close private health care facilities. (In contrast, the Liberal government routinely turned a blind eye to private medicine in Quebec but pounced on any other province that mixed private and public medicine.) This is an important development for reforming Canada's ailing government-run health system as well as treating provinces equally.

Grade: B

7. Aboriginal Policy Reform
One casualty of the government's Federal Accountability Act was the provision to permit the auditor-general to oversee tax dollars after they are transferred to native bands. Taxpayers currently provide $8-billion a year to reserves across Canada, yet there is no way to scrutinize how that money is spent. It was, however, opposition members who voted to remove this important reform from the bill.

Where the Conservative government can act independently it has, by scuttling the Liberal's Kelowna Accord -- the flawed deal to hand native groups an additional $5.1-billion over five years. It committed Ottawa to pour more money into a failed system, fund a growing bureaucracy and do little to improve the lives of ordinary natives.

The federal government's announcement to guarantee mortgages for aboriginals living on reserves is another positive step. Under the Indian Act, financial institutions cannot collect on default loans on reserves, therefore it is difficult for natives to join the Canadian mainstream by becoming homeowners.

Federal Indian Affairs Minister Jim Prentice has signaled he will introduce matrimonial property rights on Canada's native reserves. And a bill in the Senate to expand human rights laws to native reserves has also won support from Minister Prentice.

Grade: B

8. The Senate - Elect or Abolish the Upper Chamber
Prime Minister Harper announced in April he will appoint Bert Brown to the upper chamber of Parliament. Mr. Brown was re-elected as an Alberta "senate nominee" in province-wide voting in November, 2004. He was the first choice of a majority of voters in that province.

Mr. Harper has made Senate reform a priority. Government legislation before the Senate will set eight-year term limits on new senators. A second bill before the House of Commons will allow for the indirect election of senators. Rather than pursue a constitutional amendment to permit direct elections, the Prime Minister will allow provinces to elect candidates for the Upper Chamber. The Conservative government will accept these submissions and appoint the candidates to the Senate thereby ensuring the will of voters is respected -- as was done with Senator-elect Brown. It is hoped this process will overtime become convention and be respected by future governments.

Grade: A

9. Scrap Kyoto
The good news is Mr. Harper has said he will not sacrifice jobs or endanger the Canadian economy in a vain attempt to fulfill the Kyoto Protocol. As such, the Liberal's $10-billion Kyoto scheme will not be implemented. The international accord committed Canada to cutting emissions of greenhouse gases by 6 per cent from 1990 levels by 2012. Yet emissions are 27 per cent above 1990 levels and 35 per cent above the Kyoto target.

In April, Environment Minister John Baird unveiled a plan to curb emissions by heavy emitters. The plan will require most industries to become 18 per cent more energy efficient by 2010, and cut greenhouse gases by 20 per cent by 2020. It will cost the Canadian economy between $7-billion and $8-billion a year. Consumers will pay more for some energy intensive products. But rather than adopt government command-and-control solutions, Mr. Baird is leaving it to businesses to find market driven solutions. Industry leaders grumble that the plan will be costly but is achievable.

Grade: C+

10. End Long-Gun Registry
The Conservatives have tabled a bill to repeal the long-gun registry, although its passage in the House of Commons is unlikely.

Although the government has not cut off the registry's funding it has been reduced. Public Safety Minister Stockwell Day last year announced a package of fee waivers and amnesties to take the teeth out of the registry and free rifle and shotgun owners from complying with the rules. This amnesty was recently extended for a second year.

Grade: B

The next installment will grade the Conservative government on 10 additional agenda items, measuring progress -- or lack thereof -- to abolish corporate welfare, reform foreign aid, cut taxes and control spending.

Federal Spending: Only One in 10 Dollars Going to Defence Budget

Federal spending has increased dramatically since the Conservative Party won election in January 2006. Some Tory partisans argue the rapid rise is the result of one-time expenditures in equipment for the armed forces after years of Liberal neglect. It is not, they insist, irresponsible spending by a party trying to purchase a majority government.

Are they correct? Is a rising defence budget really responsible for spending going through the roof?

To date, the government has announced approximately $11-billion in military capital commitments as part of Prime Minister Stephen Harper’s undertaking to “equip and strengthen” the Canadian Armed Forces. However, Ottawa has only budgeted to spend half this amount.

The government’s “Canada First Defence Strategy” includes procurement of new armoured patrol vehicles, support ships, helicopters and the acquisition of tanks. The Conservative’s first budget, tabled in May 2006, proposed a plan to spend $5.3-billion over five years to modernize the Armed Forces. But the government allocated just $400-million to be spent in the 2006 fiscal year.

The second budget, tabled in March 2007, accelerated the implementation of the $5.3-billion defence plan by pledging to spend $3.1-billion over three years. According to the 2007 Budget, $900-million more will be spent this year, $1-billion in fiscal 2008, and $1.2-billion in fiscal 2009. The remainder of the $11-billion capital commitments will be spent in future years, most likely beginning in 2010.

During the last year of Liberal government rule, the Department of National Defence (DND) spent $14.7-billion in the 2005 fiscal year. The amount represented 8.4 per cent of Ottawa's total program spending.

As a result of the Conservative’s heightened military emphasis, the military budget increased to $15.2-billion in fiscal 2006. And Ottawa's spending estimates indicate the DND budget will rise to $16.9-billion this year (fiscal 2007). The bottom line is defence spending has increased by $2.2-billion under the Conservative government in its first two years in office.

Without a doubt, the federal government is spending more to re-equip and prepare the military for overseas engagements. This will strengthen Canada's military punch. But these expenditures do not adequately explain Ottawa's overall spending growth, which is fast rising. Defence spending is up, but so are other federal expenditures. Consider the numbers:

In fiscal 2006 — the first year under the Conservative’s watch — spending ballooned by $13.8-billion, rising from $175.2-billion when the Grits were removed from office to $189.0-billion under the Tories. This is the second biggest jump since the books were first balanced ten years ago. (Sadly it means several Liberal budgets were more prudent than Finance Minister Jim Flaherty’s fiscal framework.) For the current fiscal year, which began on April 1, spending is set to jump another $10.6-billion and level off at just under $200-billion. The military accounts for only a fraction of overall government spending growth.

The total two year spending increase under Minister Flaherty is an eye-popping $24.4-billion. This is a 13.9 per cent increase in federal receipts. Of the $24.4-billion increase, only $2.2-billion can be attributed to OttawaR17;s military budget. In other words, for every $10 spent in fiscal 2006 and 2007 less than one dollar is going to fund new defence hardware purchases.

In fact, the military share of overall program spending actually dropped from 8.4 per cent to 8.0 per cent last year because non-defence spending increased at a faster rate. This year it will be 8.5 per cent, which is only slightly higher than the percentage under the Liberals.

The rapid rise in spending has little to do with reinvigorating the armed forces after “years of neglect.” In reality, expenditure increases in Ottawa are not limited to a handful of priority areas, like the military. Rather spending is up across-the-board because the Conservative government neglected to cut spending in its non-priority areas, like corporate welfare, and overly-hyped “fiscal imbalances” with the provinces.

It is incorrect for government MPs and Conservatives to argue the large increase in military spending is driving Ottawa's recent spending spree. It is simply not the case when you look at how much has actually been budgeted, rather than what has been committed in future years.

John Williamson
Federal Director
Canadian Taxpayers Federation

Root Canal Narrowly Outpolls Tax Audit as More Unpleasant Experience

CTF public opinion poll also finds only 13% of Canadians expect to benefit from tax relief in the Conservative budget.

Ottawa – The Canadian Taxpayers Federation (CTF) released results of a public opinion poll in advance of Monday’s deadline for Canadians to file their 2006 income tax returns. The poll was conducted by Innovative Research Group for the CTF on (1) the tax relief in the federal budget, and (2) whether Canadians would prefer a root canal or a tax audit.

Canadian unconvinced they will personally benefit from tax relief in the new budget –

When Canadians were asked about the recent federal budget and how much the tax relief will help them a paltry 2% said “a lot” and only 11% said “somewhat.” A 67% majority of Canadians stated they will not personally benefit from the federal government’s tax relief. Of this sum 32% responded “not very much” and 35% “not at all.” The remainder either “don’t know” (2%) or “have not heard enough to say” (17%).

"It suggests the Conservatives missed an opportunity to brand themselves as the party of lower taxes. The governing Conservatives must do more on tax cuts if they want to make a positive impression on Canadian taxpayers,” said CTF federal director John Williamson. “The 2007 Budget did not provide broad-based personal income tax cuts and instead targets the tax relief. But very few taxpayers lucky enough to qualify for a tax break call it dramatic, deep or significant.”

Canadians divided on whether a “root canal” or a “tax audit” is more unpleasant –

When asked which is more unpleasant, 47% of those surveyed responded “root canal” and 38% said a “tax audit.” The remaining 15% “didn’t know.” Only Atlantic Canadians are wearier of the taxman (45% versus 43%), and Ontario respondents are split – with 45% saying a “tax audit” is more unpleasant and 45% believing a “root canal” is more disagreeable.

The online survey was conducted from April 4 to April 11, 2007, among 1,445 Canadian adults 18 years-of-age and older. The sample used has been weighted according to 2001 Census data to accurately reflect region, gender and age. The results are considered accurate to within +/-2.58 percentage points, 19 times out of 20.

The results are available online: http://www.taxpayer.com/pdf/CTF_Poll.pdf

John Williamson
Federal Director
Canadian Taxpayers Federation

Medicare's Socialist Weeds vs. Capitalist Wheat

A Vancouver private health clinic that was prohibited in December from treating British Columbia residents by the provincial government has re-opened its doors to the public. The False Creek Urgent Care Centre will charge $199 for a basic medical evaluation and offer patients a menu of other services. It will operate outside the government-run medicare system and provide emergency care for people willing to pay for immediate service. Predictably, fee-for-service medicine prompted the usual howls of protest.

The False Creek owner, Dr. Mark Godley, skirted provincial law banning doctors or clinics from billing patients for services covered by medicare by adopting a business model from the unlikeliest of places – Quebec. Elsewhere is Canada, “save medicare” activists insist patients sit in queues waiting – and at times dying – for hospital treatment. Yet Quebec offers its residents more private health care than any other province and for-profit facilities operate unmolested by health bureaucrats. Dr. Godley decided to import Quebec’s common sense to Lotus land.

Copying the Quebec model and recruiting physicians from outside the province not enrolled in B.C.’s Medical Services Plan appears to have worked. (The clinic hired two doctors from Alberta and one from Manitoba.) Provincial Health Minister George Abbott believes the private clinic is operating within the law. Moreover, he says Ottawa is unlikely to act because similar clinics exist in Quebec. Federal Health Minister Tony Clement stated the obvious, “This model already is in existence in Canada” and does not violate the Canada Health Act.

Some opponents of timely medical access are worried doctors will opt out of the public system. Indeed, the loss of three doctors from Alberta and Manitoba is a gain for B.C. patients. Yet Canada’s problem is not training doctors but retaining them after graduation.

A study published this week in the Canadian Medical Association Journal reports one in nine trained-in-Canada doctors is opting to practice medicine in the United States. (It is “only” one in 12 if U.S. students are excluded.) With 17 medical schools in Canada, the impact of this brain drain is like setting aside the graduates from two average-sized schools for employment in the U.S. The economics of Canada’s strict command-and-control medical system is responsible for the exodus of talent and doctor shortage.

Permitting more private care, choice and competition in Canada will result in more doctors working in Canada, not fewer. As in all other areas of the Canadian economy, some will opt to work in the public system and others in the private sector. Yet for defenders of the status quo, socialist weeds still taste better than capitalist wheat (to paraphrase China’s deceased Communist leader Mao Zedong).

Liberal MP Hedy Fry, cannot grasp why any Canadian would spend their income to buy a health service. Responding to the re-opening of the Vancouver clinic, she wondered how it will survive when Canadians are “100% entitled to have medically required services paid for” and why “someone [would] pay for something that is covered by public insurance?” Dr. Fry has spent too much time in Ottawa and not enough with patients.

The answer is obvious to anyone willing to look. Government managed health care has resulted in long wait lines for basic medical services. Furthermore, many Canadians are simply unable to find a doctor. According to a 2004 report from Statistics Canada some 1.2 million Canadians cannot find a family doctor. So much for a 100% entitlement.

Fewer and fewer Canadians believe mandatory wait lines are superior to private alternatives. As such, they are increasingly open to private delivery within a publicly funded medicare system, and even a parallel system operating alongside medicare.

Increasingly, Canadians want competition within medicare to ensure their tax dollars are delivering health care results, ensuring good customer service and improved outcomes. Many also believe government has no business telling people they cannot spend their after-tax dollars on additional medical procedures. As a result, they are looking to Europe – not America – for solutions.

Compared to other developed nations, Canada tops the list in spending, has the most restrictions on private medicine, and ranks in the middle in terms of outcomes. Sweden, for example, spends less money, has more private involvement, and offers more services to its citizens. Name your developed country – Germany, France, New Zealand, Japan, etc. – and chances are very strong they provide better care to their citizens at a lower cost. What these nations have in common is mixing a public system and a private system to deliver superior results. This is what Canadian governments ought to be striving for. Happily for patients it is what Dr. Godley is working to achieve.

John Williamson
Federal Director
Canadian Taxpayers Federation

Shrinking Corporate Welfare, A Step in the Right Direction

Industry Canada's industrial budget cut 40%

OTTAWA - The Canadian Taxpayers Federation (CTF) responded to the federal government's revamped industry subsidy program. Details of the Strategic Aerospace & Defence Initiative (SADI) were revealed by Industry Minister Maxime Bernier and Public Works Minister Michael Fortier today in Montreal. The new corporate welfare fund replaces the discredited Technology Partnerships Canada (TPC) program.

TPC was Ottawa's flagship corporate welfare program and authorized
$3-billion in payments since its inception in 1996. Taxpayers were
originally told every TPC investment dollar would return $1.74 in repayments from businesses. To date, only $169-million has been recouped by the government. This is a repayment record of less than 6 per cent.

SADI is budgeted to spend $900-million over the next five years to fund Canada's aerospace and defence industries. This amount is 40 per cent less than the amount on offer under TPC, which was $300-million a year. The industry minister will also publicly identify companies that default on repayment obligations and publish all repayments received from recipient companies twice annually.

"Today, the federal government tacitly acknowledged that many of the
criticisms repeatedly raised by the Canadian Taxpayers Federation over the past decade are indeed valid," said CTF federal director John Williamson. "Ottawa's corporate welfare budget is reduced by 40 per cent and disclosure requirements on Industry Canada, as well as on recipient companies, will ensure taxpayers are informed how tax dollars are being used."

He continues, "While these changes do not make the practice of using tax dollars to support businesses good public policy, it does narrow the program. Moreover, we believe the rigid disclosure requirements, if fully enacted by the minister, will ensure corporate welfare remains a discredited policy in the eyes of most taxpayers. Simply put, it will be possible to monitor how poorly industry department officials 'invest' tax money. We will continue to chronicle the repayment records."

Why Does the Aerospace Industry Need Government Support? According to the Industry Canada news release, the aerospace sector had sales of $21.8-billion and exports of $18.5-billion in 2005.

"Why does this industry need to be subsidized," Williamson asked. "The
industry's own financial figures make the case that business is trong and taxpayer support is not indispensable. Outside of military contracts, there is absolutely no need for government to be funding profitable ventures."

John Williamson
Federal Director
Canadian Taxpayers Federation

"Do You Think It's Easy to Hail a Cab?"

$14,200 in hotel expenses in Montreal for Stéphane Dion’s chauffeur
$5,550 spent on hotel/hospitality during Kyoto Conference in Montreal

OTTAWA: Access to Information documents obtained by the Canadian Taxpayers Federation (CTF) reveal that Stéphane Dion’s chauffeur billed taxpayers $14,225 for Montreal hotel and travel expenses. In addition, documents show during the 2005 Kyoto conference in Montreal, Mr. Dion opted to lodge at a hotel at a cost of $5,548, even though he maintains a residence in Montreal where he is the Member of Parliament for Saint-Laurent–Cartierville.

Another Limousine Liberal –

For the period July 2004 to November 2005, records show Mr. Dion’s chauffeur billed $14,225 in 98 separate expenses for trips between Gatineau (the capital region) and Montreal. The expenses include transportation costs, meals, telephone charges, etc. Review the expenses: http://www.taxpayer.com/pdf/PDF_driver.pdf

"Mr. Dion is quick to lecture Canadians on the need to cut greenhouse gases yet as environment minister he opted to drive to Montreal, keep his chauffeur in the city and bilk taxpayers $14,225,” stated CTF federal director John Williamson. “Canadians have had enough of politicians instructing us to change our driving habits when the same elites, like Mr. Dion, refuse to heed their own advice. Mr. Dion should practice what he preaches, take the Ottawa–Montreal train and hail a cab when in Montreal."

"Under the Liberals, Canada's greenhouse gas emissions drove upwards, while Mr. Dion was driven back and forth in a taxpayer-funded government car,” noted Williamson.

Hotels in Montreal? That is Mr. Dion’s Hometown –

Other documents report that during the first Meeting of the Parties to the Kyoto Protocol, held in Montreal from November 28 to December 9, 2005, Mr. Dion expensed another $5,548 for hotel and hospitality expenses. The hotel was over $300 per night and a $700 room service bill was picked up by taxpayers. Review the hotel bills: http://www.taxpayer.com/pdf/PDF_hotel.pdf

"Despite the fact that Mr. Dion lives in Montreal he opted to stay at a hotel,” concluded Mr. Williamson. “If Mr. Dion had the interest of taxpayers at heart, he would have slept in his own bed.”

John Williamson
Federal Director
Canadian Taxpayers Federation

9th Annual Teddies Waste Awards

Taxpayers Honour Senator Colin Kenny, Hydro One (Ontario), City of Edmonton, and Dalton McGuinty

OTTAWA: The Canadian Taxpayers Federation (CTF) held its ninth annual Teddies Waste Awards Ceremony to honour the best of the worst in government spending at a black tie news conference today on Parliament Hill. CTF Manitoba Director, Adrienne Batra, acted as master of ceremonies.

The Teddies are named for Ted Weatherill, a former senior public servant, who was terminated in 1999 for “expenses incurred by him … incompatible with his position as Chairman of the Canada Labour Relations Board,” according to the Office of the Minister of Labour. In the spirit of the entertainment awards season, Teddies are awarded annually to a government, public office holder, civil servant, department or agency that most exemplifies government waste, overspending, over-taxation, excessive regulation, lack of accountability, or any combination of the five.

"Sadly, 2006 has been yet another blockbuster year for government waste,” said Ms. Batra. “Politicians and public officials must realize that hardworking Canadians will not tolerate those who use tax dollars to live the high life. Our Teddies are an appropriate way to recognize those who abuse the public purse.”

Federal Nominees:

The Departed…MP – Nominated for “Best Disappearing Act”

The movie is set to be filmed in Scarborough, Ontario, a riding where the film’s star Jim Karygiannis, has been a Member of Parliament since 1988. Like many that let fame and fortune go to their head, showing up to work has never really been his thing.

He routinely skips votes, hardly ever makes statements in the Commons and has little time for the normal day-to-day duties one would expect from a Member of Parliament. In short, Mr. Karygiannis is the taxpayers worst nightmare. His no-shows would make even Lindsay Lohan – Hollywood's current truant-du jour – blush. In the 39th session of his latest Parliamentary film, Mr. Karygiannis showed up for zero of 32 votes.

Where was he? He was busy working on another project – a little independent project called “The Liberal leadership campaign of Joe Volpe.” Perhaps Mr. Karygiannis was hoping to “win” a coveted Teddy as Mr. Volpe did in ’06. Yes, taxpayers were paying Mr. Karygiannis a cool $147,700 to be in Parliament yet he was busy with partisan politics.

Letters & Bills from Dubai – Nominated for “Best Comedic Performance by an Unelected Official”

At the film’s premiere in October, 2006, Colin Kenny is overheard remarking that office budgets for senators should be increased from $135,000 to $200,000. “I’d like us to move up to match the House of Commons,” the unelected senator was quoted as saying.

The good senator really incurs the wrath of taxpayers and critics when as chair of the senate’s National Security and Defence Committee, he and a supporting cast head off on a $150,000 magical mystery tour that they claim will eventually arrive in Afghanistan. Documents clearly show that military officials told them in advance that a trip to Afghanistan was not an option. Undeterred, the good senator leads the crew onwards where they stay in a luxurious hotel in Dubai for seven days even though only one three-hour meeting is scheduled. The hotel bill is a cool $30,000.

Upon being questioned, Senator Kenny immediately calls a press conference and lashes out saying the delegation stayed in Dubai because there was a chance they’d be able to travel to Afghanistan. With earlier scenes already confirming that this was never an option, Senator Kenny brings the house down when he maintains everything was above board since the committee worked on a “report” while in Dubai and alleges a PMO conspiracy against the entire Senate. The film ends with all critics and voters alike agreeing it is time to clip Senator Kenny’s wings.

A-SPEND-alypto – Nominated for “Best Taxpayer Horror”

As taxpayers wonder if Ottawa will be successful in trimming the Department of Public Works’ $13-billion annual procurement budget the saga takes a turn when Prime Minister Stephen Harper appoints Michael Fortier to the Senate and as Minister of Public Works – all in the same scene!

After the election, Ottawa moved to reduce the amount of money it spends on goods and services. Tasked by the New Conservative ™ government, Public Works awards a $1.75-million contract to discover ways to cut costs. The film fast-forwards nine months and suddenly the “cut costs contract” has increased in value to $24-million.

Curse of the Golden Banana (Heritage Canada) – Nominated for “Feature and Visual Effects”

Artist Cesar Saez has a dream. He dreams of a 1,000 foot-long banana flying over the great state of Texas. Saez plans to make a banana-shaped, helium-filled, synthetic-paper airship that will fly 20 to 30 kilometres above the Lone Star state for one month.

This story is about making sure people’s dreams come true and luckily for Mr. Cesar, the Canada Council for the Arts shares this dream. They wanted so much to ensure this movie got made that they kicked in $49,800 of taxpayers’ money for the project. The Quebec government’s Council for Arts and Letters threw in another $15,000. With governments firmly behind this Big Banana in Space Project, the film is sure to be a “success.” Yet taxpayers and officials from NASA are curious to know if the sequel will feature the banana being peeled by the Canada space arm? Stay tuned!

Pirates of the Marine Atlantic: The Hungry Man’s Meal – Nominated for “Best Plundering of the Public Purse”

In the opening scene Marine Atlantic President Roger Flood declares that reports of excessive executive spending at the federal Crown corporation are complete balderdash. In what some are calling this year’s undisputed “Teddy moment,” Mr. Flood cries, “It is deliberately taken out of context.”

The scene in question reveals that Martine Atlantic executives expensed a dinner in December, 2003, at the Hungry Fishermen restaurant in St. John’s, Nfld. The cast was hungry indeed. The bill totalled $1,038.76. The plundering had only begun. The pirate crew pillages $1,313.71 at the Casbah restaurant in St. John’s; $1,237 at Java Jack’s in Rocky Harbour and another $666.33 at Da Maruizio in Halifax.

The closing credits reveal three Marine Atlantic executives and their chairman bill $18,857.81 to attend a convention in Greece to do some “research” on new ferries. The Marine Atlantic executive sticks to his script and calls the story “inaccurate.” Critics aren’t impressed. Taxpayers and moviegoers demand the pirates get off their tax dollar diet and try packing a lunch.

Federal Award Winner:

"And the federal Teddy goes to Senator Colin Kenny, once again showing that the last institution to get the memo regarding Canadians’ demands for accountability from lawmakers is the Canadian Senate. Rest assured Senator Kenny, the days of unaccountable officials thinking they can fleece Canadian taxpayers with impunity because they’ll never have to face the electorate will soon be over,” said Ms. Batra as she unveiled the first Teddy of 2007, a beautiful golden sow.

Provincial Nominees:

Bon Horse, Bad SONACC – Nominated for “Achievement in Living High on the Horse’s Hog”

In this business, when the provincial auditor is the one reveling the saga you can be sure it’s going to be a smash hit. The case of the Quebec government’s ‘Societe nationale du cheval de course’ (SONACC) is no exception. The story begins with SONACC’s founding in 1999 to help promote and develop QuebecR17;s horseracing industry. As the film progresses, it quickly becomes a taxpayers’ nightmare as the narrator explains that between 1999 and 2005, SONACC was handed $260-million.

Midway through the film, things turn downright ugly as officials with SONACC take rule-breaking and living high on the hog to a whole new level. The auditor explains that officers received 20 to 30 per cent annual raises while doing the same job. Bonuses of $10,000 to $30,000 were paid out without any performance evaluations or measurement criteria given.

One officer whose salary was almost six figures received an $82,500 severance, only to be rehired as a consultant. Over the next two years, he collects $350,000 to perform work related to his former duties. Other shocks include $17,000 to $22,000 on automobile allowances; spending $300,000 in “unjustified” expense claims; and almost $400,000 in reimbursements for expenses without explanation.

By movie’s end, millions have galloped out the door leaving taxpayers feeling as though they’d just been kicked, and moviegoers wondering why pigs are in charge of horses.

Little Miss-appropriation of Funds – Nominated for “Best Achievement in Public Money Mis-Direction”

This is one of those dark movies where the bulk of the actors are bad guys and it becomes even more chilling to learn it is based on a true story. The story is brought to life by the movie’s protagonist Newfoundland & Labrador provincial auditor John Noseworthy. The film stars politicians from all three political parties and opens with a scene revealing a spending scandal that begins in April 1997 and continues until filming is finally completed in 2006.

In his narration, the auditor details how $1.6-million in excessive expense claims were filed by five provincial politicians, including three former cabinet ministers. The narrator states in one scene that “the vast majority of these expenditures went directly, via cheque and that sort of thing, to (their) bank accounts.”

In addition to overspending office budgets, later scenes reveal $2.7-million was misappropriated by the same cast to buy a variety of trinkets – no doubt for adoring fans – which include gold rings, fridge magnets, pins and key chains. Outraged moviegoers demand a refund and hope the sequel keeps better track of all legislators’ receipts.

The Last Pork of Saskatchewan – Nominated for “Achievement in Editing and Mixing”

While critics and buffs alike are used to hearing stories of “political pork,” taxpayers are particularly unimpressed with new editing and spin techniques being used by the Government of Saskatchewan. The film begins with the government announcing a $1.5-million subsidy, in addition to an already outstanding $2-mllion loan to the bankrupt ‘World Wide Pork’ in Moose Jaw. The tale quickly turns dark when despite the handout and loan, workers are axed and bills to suppliers remain unpaid.

The government’s solution? Why yet another $1.5-million tax dollars! Moviegoers should be aware that this is not a good flick to see if you like happy endings because as the film winds down – six months after the latest taxpayer-funded handout – the company permanently closes its doors leaving many workers with no job and taxpayers on the hook for millions more.

Rating: Not suitable for vegetarians or those who hate to see their money go down the drain.

The CEO Wears Prada – Nominated for “Best Display of the Culture of Entitlement”

Like all good political thrillers this one begins with the resignation of a high-ranking government official. In this case, Tom Parkinson, CEO of Hydro One, the public utility responsible for managing OntarioR17;s electricity grid is forced to quit his post after damning revelations come to light.

Moviegoers learn the CEO billed $45,000 in personal expenses to his secretary’s credit card, having himself approved the expenditures. You could hear a pin drop in the theatre when it is also revealed that the same big wig is the highest paid public employee in the entire province drawing an annual salary of $1.5-million. If only it stopped there. Later scenes have the CEO using Hydro One’s helicopter to visit his private cottage in the Muskoka’s.

With his resignation taxpayers thought they’d finally gotten justice, but that was just the beginning. Hydro One’s board implies they see nothing wrong with the behaviour of their lead actor only accepting his resignation with “deep regret.” But the shocking twist comes in the last scene when Hydro One writes a $3-million severance cheque for the CEO who voluntarily resigned. Moviegoers no doubt leave the theatre scratching their heads wondering if the same rules would apply to them at work.

Provincial Award Winner:

"And the provincial Teddy goes to the politically-appointed Board of Hydro One for showing that the culture of entitlement is alive and well in Ontario,” said Batra as she presented the second golden sow. “This Teddy is for Hydro One’s board to share as it shows that a good team always sticks together through thick and thin, even when it is taxpayers getting the shaft.

Municipal Nominees:

Yo-Yorat: Cultural Gifts for America to Make Benefit Glorious City of Edmonton – Nominated for “Best Dim-witted International Idea”

This movie’s opening scene should have been shot at a prestigious business school because whoever came up with this idea is truly gifted. If taxpaying moviegoers in Edmonton wonder why ticket prices on their property go up year after year, look no further than this film’s opening scene. In it, ratepayers learn that the city of Edmonton spent $30,000 to hire 30 actors from Washington, D.C, to hand out yo-yos in the U.S. capital on Canada Day.

Edmonton officials were scripted in the film saying it was a “fun way” to promote the city and a way of connecting with the ordinary Joe. One critic called the film “absolutely ridiculous” but the Academy of Taxers and Spenders likes to set trends and always looks for the diamond in the rough.

According to sources, Canadians must wait for the director’s cut to see if anyone in Washington clutching their yo-yo said “Dad, Can we go to Edmonton next year?”

Dream Jobs – Nominated for “Achievement in Looking Busy and Beating the Stress”

What makes this film so good is the simplicity of its plot. The main actors in this movie are City of Montreal roadwork crews and the plot unfolds as follows: The workers drive around. Shovel a little gravel. Stop for a poutine. Repeat. Occasionally, they sub in the odd smoked meat sandwich instead of poutine but by and large the script stays the same. In the end, three work crews, all paid about $22 an hour and spend 90 man-hours fixing 9 potholes.

The movie’s end makes clear a sequel is in the works as the City of Montreal announces plans to “track” its workers using GPS devices. Will electric shocks be administered to workers who are eating poutine when they should be filling potholes? Fans will have to wait for Dream Jobs Part II.

The Pursuit of Taxing-us – Nominated for “Best Big City Villain”

It is rare that a film captures both the genres of comedy and horror in one feature. But taxpayers have come to expect such motion picture ingenuity from the City of Toronto – arguably the most fiscally incompetent city in Canada. Critics and movie buffs should have seen what was coming when trailers for the movie showed a beaming Mayor David Miller in response to news the feds were cutting the GST.

When the film finally arrives in theatres the opening credits reveal that Toronto is not going to pass along the savings from the one-point reduction in the GST to citizens. After all, it is a costly administrative headache to change billing systems, websites and publications to reflect new – and lower – fees. So why bother. Critics wonder whether the city would also find it too costly if prices and taxes were raised. But the mayor – oddly – never addresses this.

However, plot twists are what separate the great films from the good ones and Mayor Miller quickly reverses himself upon learning that to not pass along a tax reduction runs contrary to the federal Excise Tax Act. If he doesn’t pass it along to consumers he’ll have to pass it along to Ottawa and what’s the point in that? Rating: Warning to viewers of this film in Toronto is watch your wallet.

An Inconvenient Prize – Nominated for “Accomplishment in Civic Embarrassment”

Have you ever thrown a party and nobody showed up? That’s how the city of Edmonton is portrayed in yet another half-baked tourist promotion film. The city’s promotions department is featured prominently in the early scenes as a $50,000 budget for three all-expenses-paid vacations are offered to lucky randomly selected Canadians. But this is where the plot takes an unintended comedic twist. It turns out that city staff offers the trip to 25 people before they can find three will to accept the prize!

In one memorable scene, a woman from British Columbia explicitly states she doesn’t want to come to Edmonton!. The promotions department remains convinced that this is a good idea and that contest winners will ensure Edmonton become’s the talk of their communities upon their return which will in turn cause tourism to skyrocket. Taxpaying critics are skeptical and hope no sequel is planned.

Municipal Award Winner:

R20;And the municipal Teddy goes to the city of Edmonton for their brilliant production handing out yo-yos in Washington to drum up tourism in Edmonton,R21; said Batra. “Edmonton taxpayers should feel extra proud knowing their city managed to garner two nominations this year in the municipal category– a first in Teddies history.”

Lifetime Achievement Teddy – Dalton McGuinty

All the great ones own a memorable line that confirms iconic status. These lines usually become ingrained in peoples’ minds and can instantly be associated with the person who said it and what show it was articulated in. There are numerous examples. Clark Gable had his “Frankly, my dear, I don’t give a damn,” in Gone with the Wind. July Garland said “Toto, I’ve got a feeling we’re not in Kansas anymore,” in the Wizard of Oz.

Which bring us to our latest inductee in the Teddies lifetime achievement category, Ontario Premier Dalton McGuinty. Mr. McGuinty made two significant statements that ensure he will be long remembered by taxpayers. First, as Liberal Opposition leader on the election trail in 2003 he repeatedly told voters: "I won't raise your taxes, but I won't cut them either.

But he didn’t stop there. He showed up at a downtown Toronto hotel and signed a pledge drafted by the Canadian Taxpayers Federation that committed a Liberal government to abide by the Taxpayer Protection and Balanced Budget Act. Above his signature, read: "I, Dalton McGuinty, promise that if my party is elected as the next government, I will not raise taxes or implement any new taxes without the explicit consent of Ontario voters."

The Liberals won that election and Dalton McGuinty became Premier of Ontario. Yet, six months later, he broke that promise, ushering in the largest tax hike in OntarioR17;s history in the form of a so-called “health premium.” Voters called it a tax and the Big Lie.

Since then, Premier McGuinty has continuously blamed his predecessors for all his troubles, delivered 3 deficit budgets, ramped up spending, and continuously whined to the federal government for more handouts. Handouts for what taxpayers ask? In December, 2006, the McGuinty Liberals ushered in a 25 per cent pay increase for MPP’s. Does this sound like someone to be trusted with tax dollars?

A Teddy is awarded to Mr. McGuinty in recognition of his many accomplishments. “In just four years, Dalton McGuinty truly has amassed a lifetime of achievements and for that we honour him as this year’s recipient of the lifetime achievement Teddy. Congratulations Premier McGuinty,” concluded Batra.

John Williamson
Federal Director
Canadian Taxpayers Federation

Where Are Tory Tax Promises?

Conservative rule? This was the pledge Stephen Harper made to Canadians, but it hasn’t come to pass. During last winter’s election campaign, his candidates vowed to end wasteful programs and control government spending, which increased dramatically under the old Liberal regime. Opposition Conservatives told Canadians that if elected they would prioritize spending and govern responsibly. Certainly, no scandals have erupted under Prime Minister Harper, but that does not mean all is well in Ottawa. The federal government is growing as fast as ever and this puts the prospect of meaningful tax relief in jeopardy.

Prime Minister Harper was applauded last year for limiting the size of his cabinet to 26 members. His streamlined executive was down significantly from 37 under former Prime Minister Paul Martin. Taxpayers were told this smaller cabinet would save them $48-million.

Yet just last month, Mr. Harper decided bigger is better by adding six secretaries of state to his team. These junior ministers are paid an additional $53,000 on top of an already generous MP pay package of $147,700. When a government spokesman was asked what additional expenses might crop up, he responded there wouldn’t be any, “They do in fact get a car and driver, but there’s no added cost to the taxpayer because the costs are being absorbed within the departments through reallocation.” Oh boy, if the Conservatives believe their own spin, taxpayers are in big trouble.

Additional limos, chauffeurs, and pay are the tip of the iceberg. Junior ministers do not attend Cabinet meetings, but each is nonetheless entitled to additional political staff. And what is Ottawa’s starting salary for a “senior” twenty-something staffer fresh out of school, who reports to a junior minister, who in turn reports to a minister, who reports to the Prime Minister? Try $85,000, up to a maximum of $110,700. Throw in benefits, travel and suddenly taxpayers are shelling out real money. It might not be $48-million, but it’s closer to that figure than zero – notwithstanding the government’s absurd denial.

Forget cutting the size of the state; the Conservative government is unwilling to even abide by its own commitment to hold the line on spending or change the pork-barrel culture. The party’s 2006 election manifesto stated spending had grown to an unacceptable level: “Far too much taxpayers’ money is absorbed by the Ottawa bureaucracy or spent on ineffective or inefficient programs.” To fix this problem Mr. Harper’s team said it would begin by limiting future growth of government to the inflation plus population growth rate.

But it hasn’t happened. Instead Foreign Affairs Minister Peter MacKay tells voters in Atlantic Canada that electing a provincial Tory candidate will open regional development taps, “He’s going to come knocking and we’re going to deliver,” he said. In Quebec, Public Works Minister Michael Fortier demands military contracts be directed to his province. In December, Senator Fortier announces industrial giant Pratt & Whitney will receive a $350-million subsidy. Bombardier has also been informed it will receive a similar sized corporate welfare handout – courtesy of taxpayers – should the aerospace firm build a new regional jet. On top of this, the government recently resurrected goofy environment programs it cancelled after assuming office last year. What’s next, Rick Mercer plugging the Two-Tonne Challenge?

Remember the days when opposition Tory MPs lampooned the government for boosting annual government spending by an average 8.2% each year during the Liberals’ final five years in office? This expansion meant the state was increasingly interfering in the lives of Canadians, at work and at home.

The federal government continues to meddle by imposing regulations on businesses, over-taxing families and adopting the vote-buying policies perfected by the Grits. According to the finance department, Ottawa will grow by another $12.4-billion this fiscal year. That increase works out to 7.1% – well above inflation and population growth. Spending is budgeted to grow by another 4.5% in 2007/08. Taxpayers have no reason to believe this lower figure any more than the previous commitment to reduce spending.

When a government uses a fire hose for spending, they are left with only an eyedropper for tax relief. The Conservatives obviously find it easier to spend the rising surplus rather than control expenditures and cut taxes – just as the Liberals did. But can they really believe re-election efforts will be any easier when taxpayers cannot see a significant difference between Conservative and Liberal spending levels or their records on lowering taxes?

John Williamson
Federal Director
Canadian Taxpayers Federation

On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs

Corporate Welfare Continues to Fleece Taxpayers

- $18.4-billion in handouts given to businesses in 47,960 payments over 23 years.

- Only $1.25-billion or less than 7% has been repaid to federal government.

- By ending the subsidy game Ottawa could reduce business tax burden.

OTTAWA – The Canadian Taxpayers Federation (CTF) today released a report, entitled On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs, that details $18.4-billion in federal government handouts to businesses, associations and foundations for the period covering April 1, 1982, to March 31, 2006. It examines only tax money authorized through the federal industry department. It does not include subsidies from other departments, the three primary federal regional development agencies (Atlantic Canada Opportunities Agency, Canada Economic Development – Quebec, and Western Economic Diversification) or similar programs funded by other levels of government. The information was compiled through freedom of information requests made to Industry Canada.

“Corporate welfare programs are a sinkhole for tax dollars. Handouts serve neither businesses nor taxpayers and should be scrapped. Since 1982, billions have been given away or loaned yet repayments are paltry and many of the top recipients have taken up permanent residence at the trough,” stated CTF federal director John Williamson. “High taxes fund subsidy programs that benefit a minority of companies. If the department of industry was overhauled Ottawa could cut its corporate tax cut rate by 2 or even 3 percentage points. Such a change would benefit all businesses, improve Canada’s international competitiveness and be advantageous to consumers, workers and investors.”

The 30-page report can be viewed at: http://www.taxpayer.com/pdf/2007_corporate_welfare_report.pdf

The 809-page subsidy appendix can be viewed at: http://www.taxpayer.com/pdf/subsidies.pdf

Findings from On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs:

- Between fiscal years 1982 and 2005, $18.4-billion of assistance was authorized through 47,960 separate grants, contributions, loans, interest contributions and loan guarantees from 150 different programs. Of the total, $7.1-billion is considered repayable funding yet only $1.25-billion or 17.6% of that amount has been repaid. All said, less than 7% of the total subsidy portfolio has been recouped by Ottawa;

- Technology Partnerships Canada (TPC), which is Ottawa’s flagship corporate welfare program, has authorized $3-billion since its inception in 1996 and recovered only $169-million. This is a repayment record of less than 6%. Taxpayers were originally told every TPC investment dollar would return $1.74 in repayments from businesses;

- The Top 50 subsidy recipients have received a third of all money authorized or $5.9-billion;

- The Top 3 recipients have secured $2.6-billion in federal handouts. They are Pratt & Whitney ($1.5-billion authorized plus another $350-milion announced in Dec. 2006 that is not included in this report), Bombardier ($745-million authorized plus another $350-million announced in Nov. 2006), and General Motors Canada ($360-million); and

- Industry Canada has 2,234 lobbyist registrations and is the most lobbied department in Ottawa.

Rule-Breaking & the Transparency Deficit –

One characteristic of the subsidy game is rule-bending and rule-breaking. Audits have revealed companies routinely paid forbidden “success fees” to lobbyists in exchange for securing subsidy handouts. In addition to paying prohibited fees, audits have found lobbyists have neglected to register, which is another violation of transparency and accountability rules.

Another concern to taxpayers is the lengths politicians and bureaucrats will go to avoid checks and balances when doling out tax dollars. A glaring example of this is the fact that nearly 10% of all authorized monies under TPC are just below the $10-million mark, the level at which Treasury Board approval is not required. “Without as many checks and balances, the money flows quicker, albeit by smaller amounts, and there is less scrutiny,” said Williamson. “This makes it easier for industry officials to funnel tax dollars from government coffers to recipients’ bank accounts.”

Moreover, politicians make multi-million dollar spending announcements without first receiving approval from the Treasury Board. “This is another example of how politicians use corporate welfare as a means to buy votes in advance of an election,” stated Mr. Williamson. “It should be outlawed.”

The Conservative Government & Corporate Welfare –

The Conservative government has sent mixed messages on corporate welfare since coming to office. “While progress has been made regarding releasing TPC repayment data, the government has breathed new life into TPC and continues to make new announcements,” stated Mr. Williamson.

In opposition, Stephen Harper criticized the practice of corporate welfare saying Ottawa should “get out of the grants and subsidies game.” In 2004, he vowed to cut business subsidies and use the savings to lower business taxes. “We will only reduce business and corporate taxes further to the extent that we can reduce corporate welfare over the next term,” he told the Toronto Board of Trade. Williamson noted, “This is the right policy. Business leaders should be forced to choose between lower taxes or subsidy programs.”

A Better Way, Lower Taxes for All –

A 2005 C.D. Howe Institute study ranked Canada a dismal 30th among 36 industrialized countries in terms of combined average federal-provincial corporate income tax rates. The report also found Canada had the second highest marginal tax rate on capital. The only higher-tax jurisdiction was communist China.

“By getting out of the subsidy and regional development business, Ottawa could reduce the corporate tax burden. Savings of $2- to $4-billion could be realized annually if Ottawa recognized that corporate welfare was not a suitable role for the government,” concluded Williamson. “Ottawa’s general corporate income tax burden, which is 21%, could be reduced by 2 or even 3 percentage points. This tax reduction will benefit all companies, our domestic economy, and improve Canada’s international competitiveness.”

John Williamson
Federal Director
Canadian Taxpayers Federation

More Tax Dollars for these Welfare Bums?

Canada’s Corporate Welfare Deadbeat: Pratt & Whitney

OTTAWA – The Canadian Taxpayers Federation (CTF) responded to yet another announcement of government handouts for Pratt & Whitney – this one for $350-million from the Technology Partnerships Canada program – by releasing Access to Information documents that show Pratt & Whitney is Ottawa’s top corporate welfare frequent flyer. The aerospace company has led the porker pack having been granted $1.5-billion in various types of assistance from Industry Canada since 1982.

The CTF will release a report, entitled On the Dole – Businesses, Lobbyists & Industry Canada’s Subsidy Programs, in January, 2007. It will chronicle Industry Canada’s subsidies to businesses from 1982 to 2005. Data from that forthcoming report include a history of handouts to Pratt & Whitney gone bad:

Pratt & Whitney has received $1.25-billion in subsidies predominantly through two of Ottawa’s most controversial and discredited corporate welfare schemes – the Defence Industry Productivity Program (DIPP) and Technology Partnerships Canada (TPC) – between April 1, 1982, and March 31, 2006. (A total of $1.496-billion has been authorized. The complete list is available here: http://www.taxpayer.com/pdf/Handouts_to_Pratt_&_Whitney.pdf)

Of the $1.25-billion doled out, Pratt & Whitney repaid just $92-million, a pathetic 7.4%.

Figures from the Industry Department show of the $691.8-million authorized through TPC alone, the aerospace giant has repaid only $21.1-million – a paltry 3.1% (as of March 2006).

In August, 2006, it was revealed the industry department turned off the TPC subsidy taps to Pratt & Whitney following a dispute over how much the federal government should reimburse the company for its research and development costs.

Pratt & Whitney is savvy when it comes to securing handouts from Ottawa. Their registered lobbyists include a former assistant deputy minister of Industry Canada John Banigan, and Conservative Party insider Yaroslav Baran.

“Given their paltry repayment record and omnipresence at the trough, giving Pratt & Whitney more of taxpayers’ money is like giving a pyromaniac a jerry can and pack of matches. And as usual it is Canadians taxpayers who will be burned,” stated CTF federal director John Williamson. “When it comes to corporate welfare it’s all about who you know in Ottawa, and Pratt & Whitney makes sure it knows everybody. It is paying off handsomely.”

“Today’s announcement shows that Pratt & Whitney is again at the forefront when it comes to handouts,” continued Mr. Williamson. “Rather than focus on subsidies and vote-buying, the Conservative government should seek to protect all taxpayers from this type of wasteful spending. Canadians taxpayers deserve better. Our forthcoming report will demand an end to paying subsidies to businesses.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Jim Flaherty, Canada’s Minister of Gimmicks

The Conservative government’s annual budget update hit all the right notes. Unveiled last month by Finance Minister Jim Flaherty, it laid out a three-point plan. Government debt will be eliminated by 2021. Annual interest savings from a lower debt will be plowed back to taxpayers by cutting personal income taxes – he calls this the Tax-Back Guarantee. And the government will “maintain a tight rein on spending.”

This is all music to taxpayers’ ears. Yet none of it will happen. The minister is instead proposing a series of gimmicks.

Take the pledge to pay down “total government net debt.” To most Canadians this means one thing – paying off Ottawa’s $481.5-billion federal debt, which incidentally costs taxpayers $34-billion in annual interest costs. (That’s $93-million each day.) National debt, as it is commonly understood, is the sum of annual deficits accumulated by the federal government since Confederation.

But Mr. Flaherty isn’t proposing eliminating this debt. He will eliminate “government net debt,” an altogether different proposal.

His net debt includes federal debt plus provincial, territorial and municipal government liabilities less the accumulated assets of the giant Quebec and Canada Pension Plans (Q/CPP). By including the funds earmarked to pay future Q/CPP benefits to pensioners, Mr. Flaherty’s no “net debt” objective will easily be achieved. Ottawa will only need to reduce its debt by $3-billion a year, for a total reduction of $48-billion over the next 16 years.

Debt reduction is supported by many Canadians. It is akin to paying off the national mortgage. In fiscal 1996/97, Canada’s debt stood at $562.9-billion. The federal budget was balanced nine years ago and debt repayment has since totaled $81.4-billion, which saves billions and billions of dollars in annual interest payments. Mr. Flaherty’s scheme will pay down less debt than reductions made over the past nine years. Redefining “debt” makes his meek 16-year “net debt” plan appear a great leap forward.

Mr. Flaherty calls this fable a “bold new plan.” Liberal finance critic John McCallum accused the minister of using “an arcane statistic” to confuse people. (And he’s right.) Taxpayers call it phantom debt relief – a political gimmick.

A last point on debt: the minister’s pledge to apply every surplus dollar to bring down the debt is nothing to celebrate either. It is already federal law. The Financial Administration Act wisely requires that 100% of any surplus be directed to debt repayment.

As for Mr. Flaherty’s promises of tax relief, according to the November update, Ottawa’s surplus will total more than $50-billion over the next six years. Yet Mr. Flaherty announced that the GST will not be cut again until 2011. And his so-called Tax-Back Guarantee ties future personal income tax relief to his debt relief schedule.

Under his plan, there will be no income tax relief without significant debt interest savings. This is an excuse for Ottawa to keep taxes high. The proposal to pay off $3-billion in debt each year will save taxpayers approximately 10 bucks annually – a trivial amount.

Last is the Conservative commitment to keep spending under control, a policy already in tatters. In his update, Mr. Flaherty scolded the Liberal government for its awful spending record, “Over the past five years of the previous government, total program spending grew by an average of 8.2% each year.” He added, “This growth was neither sustainable nor desirable.”

The Conservatives will be more disciplined. Mr. Flaherty said, “The government is committed to keeping the growth of program expenses below the growth of the economy over the medium term.” In Parliament he repeated “...our new economic plan proposes to keep the growth rate of program spending on average below the rate of growth in the economy.”

And why is this important? “To the extent spending growth is kept below the growth in the economy, this will contribute to further reductions in public debt and in taxes given the commitment to dedicate interest savings to tax reductions,” said the minister. His message is clear: tax and debt reductions are conditional on spending restraint.

But the ink on the update wasn’t even dry and the Conservatives already betrayed the commitment to keep spending “below the growth of nominal GDP.” Mr. Flaherty’s May budget stated program spending will “rise 5.4% in 2006/07 ... below the growth of nominal GDP.” His update reports “nominal GDP is projected to grow 5.0% this year and 4.6% in 2007.”

So how does Mr. Flaherty explain this little ditty from the update: “Program expenses are expected to grow by 7.1% in 2006/07”? This level is much higher than nominal economic growth. Moreover, it is only a stone’s throw away from the Liberal’s 8.2% spending spree routinely disparaged by Conservatives.

Meager tax relief, Liberal spending levels and less debt repayment all dressed up as a bold new plan. Taxpayers had hoped for some straight talk from the Conservative government. Instead Minister Flaherty is selling a false bill of goods.

John Williamson
Federal Director
Canadian Taxpayers Federation

Prisoner Tattoo Program, A Happy Ending

Ending Prisoner Tattoo Program the Right Move
Federation Fought to End Taxpayer-funded Tattooing of Inmates

Ottawa: The Canadian Taxpayers Federation (CTF) reacted to Public Safety Minister Stockwell Day’s announcement this morning that the Correctional Service of Canada’s tattooing program for federal inmates has been terminated.

The CTF fought to end the waste of taxpayers’ money on Ottawa’s tattooing pilot program for prisoners – releasing the following “Let’s Talk Taxes” commentary on July 20, 2006: http://www.taxpayer.com/main/news.php?news_id=2337

The program cost the taxpayers of Canada $350,000 in start up costs and another $600,000 in annual operating costs at six prisons. The CTF estimates the annual cost to taxpayers to expand the program to all 58 federal correctional facilities at $5.8-million, plus $2.6-million in one-time startup costs.

“It just doesn’t make sense that people who commit crimes, in some cases violent crimes, are treated to a buffet of free tattoos when sent to prison,” says CTF federal director John Williamson. “This program is a prime example of goofy government spending and Minister Day did the right thing today by terminating it.”

“The CTF was encouraged to note the Conservative government listened by ending the prisoner tattoo program,” concluded Williamson. “We expect Finance Minister Jim Flaherty to follow Mr. Day’s initiative and reduce spending elsewhere. In last month’s fiscal update, Mr. Flaherty reported program spending is set to rise by 7.1 per cent this year, which is well above the Conservative’s own target to keep spending below the economic growth rate. Government spending is already off target and this does not bode well for broad-based income tax relief.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Good on Debt Relief – Bad on Program Spending

Ottawa aims to eliminate Canada’s debt in less than a generation

Spending to rise 7.1% this year, up from ’06 budget projection of 5.3%

OTTAWA – The Canadian Taxpayers Federation (CTF) reacted to the Economic & Fiscal Update delivered this afternoon by Finance Minister Jim Flaherty before the House of Commons Standing Committee on Finance.

Minister Flaherty announced a policy to reduce Ottawa’s debt by 2021. At the end of 2005/06 the federal debt stood at $481.5-billion. Last year, Ottawa spent $33.8-billion on debt servicing. Another $34.8-billion will be spent on interest this year. That works out to $95-million a day.

“Since 1997, the Canadian Taxpayers Federation has called for Ottawa to implement a legislated debt relief schedule and eliminate the debt in a generation,” said CTF federal director John Williamson. “Today, Finance Minister Jim Flaherty announced the Government of Canada will do just that.”

Williamson continued, “We applaud Mr. Flaherty for embracing and adopting policy advanced by the taxpayers’ federation, but for this policy to be meaningful the Conservative government must table legislation to make it the law of the land. Otherwise it is an empty promise. With the national debt standing at $481.5-billion, lawmakers cannot afford to not take debt repayment seriously.”

Federal Spending Rising –

Government Policy Commitment from today’s Economic & Fiscal Update:

“Canada’s New Government is committed to keep the rate of growth of program spending, on average, below the rate of growth in the economy.”

“…as a matter of principle, the Government’s approach to fiscal planning will limit the rate of growth of program spending, on average, to below the rate of growth in the economy.”

“In the May budget, Minister Flaherty reported program spending would grow by 5.3 per cent this year yet today he reported the annual spending increase will instead be 7.1 per cent,” observed Williamson. “The government has already betrayed its commitment to keep program spending below the growth rate of the economy. Economic growth is estimated to be 2.8 per cent this year. It is disappointing the Conservative government’s spending is already way off target. And if spending targets are missed, meaningful tax relief in the next budget can’t happen and debt repayment just isn’t possible either.”

John Williamson
Federal Director
Canadian Taxpayers Federation

An Indefensible Junket

Colin Kenny, Chairman of the Senate Committee on National Security and Defence, is applying a time-tested military tactic: A strong offence is a smart defence.

At a Parliament Hill news conference last Friday and on yesterday’s National Post comment page, he scolded journalists, editorial writers and Canadians for daring to question why his Senate committee spent tens of thousands of dollars on a recent trip to the Middle East. Indeed, a defiant Sen. Kenny instead characterized the story as “cartoon journalism.” He blew the opportunity to explain how taxpayers receive value for their money from this committee’s work.

At issue is not whether lawmakers should travel to perform their duties. Clearly, they must. Rather, it is why four senators and three staff members traveled to Dubai last month to wait seven days for permission to travel to Afghanistan on a fact-finding trip. When the story erupted last week, Conservative Senator Michael Meighen told CTV National News that committee members had stayed in Dubai because they were waiting to travel to Central Asia. “We shouldn’t have cancelled Dubai as long as there was a chance we’d get into Afghanistan,” he said.

It turns out that some senators knew the committee would not be traveling to Afghanistan. We know now Canadian military officials met with Sen. Kenny in his office beforehand to explain “for reasons of personal safety,” traveling to Afghanistan was not an option. (Operation Medusa, which was then underway, had Canadians soldiers engaged in battle against insurgents. NATO said hundreds of Taliban members were killed. Sadly five Canadians died as well.)

Rather than modify their travel plans before departure or along the way at stops in England or the Netherlands, the committee pressed on. The senators gambled the military situation in Afghanistan might improve and their trip could proceed as planned. Yet they ended up waiting around in Dubai for a week, attending one three-hour meeting with port officials and spending nearly $30,000 on posh hotels. Sen. Kenny now claims the military’s “warning had come late.”

Sen. Kenny sees goblins everywhere. One minute, he says this is not about accountability and oversight of tax dollars, but is a campaign to discredit the upper house in the voters’ eyes. The next, he claims criticism is about making Senate reform an election issue. He also insists a further motivation is that the Conservative government does not want its handling of security issues questioned.

Senate testimony paints an altogether different picture. Other senators have been critical of this committee’s budget and travel costs for some time. The Dubai junket is simply the straw that broke the camel’s back.

In March, 2005, the security and defence committee requested a $914,000 budget for the 2005/06 fiscal year. Liberal Senator Serge Joyal expressed concerns about the proposed budget: “When I voted in favour of creating the Standing Senate Committee on National Security and Defence, it was not inherent that the committee would spend $1-million per year to travel around the world.” Senator Joyal pointed to another senate committee studying anti-terrorism legislation and noted it heard testimony from around the world via teleconference.

In the end, the Senate clipped the committee budget to $657,000, an amount still regarded as high by some. Sen. Lowell Murray, for instance, asked what this $657,000 represented as a proportion of the total of all budgets for all senate committees. Sen. Paul Massicotte, then-chairman of the Senate’s board of internal economy, replied, "I believe the answer would be one-third."

The public’s demand for greater accountability and transparency includes the Senate. Its Board of Internal Economy now owes it to taxpayers to call Sen. Kenny to account for the spending and changing story. Pressure should be applied for the senators to return the Dubai trip money. Failing this, the committee’s budget should be reduced by the amount spent in Dubai.

It simply does not hold that revelations about the junket were an attempt to discredit the Senate as a whole (although it did just that). Not with Conservative, Liberal and independent Senators all raising concerns about this committee’s budget. Indeed, Committee Vice-Chair Sen. Meighen is a loyal member of the Conservative caucus. Moreover, the committee’s strong bipartisan support for the Canadian Forces makes it an unlikely target for the Conservative government.

Throughout this entire episode, Sen. Kenny has never been shy about trumpeting his committee’s work to provide solutions to improve our country’s security. What he does not seem to grasp is that good work does not give any parliamentarian – elected or otherwise – license to spend tax dollars recklessly or balk when called to account for such spending.

John Williamson
Federal Director
Canadian Taxpayers Federation

’Til Debt Do Us Part?

’Til Debt Do Us Part? – With a Plan Ottawa’s Debt Can be Eliminated
By Adam Taylor

Finance Minister Jim Flaherty recently revealed last year’s federal surplus was $13.2-billion. The government immediately announced the entire amount would be put toward reducing Canada’s national debt. This was a good move, but a much more concentrated effort will be required to eliminate the half-trillion dollar debt successive governments have rung up since the 1960s.

The new Conservative government and previous Liberal government should both be commended for paying down $81.4-billion of Canada’s national debt over the last nine years. As a result, billions of dollars are saved every year on reduced interest costs. However, Ottawa must go further by shifting from its record of debt elimination by accident to debt elimination by design. With the national debt standing at $481.5-billion, Canada cannot afford to not take debt repayment seriously.

Last year, Ottawa spent $33.8-billion on debt servicing. Another $34.8-billion will be spent on interest this year. That works out to $95-million a day. Paying the interest on Canada’s national debt is the federal government’s single largest expenditure. That’s right, Ottawa spends more on interest charges than it spends on any other big ticket budget item like senior entitlements, health care or national defence. Every dollar that goes toward debt interest is one less dollar for health care, infrastructure, pensions for seniors, or tax relief. In other words, Canadians today are paying for yesterday’s fiscal recklessness. Without a change of course our kids and grandkids will be paying the interest on yesterday’s spending.

Taking debt elimination seriously will help ensure future generations are not saddled paying for past program expenditures. Debt elimination also frees up tax dollars. By paying down $13.2-billion in debt, the federal government will save over half a billion dollars in debt interest payments it is no longer required to make. This is a savings of over $500-million each and every year.

Between 1961 and 1996, Canadian governments spent more money than they could afford, piled up budgetary deficits, and increased the national debt from $14.8-billion to $562.9-billion in 1996. Since 1961, interest and service charges on the debt has cost taxpayers almost $1-trillion. That’s twelve zeros after the $1 folks. This figure will continue to increase until the debt is eliminated.

With a dedicated effort, paying off Canada’s national debt is possible and it should be made law. Yes, it is an immense task but it could be done if Ottawa added a mandated debt repayment line-item in each budget. The Canadian Taxpayers Federation (CTF) first advocated such a policy in 1997, one year ahead of the budget being balanced. Today, we recommend a phased-in line item worth 5 per cent of revenues, which would begin next year at 1 per cent of revenues and increase by 1 per cent a year until a full 5 per cent debt elimination schedule is reached. That would guarantee a debt repayment of $2.4-billion next year, rising to $13.3-billion by 2011. Ottawa’s current policy on reducing the national debt is to do so only if a surplus exists at year end. If there is no surplus, the debt is not reduced.

As of April 1, 2004, Alberta became Canada’s only debt-free province. This was accomplished the old fashioned way: restrained spending and through steady resolve – the province passed CTF-inspired legislation to eliminate its debt. The same ingredients should be applied in Ottawa to wipe away Canada’s debt. Assuming revenue growth of three per cent a year, and by dedicating 5 per cent of revenues to debt relief, Ottawa could be debt-free by 2034, less than thirty years away. It could be done even faster if the federal government began the sale and divestiture of Crown assets – many of which were acquired in times of budget deficits.

Focusing greater attention on paying off the debt would have other immediate benefits. As the national debt declined, significant savings would be realized through reduced debt interest payments. That money could be used for a variety of things – tax relief or additional spending for health and pension benefits in response to rising demand from retiring baby boomers.

Since the books were first balanced almost ten years ago, politicians have once again ramped up spending and made multi-billion dollar surpluses seem like a sign of fiscal competence. Debt repayment has become an afterthought. This is a mistake. With the political will and a plan, Canada’s debt could be eliminated. This would be good for all – it would tackle yesterday’s mistakes head on, and ensure that we don’t completely handcuff and sell out the taxpayers of tomorrow.

Adam Taylor is research director of the Canadian Taxpayers Federation

John Williamson
Federal Director
Canadian Taxpayers Federation

Ottawa to Trim Some Fat & Ideological Programs

Program Spending Down $1.1-Billion – First Decline in 9 Years
Structural Over-Taxation Results in $13.2-Billion Surplus

Ottawa: The Canadian Taxpayers Federation (CTF) reacted today to the announcement that the federal government’s surplus for the last fiscal year (2005/06) will be $13.2-billion, up significantly from the $8.0-billion forecast by Finance Minister Jim Flaherty in the May budget. The surplus money will be used to reduce Canada’s debt, bringing it down to $481.5-billion. One reason for the larger surplus is that program spending was cut by $1.1-billion from the previous year. Mr. Flaherty and Treasury Board President John Baird also identified budget cuts totaling $1-billion over the next two years (fiscal years 2006/07 & 2007/08).

Budget Cuts Welcome, but Tax Relief and Additional Spending Reductions Needed –

“The majority of Canadians will applaud the government’s plan to pay down the federal debt and a $1-billion spending cut to some awful programs, like Technology Partnerships Canada, a corporate welfare boondoggle, and the Court Challenges Program, which paid tax dollars to the lawyers of special interest groups to fight government legislation in court,” said CTF federal director John Williamson. “But hold the champagne. Government spending restraint is not the cause of today’s big surplus announcement. Rather it is structural over-taxation by Ottawa that has created massive government surpluses. These surpluses existed under the Liberal regime and they continue under the Conservative government.”

“The federal government should collect in taxes only what is needed to fund its spending priorities. Annual surpluses represent over-taxation by government and the money should go back to taxpayers in the form of lower income taxes. Taxpayers will consider the 2007 Budget a failure if it does not offer Canadians broad-based income tax cuts,” said Williamson. “The 2006 Budget reduced some taxes, the one-point GST cut for example, but the tax relief was not nearly as dramatic as the Conservative government would like voters to believe. It is time to cut personal income taxes.”

“The spending cuts are welcome, but more reductions are necessary. A $1-billion trim is approximately half of one per cent of Ottawa’s program spending. In future years the Conservative government must ensure program spending is kept down and does not gallop ahead,” noted Williamson. “Still, it is encouraging that Messrs. Flaherty and Baird have taken steps to reduce funding to special interest groups and cut programs out of whack with the priorities of the new government, such as eliminating the Canadian Identity Grant and Contribution Program as well as the Medical Marijuana Research Program.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Sign of the Times

The Liberal-dominated Senate is in no great rush to pass the Federal Accountability Act, legislation intended to clean up Ottawa in the wake of the Sponsorship scandal. The House of Commons passed the bill in June with broad multi-partisan support. It requires approval in the Senate before it becomes law.

Senator Joseph Day, the Liberal accountability critic, says the legislation cannot be passed quickly: “We know these things do get drawn out … It could take some time.” Some time to hear from a plethora of “expert” witnesses — never mind the statement voters made in the last election. The Senate legal and constitutional affairs committee got down to work two weeks ago. But after only one week of work, the committee adjourned for a week of rest.

The Ottawa Citizen reported last week Senator Day was on a week-long parliamentary junket to the Philippine island of Cebu. Tourist literature describes tropical Cebu Island as “the perfect vacation spot for all seasons.” The brochure might consider adding “and Senators.” New Democrat MP Pat Martin observed, “They’re wasting a week of hearings on the legislation for this? They're jeopardizing the whole bill for this hog-trough junket.” Mr. Martin was speaking for the millions of Canadians fed up with business as usual in Ottawa.

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Taxpayers are not fairing much better over at Industry Canada. The federal department provides funding to Canada’s Digital Collections, which promotes Canadian content on the internet. The program’s online description is rather dull, “These fascinating Web sites range from treasures of federal institutions, such as the National Library of Canada, the National Archives of Canada and the Canadian Museum of Civilization, to the local histories and way of life of Canadian communities.” We can guess then, that The Little Black Book – A Book on Healthy Sexuality Written By Grrrls for Grrrls (sic) falls under “way of life” in downtown Toronto.

This guidebook (http://www.ststephenshouse.com/littleblackbook/#) is meant to offer teens insight on all manners of adult topics. Funded by government and written by teens themselves it offers the following advice: “Kids are growing up a lot faster nowadays (or so we are told), and it’s important that they be educated about sex, its risks, but also its pleasures and the act itself.”

The book teaches kids about sexually transmitted diseases in a cutesy way. Bisexual relations are good because they expand the dating pool. That sex without love is not always a good idea. But that’s OK because you can fall in love with someone in a week. Readers – young and old alike – will find the “gayness” chapter insightful: the author writes 80% of Canadians are bisexual, 10% are gay and 10% straight. Can taxpayers install a Net Nanny spam filter to protect their tax dollars?

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The Conservative government passed an important test in August by yanking a contract with David Rotor and Douglas Tipple. These consultants were hired to advise the Public Works Department on how to cut government costs. On a fact-finding trip to London the pair flouted government expense rules, skipped meetings with British government officials, and submitted “trip notes” cribbed from websites without attribution.

Messrs. Rotor and Tipple defend their actions. Government mandarins recommended the consultants receive strongly worded reprimand letters. Public Works Minister Michael Fortier balked at this limp-wrist punishment and ordered instead they be fired. Mr. Fortier’s decisiveness will help change Ottawa’s culture of entitlement. Public Works employees will be more respectful of tax dollars … or else.

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Bob Rae’s self-flogging has finally stopped. In a Globe & Mail profile article the Liberal leadership candidate discussed his disastrous tenure as premier of Ontario. Mr. Rae admitted to making some mistakes, such as relying on advisors’ rosy economic forecast and also being overly ambitious. “I’m the wiser for it today, but I don’t think I’m going to beat myself up forever,” said Mr. Rae of his record.

Fair enough. Politicians can live and learn from experience. The problem is that Mr. Rae has never taken responsibility for his policies. Under then-New Democratic Premier Rae, Ontario’s tax rates soared, spending ballooned, the province’s debt tripled and the state expanded while the economy shrunk. Mr. Rae’s government drove the economy into the ground. He still does not understand that economic ruin is largely the result of lousy public policies. He’s the wiser for it — so too are those Ontarians voters put out of work during his tenure in office.

John Williamson
Federal Director
Canadian Taxpayers Federation

Corporate Welfare Rears its Ugly Head Again!

For 10 years Technology Partnerships Canada (TPC) was Ottawa's flagship business subsidy program and a public policy failure.

In September, 2005, the old Liberal government finally tired of defending TPC from critics and announced the program would be shut down. Abysmal financial returns, damning internal audits, and scandals over illegal commissions paid to lobbyists meant government ministers could no longer declare TPC a success and still be taken seriously.

Rather than admit defeat and forgo corporate welfare altogether, the Liberals followed their predictable script. They promised to fix the problems and get it right, this time with another subsidy fund called the Transformative Technologies Program. The "new" program was to be launched on April 1, 2006. For taxpayers it was more of the same empty political promises and throwing good money after bad.

But before the program saw the light of day, Liberals were replaced in office by Conservatives. In opposition, the Conservative Party was highly critical of TPC, calling it a Liberal boondoggle."This Liberal government is simply trying to sweep the chronic mismanagement of TPC under the carpet," Industry critic James Rajotte said when the TPC facelift was announced a year ago. Rather than account for the billions of dollars granted under this program, the Liberals are going to change the name and hope everyone forgets.

Following the winter election, the new Conservative Industry Minister Maxime Bernier quietly cut off Pratt & Whitney "the biggest TPC deadbeat" from the subsidy trough. Furthermore, he helped to discredit the program by making TPC repayment records public. Despite assurances made by the Liberal government that TPC loans were generally in good standing, the data revealed the opposite. A group of 42 recipient companies had yet to submit any reimbursements whatsoever; repayment records for 88 others totaled a paltry $149-million; and another 78 companies had repaid a total of $7.4-million but refused to make their exact repayments known to the public. The data confirmed what critics of Ottawa's corporate welfare program have been stating for years: These programs are a sinkhole for tax dollars.

Because the Liberals had already dug the TPC grave and tossed in the body, the Conservative government would not need to lift a finger to scuttle the program. It was done. Seldom do events in government work out so well. Corporate Canada was unlikely to cause a dust-up, particularly when many businesses prefer a lower tax regime to more subsidies. Moreover, there is no public demand for more corporate welfare. The only advocates are a handful of corporate executives and union bosses, hardly a core constituency of the Conservative Party. Taxpayers could finally see the day with one less government subsidy program.

Unfortunately, this was all thrown into doubt last week when Industry Minister Bernier's office issued a news release. It outlined regulations for future projects funded under the TPC. Future projects? Incredibly, Mr. Bernier put TPC on life support. What is happening here?

TPC was established to replace the old Defence Industries Productivity Program (DIPP), a corporate welfare plan that paid out $2.15 billion in grants and contributions to businesses over a 20 year period. DIPP was also cancelled by the Liberals because fewer than one-in-four dollars were repaid to the government. When TPC was created a decade ago, the government declared it would be properly managed. Taxpayers were assured government officials would make certain that tax dollars paid to companies would be repaid.

Unfortunately, that policy dream ended in a nightmare. Government records reveal that TPC funds comprise a pit of $3-billion, of which $2.2 billion has been invested since 1996 and hundreds of millions in approved funding yet to be paid out. Of the $2.2-billion, approximately 10% has been repaid to Ottawa, leaving $2 billion outstanding. This makes DIPP a success story by comparison even though it has $1.6 billion in outstanding "repayable" loans. Big business owes the treasury billions of tax dollars and yet Mr. Bernier seems to believe TPC is worth saving.

Industry official have likely assured their minister they possess the wherewithal to make a more transparent, more accountable, and more cost-effective corporate welfare program. They do not. The minister should not allow TPC to be revived or renamed.

Mr. Bernier needs to review the dismal repayment records of all of his department's programs. Next he should ask industry officials and his cabinet colleagues why the Industry Department should subsidize research and development undertaken by private sector firms in the first place. After all, Ottawa already provides well in excess of $1 billion in research and development tax credits every year. This is in addition to support provided by provincial governments.

The industry minister tells us that "companies that behave inappropriately will be held publicly accountable for their actions." He hopes to "name and shame" companies that fail to repay loans. Yet his department's dismal repayment record is not entirely the fault of companies - or even lobbyists - but rather the ministers and bureaucrats that let tax dollars flow out the door in the first place.

Empty promises made by a Liberal government should not today be echoed by the Conservative government. It is time for this wasteful spending to stop.

John Williamson
Federal Director
Canadian Taxpayers Federation

Just Say “No” (to Mayors)

When the Federation of Canadian Municipalities asked Stephen Harper to their meeting last week, municipal leaders probably expected him to rollover and accept their demand for a slice of Ottawa’s GST and income tax revenues. The Prime Minister would have none of it. He understands the votes of taxpayers are more valuable to him than accolades from mayors.

On the specific issue of providing tax room to municipalities, Mr. Harper simply said, “We have no plans to do that but obviously we’re listening to all kinds of proposals.” And what proposals might there be? Ottawa, he suggested, would be pleased to discuss ways to divvy up future federal surpluses. But don’t hold your breath because he cautioned “we do not anticipate large federal surpluses in the future.” If cities want more money, he told mayors, they should look to the provinces: “I do have to point out that municipalities are the responsibilities of the province.”

None of this is meant to suggest Canada’s cities have not received help, indeed the opposite it true. The three federal parties all support the GST rebates to municipalities as well as the “New Deal for Cities and Communities” which will transfer $5-billion of Ottawa’s gas tax money to them over five years. In addition, the recent federal budget included $16.5-billion in infrastructure spending over the next four years.

Because “no” is a word Canada’s big cities mayor don’t often hear, Federation of Canadian Municipalities President Gloria Kovach insisted afterwards the door somehow remained open for the federal government to transfer some of its taxing power to cities. She outlined the view of municipalities that property taxes are used to pay for basic infrastructure needs, like roads, police and fire services and other traditional costs like garbage collection. This is an exhaustive list. So what else is there?

According to the federation’s president, additional taxes are necessary for cities to tackle other new priorities, like culture subsidies and climate change. With cities jumping into these provincial and federal jurisdictions no wonder municipal property taxes have jumped by 24% nationwide since 2000.

The mayors even adopted a resolution to abide by the Kyoto Protocol. Ottawa believes it impossible for Canada to fulfill the targets to reduce greenhouse gases as spelled out in the international treaty without spending billions of dollars and crippling the economy. But not the Federation of Canadian Municipalities it seems.

A recent report from the C.D. Howe Institute concluded Ottawa’s (now defunct) plan to implement the protocol would cost $12-billion over seven years and still not achieve the targets. Continuing the plan would cost $80-billion over 35 years and emissions would be 50% higher than today. Little wonder budgets are stretched at City Hall.

One important responsibility of lawmakers is ensuring tax dollars are used efficiently. This is a lesson lost on the Federation of Canadian Municipalities and it is why granting additional tax powers is a nonstarter. Our municipal governments have a spending problem, not a revenue problem. Between 2000 and 2004, revenues collected directly by municipalities increased by over 16%. By way of comparison, Ottawa’s revenues over the same period grew by less than 9%. Cities need to begin prioritizing their spending, which is not happening. More money will only enable councilors to find new ways to spend it.

The Prime Minister’s message to municipal leaders was welcome. Next, taxpayers hope he is prepared to display a similar resolve when dealing with the country’s other group of whiners – Canada’s premiers. Provincial leaders will be meeting this week in Edmonton and they all want one thing from Ottawa. You guessed it, more of your money.

John Williamson
Federal Director
Canadian Taxpayers Federation

Gun Registry Still a Billion Dollar Boondoggle

Recall the Original Promise to Taxpayers – Ottawa’s firearms registry was to cost a grand total of $2-million, not $80-million every year

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to the report tabled by Auditor-General Sheila Fraser this afternoon in the House of Commons. This audit reviews the federal government’s management (or lack thereof) of tax dollars related to military recruitment and training, the collection of tax debts, the distribution of grants, the management of programs for Aboriginal Canadians, and ongoing problems with the Canadian Firearms Program. In addition, Ms. Fraser outlined how rising gun registry costs were not reported to Parliament, thwarting the constitutional duty of Members of Parliament to oversee and approve the spending of tax money.

“The auditor-general found the Canada Firearms Centre made progress in disclosing its spending. However, she also found that whenever gun registry costs ballooned beyond what Parliament had authorized, or above what the government had publicly promised, the true amounts were hidden from legislators and the public,” said CTF federal director John Williamson. “This represents a serious breach of Parliament’s constitutional authority to approve program spending.”

When the federal firearms registry was established in 1995, the CTF adopted a wait-and-see attitude towards the program. That year, the federal government estimated the registry would cost $119-million to establish but recoup $117-million through firearms license fees for a net cost to taxpayers of $2-million. Today’s report reaffirms the total program cost at the end of 2004 was $1.045-billion with only $99-million collected in fees. This colossal cost explosion has taxpayers on the hook for $946-million, and Ottawa will spend another $82-million in 2005 and $83-million more in 2006.

“Canadians have no problem with government spending a billion dollars on a program if it delivers results, but the firearms registry fails to do this. The costs have exploded, statistics show the registry has had no measurable impact on reducing gun-crime, and now Ms. Fraser reports Parliament was again kept in the dark,” said Williamson. “Ottawa’s handling of the gun registry is a textbook example of public administration at its absolute worst. It is a fiscal crime committed against taxpayers. Forcing duck hunters and farmers to register their long-guns will not reduce crime. It is past time to shoot this registry down.”

The CTF is calling on the Conservative government to –

1. Table legislation to abolish the long-gun registry;
2. Immediately cut the program’s annual funding; and
3. Issue an amnesty for gun owners to stymie the registry bureaucrats responsible for issuing a letter to police informing them to arrest citizens that fail to comply with the registry.

John Williamson
Federal Director
Canadian Taxpayers Federation

Child Care Allowance

Ottawa’s $1,200 Child Care Allowance Good for Families
Government Must Stop Funding Daycare Special Interest Groups

Ottawa: The Canadian Taxpayers Federation (CTF) reacted to today’s announcement made by Human Resources & Social Development Minister Diane Finley that Ottawa will move quickly to enact the new Universal Child Care Benefit plan. The 2006 Budget confirmed the Conservative government will provide all families with an annual $1,200 allowance for each child under the age of six (which will be taxed in the hands of the spouse with the lower income).

“The child care allowance means Canadian parents will have more money in their pockets to help with the costs of child rearing. The allowance means parents will have more choice to determine how best to raise their kids,” said CTF federal director John Williamson. “It is better parents have that money than institutional daycare providers.”

A universal child income tax credit/payment was proposed by the CTF in its 2006/07 pre-budget presentation to the House of Commons Finance Committee in October, 2005.

“The previous government’s daycare program was flawed because it passed money from politicians in Ottawa to other politicians in provincial capitals,” added Williamson. “It put the priorities of bureaucracies and daycare providers ahead of Canadians families.”

End Government Financing of Political Advocacy Groups –

The CTF is concerned the federal government has not moved to cut Ottawa’s funding of advocacy groups, and specifically, organizations that spend tax dollars to urge politicians adopt an institutional daycare scheme.

“Today, the CTF is calling on the federal government to review its funding of third party advocacy organizations,” said Williamson. “Each year Ottawa spends between $6-billion and $8-billion bankrolling the activities of special interest groups, non-government organizations and third party groups. Many of them use tax dollars to lobby Ottawa and the public to support their political objectives. This must stop. Organizations or citizens that wish to influence public policy should solicit voluntary financial support from Canadians and not do so with tax dollars. Ottawa must not compel taxpayers to support political advocacy work.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Federal Accountability Act Plays Bait and Switch with Voters

Newspapers & Taxpayers’ Groups Press Harper Government to Keep Transparency Pledge

Ottawa: The Canadian Taxpayers Federation (CTF) and the Canadian Newspaper Association are calling on Prime Minister Stephen Harper to honour campaign promises to end a culture of secrecy in Ottawa by committing to a timetable for enacting reforms to the Access to Information Act.

“We are calling on the government to implement – not study, but implement – the Information Commissioner’s recommendations for reform of the Access to Information Act, exactly as promised in the Conservatives’ election platform,” said CTF federal director John Williamson at a news conference on Parliament Hill today. “Prime Minister Harper is wrong if he believes this is politics as usual. Advocates seeking reform are not looking to pocket half a loaf here.”

“By introducing the Federal Accountability Act without promised reforms to improve transparency, the government has played a game of bait and switch with Canadian voters,” said Anne Kothawala, President and CEO of the Canadian Newspaper Association. “Prime Minister Harper made a bold promise to restore the public’s trust in government, but, strangely, he left meaningful reforms to Access to Information out. It’s as if an auto manufacturer promised to make its cars safer, added airbags and left out the seatbelts.”

The two groups said they have come together to make common cause in a matter of vital public interest. Access to Information is essential for the press to do its job of informing the public on what government is doing and why. Access to Information is vital for taxpayers to learn how their dollars are being used.

The Conservative election platform pledged to enact the Open Government Act, a bill drafted by Information Commissioner John Reid at the request of Parliament last year. Instead of introducing this bill in the House of Commons as his party’s platform promised, Treasury Board President John Baird sent the draft bill and a discussion paper to a committee for further study. “The government is in serious danger of running out of time to honour its promise to improve transparency,” Ms. Kothawala said. “Transparency is so critical, not just because it shines a light on wrongdoing, but because it is a powerful deterrent against wrongdoing.”

The two groups also called on opposition parties to work collaboratively to speed the introduction and passage of a bill to reform the Access to Information Act. “If Opposition members stand shoulder to shoulder they can prevail on this important issue,” Mr. Williamson concluded.

John Williamson
CTF Federal Director
www.taxpayer.com

Final Gomery Report Fails to Impress Taxpayers

Narrow Recommendations Insufficient to Thwart Future Scandals

Conservative & NDP Accountability Measures More Encompassing

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to Judge John Gomery’s report on the sponsorship scandal, released yesterday, and its recommendations to restore accountability in our nation’s capital. The first Gomery report, released in November, revealed to Canadians that of the $355-million spent on the Quebec sponsorship program approximately $150-million went to Liberal-friendly ad agencies, many of whom charged the federal government for work of little or no value.

“Judge Gomery first volume did a good job detailing the mechanics of Adscam to Canadians, but his second is disappointingly narrow in its sweep,” said CTF federal director John Williamson. “There certainly are some good recommendations. Yet in some cases he identifies real problems, but fails to make specific reform measures. Elsewhere, he simply ignores longstanding troubles altogether, as he did with Ottawa’s dysfunctional Access to Information Act.”

In Restoring Accountability – Recommendations Judge Gomery writes, “I have become convinced that we need to rebalance the relationship between Parliament and the Government in order to attain better accountability within government.” (Emphasis added.) “Unfortunately, the Gomery Commission addressed only one specific scandal and suggested narrow recommendations related to it,” observed Williamson. “But taxpayers expect reforms that will change Ottawa’s culture of secrecy, entitlement and lawbreaking that rarely results in penalties or sanctions being imposed. Yes, such a change will require greater accountability within government. But it also mandates accountability outside government, between public servants and citizens.”

Prime Minister-designate Stephen Harper re-affirmed his promise to pass the Conservatives’ own Federal Accountability Act. The proposals include specific measures to reform how political parties and candidates are financed, strengthen the Lobbyist Registration Act, ensure appointments are merit-based, reform the government’s procurement process so it is free from political interference, legislate an effective whistleblower law, increase the powers of the auditor-general as well as those of the ethics and information commissioners, dramatically expand Ottawa’s freedom of information law, improve government auditing, and establish an independent director of public prosecutions. Similarly, The New Democratic Party proposes reforms to fix government and make it more transparent to Canadians.

“If voters had to choose between Judge Gomery’s recommends and the Conservative and New Democratic accountability packages, the choice is an easy one. If the goal is to clean up Ottawa, taxpayers are further ahead with what was promised on the campaign trail. That’s the measuring stick the CTF will be applying in the months and years before us,” concluded Williamson.

John Williamson
Canadian Taxpayers Federation

Pension & Severance Calculations for Departing MPs

Resigned or Defeated MPs to Collect $72-million in Cumulative Pension Entitlements from Taxpayers

CTF Releases Pension & Severance Calculations for Departing MPs

Ottawa: The Canadian Taxpayers Federation (CTF) today released a list of projected pension and severance payments to be paid to 67 MPs who were either defeated in the January 23rd general election or resigned prior to the vote. Defeated or retiring MPs will collect a grand total of over $72-million in cumulative pension payments. (Annual pension payments total approximately $3.3-million in today’s dollars.) In addition, another $2.6-million in severance cheques will be issued to former MPs. The pension and severance calculations for individual MPs are available at:

http://www.taxpayer.com/pdf/MP_Pensions_2006.pdf

“Defeated and retiring members will win financially thanks to a gold-plated pension plan and rich severance payments for parliamentarians,” said CTF federal director John Williamson. “Shed no tears for retiring or defeated MPs. They are being well looked after by Canadian taxpayers.”

The biggest annual pension winners – the $100,000-plus club – include Liberal MPs Ethel Blondin-Andrew at $137,820; Don Boudria at $135,906; David Anderson at $114,600; Marlene Catterall at $109,408; Beth Phinney at $102,308; and Anne McLellan at $100,132. Independent David Kilgour rings in at $128,228. Cumulative pensions that will exceed $3-million will be paid to Liberals Ethel Blondin-Andrew, Don Boudria, Tony Valeri, and Paddy Torsney. Please see CTF calculations for the list of those MPs that will receive cumulative pensions in excess of $2-million and $1-million.

The CTF does not oppose the principle of a pension plan for MPs. However, the organization has long advocated for the introduction of a matching dollar-for-dollar defined contribution pension arrangement – as the CTF successfully campaigned for in B.C., Alberta, Manitoba, and Ontario – as opposed to the current defined benefit plan where taxpayers contribute approximately $4.00 for each dollar a MP contributes.

Defeated or retiring MPs are eligible to collect a pension at age 55 if they have served at least 6 years in the House of Commons. MPs who have not served the minimum years and receive no pension collect a severance equal to 50 per cent of 2005 member indemnity. Former MPs who are eligible for a pension but have not reached the age of 55 are also entitled to a severance. If a member turns 55 years old within 6 months of being eligible for a pension, a reduced severance cheque is paid to them. Lump sum severance payments range from a low of $34,012 and a high of $106,750.

“With the election of a new government it is time to bring MP pay and pensions in line with public expectations,” concluded Williamson. “The CTF will continue to call for the replacement of the current pension plan for MPs with a matching RRSP plan for all lawmakers.”

John Williamson
Canadian Taxpayers Federation

No Sunshine Here: Ottawa Stonewalling on Gomery Legal Costs

Ottawa: In light of recent government stonewalling on Gomery-related legal expenses, the Canadian Taxpayers Federation (CTF) is calling on the next federal government to end Ottawa’s “culture of secrecy” and remove political interference from the access to information process.

On November 7th, 2005, and November 16th, 2005, the CTF submitted two access to information requests asking for the total amount taxpayers paid for lawyers fees at the Gomery Inquiry into the Sponsorship Program. These requests went to two government bodies – the Privy Council Office and the Department of Public Works and Government Services Canada. On December 5th, 2005, both the Privy Council Office and the Department of Public Works replied saying an additional 60 days was needed for one request and an additional 100 days was needed for the other. (The letters can be accessed here: http://www.taxpayer.com/pdf/FOI_Letter_Jan_2006.pdf) Coincidentally, the election will be over by the time this information sees the light of day.

“While some requests legitimately require additional time, these particular extensions seem politically motivated,” said CTF federal director John Williamson. “Again the public’s right to government information has taken a backseat to politics.”

“It is no secret that Gomery’s revelations of corruption have outraged Canadians and no doubt taxpayers will be further angered when they realize that millions more of taxpayers’ money has been spent on defending the likes of Alphonso Gagliano and Chuck Guité,” added Williamson.

A May, 2005, study by the Canadian Newspaper Association (CAN) found that access to information laws are riddled with “red tape, poor disclosure, prohibitive fees, and incompliance with statutory time limits.”

“The federal government is the only stakeholder that benefits from ensuring this information is not promptly disclosed,” said Williamson. “That potentially embarrassing information is so easily kept under wraps for political reasons shows that the current laws need reform.”

Information Commissioner John Reid has publicly berated Ottawa for its “pro-secrecy” culture. His office receives approximately 1,500 complains per year about non-compliance. The CTF calls on the next federal government to reform Canada’s outdated access to information law and remove political meddling. Taxpayers, voters, and citizens deserve no less.

John Williamson
Canadian Taxpayers Federation

The Party that Cried Wolf!

Liberal’s fiscal forecasting lacks credibility

Ottawa: The Canadian Taxpayers Federation (CTF) today responded to concerns raised by the Liberal Party that campaign promises made by the Conservative Party will result in chronic deficits. Over the weekend, Prime Minister Paul Martin said, “I know these numbers and I know that we’ve got a very strong economy because we stayed out of deficit and I will be very, very interested in how all [the Conservative] numbers add up.” The Liberals say the Conservative plan will produce deficits “of at least $12.4-billion over five years.”

“The Liberal government has so poorly predicted past surpluses that its credibility to calculate future deficits or surpluses is simply not believable today,” said CTF federal director John Williamson. “It is like the boy who cried wolf, only Mr. Martin is crying ‘deficits, deficits’ and taxpayers, fooled before, should not be duped again.”

Following the November, 2005, pre-election mini-budget the CBC online news reported, “[Finance Minister Ralph] Goodale’s last [2004] economic and fiscal update projected that the surplus for 2005/06 would be $500-million, followed by $900-million in 2006/07. Monday's document revised those figures to $8.2-billion and $9.2-billion, respectively.”

“In other words, the Martin government was off by ‘only’ $16-billion, $7.7-billion in year one and $8.3-billion in year two,” noted Williamson. “And let’s not forget that when the 2004 budget was tabled the Liberal government said program spending would increase by 3.1 per cent. When the fiscal year ended, however, it had increased by an astounding 15.1 per cent. I think that’s all we need to say about Mr. Martin’s knowledge of the numbers and his ability, as prime minister anyway, to budget responsibly.”

John Williamson
Canadian Taxpayers Federation

Shining the Light on Government

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability and democratic reform measures. This fifth commentary in the series is written by CTF federal director John Williamson on the subject of Canada’s freedom of information law. John is available for media interviews or comment on this subject by calling 613-234-6554.

January 5, 2006

Shining the Light on Government

Many Canadians want government to lower taxes. Others would like more spent on social programs, roads or the military. All are adamant that public officials – be they elected or career civil servants – waste fewer tax dollars and be publicly accountable for their decisions. But this is not happening in Ottawa because Canada’s Access to Information Act, which is the primary tool for citizens to review how money is spent, is broken.

This type of “sunshine” or “freedom of information” (FOI) law mandates that government records, administrative decisions and minutes be made available to the public. They balance the public’s right to be informed of government decisions with respect for the privacy of individuals.

Canada’s federal FOI law came into effect on July 1st, 1983, with the promise of greater government transparency. Testifying before the Justice and Legal Affairs Committee, then-Communications Minister Francis Fox said the bill “will create opportunities for a more informed dialogue between public leaders and citizens…improve the nature of government decision-making by allowing greater input from the private sector. Finally, it will impose on ministers and officials a greater degree of accountability and of responsibility for their actions and their decisions.” For a $5 fee, Canadians may request government documents and officials have a 30-day limit to provide a response.

Yet the dream of greater transparency does not fit with reality. The law is littered with loopholes and administrative barriers to keep prying eyes out. Canadians submit approximately 25,000 requests each year. Many are stonewalled when questions hit a government nerve, resulting in the Act’s Information Commissioner – who serves as Canada’s official FOI watchdog – receiving approximately 1,500 annual complaints about non-compliance. For keeping taxpayers in the dark Information Commissioner John Reid has publicly berated Ottawa for its “pro-secrecy” culture.

To determine how well government officials follow FOI laws, 45 newspapers tested the system last year. The audit – which reviewed federal, provincial and local procedures – revealed government data was released in only 1 out of 3 requests. Journalists discovered a hodgepodge of excuses and, at times, intransigent bureaucrats. Another separate study found the refusal rate for media requests was more than twice that of requests from the general public. It has been discovered that officials “red flag” politically sensitive requests made by journalists, parliamentarians, and groups like the Canadian Taxpayers Federation. Red flags are used to safeguard lawmakers from public embarrassment: There is no better way to kill a story than by withholding the release of information that backs it up.

With a single exception, Ottawa’s access law has not been updated since its inception. In 1999 it became a criminal offense to alter, destroy or conceal a record to frustrate an access request. It is disappointing that such a change was necessary. And yet bureaucrats continue to thwart requests today. Although files are no longer destroyed, Commissioner Reid has found they are, instead, just not being created in the first place. To guarantee compliance penalties must be in place to punish officials that fail to create and maintain proper records.

It is time to expose every government agency, organization, foundation and Crown corporation that spends public money to effective sunshine laws. Of Ottawa’s 246 Crown corporations and agencies only 49 are subject to the Access to Information Act. And under existing law, the numerous foundations tasked with spending $9-billion of tax money cannot be inspected by Canadians, the auditor-general or even elected parliamentarians.

The law should also include Officers of Parliament so taxpayers can assess their operation records (but not their adjudicative or case files). This would have permitted a review of former privacy commissioner George Radwanski’s lavish spending, which resulted in his dismissal.

The public interest should trump a government’s culture of secrecy. To ensure open government, departments and agencies should, for instance, disclose broader information on a webpage and in annual reports. Why are the repayment records of companies that accept government loans not publicly reported? A reformed FOI law should establish a “public interest override” for a narrow scope of exemptions and give the information commissioner powers to order government to release information.

Parliament must also ensure the FOI system is adequately funded. It currently costs Ottawa $30-million a year to administer. Meanwhile, the federal government spends $400-million on its communications efforts. A rebalancing of priorities is in order.

So long as individuals within government have the ability to hide their malfeasance, they will do so. So long as rules permit bureaucrats – working on their own behalf or that of their political masters – to delay or deny the release of embarrassing information, cronyism and poor management of tax dollars will continue.

FOI laws are a cornerstone of democracy. Rather than resist sunshine laws, governments should embrace them. Reforms to topple Ottawa’s cult of secrecy are indispensable to a well functioning government. They work to ensure greater accountability and are a tool to reduce scandals. They help build trust between citizens and lawmakers. Moreover, they are critical to ensure rules are adhered to and tax dollars are well spent. Such a change might mean fewer complaints from taxpayers when it comes to paying taxes.

John Williamson
Canadian Taxpayers Federation

Accountability on Canada’s Highest Court

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability and democratic reform measures. This third commentary in the series is written by the CTF Ontario director Tasha Kheiriddin on the subject of judicial accountability and Canada’s Supreme Court. Tasha is available for media interviews or comment on this subject by calling 416-203-0030 or e-mailing her at tkheiriddin@taxpayer.com.

December 21, 2005

Accountability on Canada’s Highest Court

The Supreme Court of Canada is the ultimate arbiter of law and justice in our country. As evidenced by its recent decisions on the same-sex marriage reference and the health care case of Chaoulli v. Quebec (Attorney General), it can have a profound impact on laws affecting the day-to-day lives of Canadians.

And who sits on the court can have a profound impact on its decisions. This was never so clearly evidenced as in 1981, when Prime Minister Pierre Trudeau asked the Court to pronounce itself on his proposal to unilaterally patriate the Constitution. Seven of nine judges found the proposal legal; of these, all had been appointed by Mr. Trudeau. The two dissenting ones had been appointed by Prime Minister John Diefenbaker.

Yet the judges who compose the high court are selected by what is probably the least accountable and transparent process for any body of this importance. Currently, our Constitution gives the Prime Minister complete discretion to appoint whomever he chooses. There is no requirement for a review committee, no list of recommendations, and no obligation to consult anybody. Apart from regional balance (the Constitution mandates that Quebec gets three out of nine judges, by virtue of its civil law tradition), the matter of who dons the scarlet robe is completely up to the PM.

During the last round of judicial appointments in 2004, the government did constitute an all-party committee to hear about – but not from – the two proposed nominees, Rosalie Abella and Louise Charron. Neither was compelled to testify before MPs or answer any questions. Contrast this with the American system, where Supreme Court nominees must face a grueling committee hearing, complete with thorough questioning in front of television cameras, a Judiciary Committee vote, and then a full vote of the United States Senate before being confirmed. And this comes only after the president consults senators on who to nominate. Were President George W. Bush’s failed nominee Harriet Myers up for consideration in Canada, she would probably have landed on the high court instead of in hot water.

The Canadian legal community has repeatedly called for reforms to the appointment process. Voters should remind politicians, however, that justice is not the exclusive purview of lawyers and legalists. What is missing is the voice of Canadian citizens, who just happen to foot the bill for the entire justice system. And that system does not come cheap. The last time Statistics Canada checked these things in 2000/01, more than $1-billion was spent annually on the operation of Canadian courts. This included the employment of nearly 10,000 court staff and 2,000 judges, over half of whom were appointed by the federal government. Salaries and benefits paid to this judiciary totalled $382-million – an average of $191,000 per judge.

Public funding brings with it certain expectations, including accountability and transparency. But if an appointment is made behind closed doors, no one can be held accountable until after the fact – when it is too late to do anything about it. Small wonder then that Canadians are cynical about their courts. According to an Ipsos Reid opinion poll taken in March, 2003, a majority of respondents said they do not trust judges or the judicial system. Even more disquieting is the finding that two in three polled think that Supreme Court judges are influenced by partisan politics. Such a perception erodes confidence in the judicial system, and puts into question the leadership of those who appointed judges in the first place.

The Prime Minister must go further than a rubber-stamp committee if he is to increase judicial accountability and transparency. He should institute an open appointment process that lets Canadians judge the judges for themselves before they are chosen. He should also introduce term limits for judges as several European countries have done, so that no one administration can stack the bench indefinitely (Prime Minister Jean Chrétien appointed five of the current nine judges – two of them will not retire until 2022 and 2028). And to truly ensure regional representation, he should rebalance the court to ensure that Quebec does not have an over-representation in terms of population and caseload heard.

Taken together, such reforms would go a long way to restoring public confidence in the Supreme Court and ensure that Canada benefits from the best and most accountable legal system possible.

Tasha Kheiriddin is Ontario director of the Canadian Taxpayers Federation.

John Williamson
Canadian Taxpayers Federation

Calling All Party Leaders: What is the Kyoto Plan?

A United Nations conference on climate change in underway in Montreal. The purpose is to develop a roadmap to reduce carbon dioxide emissions (CO2) – more commonly known as greenhouse gases – when the Kyoto Protocol expires in 2012. Unfortunately, Canada’s election campaign is diverting media and public attention away from this global meeting, which concludes on Dec. 9.

Before a second international agreement is signed, it is probably worth reviewing Ottawa’s progress under the first. Kyoto requires Canada to cut emissions of carbon dioxide to 6% below 1990 levels by 2008-12. Six per cent might not seem like a big cut, but factor in Canada’s greenhouse gas growth since 1990, which the UN says had increased by 24% at the end of 2003, and suddenly the scope of reduction becomes clear. With today’s technology the only way for Ottawa to achieve Kyoto targets is to reduce energy output and slow economic growth.

Since 1990, the Canadian economy has grown an impressive 45%. Liberal Environment Minister Stéphane Dion has acknowledged a strong economy and job growth has worked against Kyoto. Unless Ottawa is willing to trigger a made-in-Canada recession it will fail to meet its emissions goal. If this sounds alarmist consider that greenhouse gases increase with economic growth. To roll them back means shrinking the economy or achieving negative growth. The economic term for 2 quarters of negative growth is a recession.

It is good news that no government hoping to be re-elected – today or down the road – can advocate inflicting the economic pain on Canadian workers that Kyoto requires. So how might Ottawa fulfill its obligations?

One scenario is for the federal government to purchase so-called greenhouse gas credits from developing nations, like Russia and the Ukraine. Because of the collapse of Communism in 1989 – and the economies of Eastern Europe and Russia soon after – Moscow and others have a surplus of “unused” emissions to sell today.

Many economists and environmentalists regard this as purchasing “hot air” since nations that sell surplus gases need not reduce their current CO2 output levels. The result is Canada will continue to pump out emissions and claim victory while it pays foreign governments for credits. This is absurd public policy: tax dollars spent overseas with no tangible benefits to our environment, the economy or Canadian taxpayers.

With Canadians voting in January, now is an ideal time to ask whether or not our political leaders support using tax money to buy emission credits from other nations.

Since political parties prefer not to develop policy during election campaigns this should be an easy one for them. Canada ratified the Kyoto agreement in 2002, giving all leaders ample time to develop a position. Taxpayers are seeking an answer to the following question: will a (insert party leader’s name here) government spend tax dollars to purchase carbon dioxide credits from other nations to meet Canada’s Kyoto targets?

A weasel response that “Canada will meet its Kyoto commitments” holds no water. Not when Canada’s emissions are up 24%. And certainly not when the UN reports emissions in the United States rose by 13% over the same time. (Washington rightly rejected Kyoto on grounds it is too costly. The U.S. is nonetheless achieving reductions through the use of new technology, not with subsidies and hot air gimmicks.)

Purchasing credits is no academic point. Ottawa has allocated $12-billion to its climate plan. In February, it was revealed the government is considering spending $1.4-billion to buy credits abroad.

If Canada is going to fulfill its Kyoto commitment, the heavy lifting should be done at home – not off the backs of eastern Europeans and Russians. What do party leaders Paul Martin, Stephen Harper, Jack Layton, Gilles Duceppe and the Green’s Jim Harris say about this important issue?

If you found this commentary informative, please consider joining the Canadian Taxpayers Federation and add your voice to the campaign for lower taxes, less waste and more accountable government. Click below to become a supporter:
https://secure.lexi.net/ctf/jointhectf.php

John Williamson
Canadian Taxpayers Federation

Surplus Squandered – Spending Jumps 15%

Whatever Happened to the Old Paul Martin? Taxpayers Lament his Disappearance.

Ottawa: The Canadian Taxpayers Federation (CTF) reacted today to the announcement that the federal government’s surplus for the last fiscal year (2004-05) will be $1.6-billion, down from the $3-billion forecast by Finance Minister Ralph Goodale in the February budget. Last year, the surplus was $9.1-billion.

"Ottawa's program spending jumped over $21-billion in a single year and the surplus has been squandered," said CTF federal director John Williamson. "Over the previous three years, the period between 2000-01 and 2003-04, program spending increased by $22.7-billion or 19 per cent. A 15 per cent annual increase can only be described as utterly irresponsible. As Brian Mulroney might have said of the surplus, 'They pissed it all away.'"

"The government re-stated 2004-05 program spending by $4.6-billion, which is the amount of the so-called NDP budget," observed Williamson. "The last budget pegged spending at $158.1-billion and today it has come in at $162.7. It would appear Jack Layton’s two-year budget deal will be delivered twice. This should please the New Democrat opposition, but it leaves taxpayers footing the bill."

"Taxpayers are wondering who is running the Finance Department. The tax-and-spend Liberals or the tax-and-spend New Democrats? It is impossible to tell the difference," concluded Williamson.

John Williamson
Canadian Taxpayers Federation

Alberta’s “Baby Steps” on Health Care Reform

Alberta's "Baby Steps" on Health Care Reform – A Small Step Forward

St. Andrews by-the-Sea (New Brunswick): The Canadian Taxpayers Federation (CTF) today responded to the Alberta government's health care announcement, describing the reforms as "baby steps" towards more choice and accountability within the medicare system. The province will open up the state-run health care system to more competition by permitting health authorities to contract medical services out to the private sector. However, the prohibition on medical insurance remains in place.

"Canadians should have the right to spend their own money on health care services for themselves and their loved ones as recently directed by the Supreme Court of Canada in its Chaoulli ruling," stated CTF federal director John Williamson.

"Albertans are allowed to spend their own money on alcohol, tobacco, vacations, jewelry, VLTs, and fast food. But when it comes to better health care or faster health care, Alberta’s laws prohibit its residents from buying their own medical insurance to obtain better health care," added Williamson. "Unfortunately, this ban remains in place after today’s announcement in Calgary."

The Alberta Health Care Insurance Act has similar provisions to the Quebec law struck down by the Supreme Court this past June, which prevents people from spending their own after-tax dollars on their own health care. In its Chaoulli decision, the Supreme Court of Canada ruled that suffering – and dying – while waiting for "non-urgent" medical care violates our right to "life, liberty and security of the person.' The court noted – on the basis of unchallenged evidence before it – that delays for surgery cause irreparable physical injury, and can even result in death. Further, living in pain for months – or years – while waiting for surgery interferes with the quality and enjoyment of life, not to mention a person's ability to earn a living.

In the most recent ranking of public health care systems by the World Health Organization, Canada ranked 30th in the world, behind France, Germany, the Netherlands, Portugal, Spain, Greece, Morocco, Singapore, Japan, Australia, the United Kingdom and other countries which allow a private parallel system to co-exist alongside the public system.

"Canada, North Korea and Cuba are the only countries in the world which outlaw the freedom to spend one's own after-tax income on one's own health. It's time to amend the Alberta Health Care Insurance Act, and if necessary the Canada Health Act, to allow Albertans and other Canadians to spend their own money on the medical services and medical insurance of their choice," concluded Williamson.

John Williamson
Canadian Taxpayers Federation

Happy Canada Day

Happy Canada Day!

Whether you are celebrating along with us on Parliament Hill, or anywhere else across the nation or the globe, Happy Canada Day! If you're able to, come out and enjoy the fireworks in Ottawa on Canada Day... Your tax dollars pay for it! It's truly a spectacular display not to be missed. Show your patriotism and be glad we live in the best country in the world.

For a calendar of events on celebrating Canada, see the Department of Canadian Heritage Celebrate Canada web site or view the National Capital Commission Canada Day web site.

Enjoy the holiday, Canada!

Where your tax dollars go

The Government of Canada's Department of Finance has a multimedia presentation on its web site that illustrates the main sources of government revenue and how federal revenues were spent in the most recent fiscal year available. (Most recent data is for 2003-04.)

For the presentation, see:
http://www.fin.gc.ca/TaxDollar/taxdollar_e.html

Live 8 – A Solution that is Simple, Direct and Wrong

What is the best way for developed nations to help Third World countries rescue themselves from poverty? For rock stars it is to organize a series of international concerts – dubbed Live 8 – in advance of the G-8 meeting of the world’s most powerful nations. Nine concerts – including one in Barrie, north of Toronto – will be held on July 2 to pressure G-8 leaders to boost foreign aid budgets to 0.7 per cent of gross domestic product, and cancel debt owed by the poorest nations. For a country like Canada this means nearly tripling the foreign aid budget and spending some $42-billion more over the next decade.

But will spending such vast sums improve the conditions of people living in squalor? If taxpayers could be assured it would, most would gladly contribute. But given the abysmal record of government aid agencies to improve living conditions in Africa, and elsewhere, Ottawa should resist calls from entertainers to spend more. Providing more foreign aid – without fundamental governance reforms – is a costly proposition for taxpayers and one that will not help the world’s poor.

Developed nations today contribute approximately US$70-billion a year in official development aid to the Third World. And what has such generosity achieved? Most experts would say, not much. While volunteer aid agencies do good work feeding and healing the sick, government attempts to improve economic conditions have largely failed.

For answers why this is so, taxpayers – and policy makers – need only pick up a copy of Lords of Poverty.

Published in 1991, the book exposes the many failures of the multibillion dollar government aid business. Lords of Poverty is an indictment of the international aid industry, and as a New York Times book review noted, "If books had hands, this one would be reaching out to strangle the United Nations officials who will no doubt be reading it at their desks in brown paper wrappers." (Voluntary agencies are spared criticism because they tend to be funded by charitable contributions and are pressured to spend money more wisely than government agencies.)

Author Graham Hancock became disillusioned with the aid industry after working in developed nations. He asserts – with examples of waste and corruption – government aid programs more often than not worsen the conditions of those they are meant to help. Aid organizations, like the Canadian International Development Agency, serve to keep western consultants employed but do little to develop poor economies. Government programs are ill conceived because they rest on the premise that developed nations must save the Third World – precisely what taxpayers are being told in advance of Saturday’s Live 8 concerts.

From 1950-55 total government aid seldom exceeded US$1.8-billion per year. By 1962 total world aid hit nearly US$6-billion and a decade later OECD nations (i.e. western countries) gave almost US$10-billion. By 1984 this figure jumped threefold and the Soviet Union was also doling out development assistance. Total world aid in 1987 was over US$50-billion, topped US$60-billion when the Berlin Wall fell, and stands at US$70-billion today.

If foreign aid works shouldn’t the poor be doing better today than before the dollars started flowing? Instead Africa remains an economic basket case whereas millions of people have escaped the poverty trap elsewhere. Improvements in Asia and South America, however, are not attributed to handouts from the West but better governance and trade opportunities.

Africa lacks the basic conditions to better the lives of its citizens, and more money will not change that. The first step is to develop an independent judiciary that can enforce laws and contracts. Developed countries meanwhile should work with nations willing to help themselves by making such changes. This is not to suggest full blown democracy must exist, but progress must be seen. Handing billions more to corrupt governments will drive up Mercedes-Benz sales, but do nothing to help the poor.

The most dramatic improvement in living conditions will result from western nations reducing tariff barriers and liberalizing trade to give Africans greater economic opportunities. And when aid money is to be spent, project outcomes must be defined so results can be measured. This means focusing on combating the AIDS epidemic or providing clean water rather than "developing an economy."

Taxpayers support providing emergency aid when disasters strike, but not funding economic or regional development projects. They know this type of grant-giving will not work any better in Africa than it has in "developing" our Atlantic Canadian economy or native reserves. Regrettably, this is the type of foreign aid championed by government aid agencies with the backing of Live 8.

John Williamson
Canadian Taxpayers Federation

Defend patient rights, not a broken system

The Wrong Question in the Wrong Town

Reaction varied widely to the Supreme Court's ruling that it is unconstitutional for the state to disallow Canadians who are suffering – and at times even dying – while they wait for "non-urgent" health care to seek treatment outside of the medicare system. This is because the decision – which applies only to Quebec – will have a profound impact on Canadian health care. Over time the government monopoly will be truncated and accessibility to private care will grow.

But what are Canadians to make of the teetering reply in our nation's capital? The government is asked what will be done to save medicare. This is the wrong question since it implies Ottawa’s chief concern should be to retain the single-tier health system. Yet the court struck down the law forbidding Quebec residents from purchasing private medical services and private medical insurance. Medicare's monopoly status and state restrictions on constitutional freedoms is unacceptable. Elected officials instead should be questioned on how they will ensure individual rights are respected, not eroded by the state.

A point of comparison is when lower courts ruled in favour of gay marriage. The federal government did not appeal these rulings. Rather Ottawa vowed to entrench the right to same-sex marriage in legislation, even though the Supreme Court had never explicitly ruled that such a right existed. "Saving" traditional marriage took a backseat.

Ottawa should ensure the medicare ruling is respected and not blunt the decision. A bigger health care bureaucracy cannot shorten wait times. Respecting patients' rights means removing barriers to private health care erected by government.

Far from killing medicare this path will improve it. As the Supreme Court found, "many western democracies that do not impose a monopoly on the delivery of health care have successfully delivered to their citizens medical services that are superior to and more affordable than the services that are presently available in Canada. This demonstrates that a monopoly is not necessary or even related to the provision of quality public health care." Saving medicare means permitting private service. Ottawa should loosen its grip and allow provinces the flexibility to experiment with various reform measures.

The focal point will be how provincial legislatures answer the court's ruling. Provinces have the constitutional obligation to deliver health care. The Supreme Court has handed them the tools to sidestep those who want to keep the system closed to competition and simply pump more money into government-run health care.

What do taxpayers receive for the $90-billion their governments' budget annually for health care? A system that is good, but not anywhere near "the best" as is claimed. The World Health Organization (WHO) recently ranked our system 30th out of 196 surveyed countries. With health care funding rising twice as fast as the growth rate of provincial revenues, governments need to develop solutions that save money and provide quality health care.

Rather than wait for patients to petition the courts for the same rights granted Quebec residents, it is hoped that provinces will now become laboratories of social policy experimentation, whereby different mixes of private and public health care are provided. Successful reforms tested in other jurisdiction should be copied.

With the exception of Cuba and North Korea, Canada stands alone in outlawing the freedom to spend one’s after-tax income on one’s own health. With 29 nations ranked ahead of Canada there is no shortage of jurisdictions to emulate. Allowing a parallel, private system to co-exist along side the public system is essential to improving Canada's medicare system. Hopefully, this decision will make genuine health care reform a reality.

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

The "Do Anything, Say Anything" Conservative Party

Deputy Conservative leader Peter MacKay this week accused the Liberal government of having a "do anything, say anything" strategy to cling to power. Conservative MPs believe – along with a good number of Canadians – the Liberals are guilty of trying to bribe voters with tax money. But Mr. Mackay might have been describing his own party.

The Official Opposition has been busy jettisoning and twisting policies they fear the ruling Liberals might suggest are controversial. Conservative members, it seems, pull policy from a hat to win applause with no concern for contradictions or inconsistencies.

Last month, for example, the Canadian Taxpayers Federation (CTF) launched its 7th annual Gas Tax Honesty Campaign to inform Canadians of the high gasoline taxes they pay at the pumps – it is currently 38% – and ensure fuel taxes are dedicated toward road construction. Rahim Jaffer, a Tory MP, issued a news release entitled, CTF Report Mirrors Suggestions Put Forward by Conservatives. It read, "Many of the recommendations put forward by the CTF are similar to those made by the Conservative Party of Canada over the past several years. These include reducing the excise tax on gasoline, eliminating the GST on the excise tax and putting more money into infrastructure." According to his release these ideas were outlined in a June 2003 motion advanced by the party in Parliament.

But who is mirroring who here? The motion Mr. Jaffer cites was based, in large, part on the CTF’s 2003 gas tax report.

Imitation is the greatest form of flattery. If, however, the party is going to crib good policy it should trumpet it during election campaigns, not only when it is convenient. And here Mr. Jaffer’s statement falls short. In the last election the Conservative party vowed to "axe the tax on the tax" and "remove the GST on gas prices above 85 cents per litre." Missing was any promise to lower the excise tax. And what is the Conservative policy on a gas tax transfer today? That’s another story. Ottawa has already promised $5-billion over five years, but little will be spent on roadways. Yet the Opposition will not alter any federal-provincial deals and the party, says Mr. Jaffer, "has made the commitment to not only match but possibly even exceed the amount of spending the federal government does on infrastructure."

The Conservative position on daycare is also mind-boggling. Not so long ago, the Opposition favoured treating all parents with young children equally; if elected to government, they would not discriminate against parents who decide to stay home to raise their kids or choose other care options outside of the home. The Liberal proposal will provide financial support only to families that put their kids in a government-run daycare program.

Yet this spring – with all politicians in pre-election mode – Conservative MP Rona Ambrose announced a policy U-turn. Her party, she told the Commons, "will honour the child care agreements with the provinces." If the Conservatives are now committed to honouring the Liberal’s child care agreements, which will cost $5-billion over five years, how much more will they spend on stay-at-home parents?

Things are no better on the Kyoto file. When Ottawa tabled its $10-billion Kyoto implementation plan in April, Environment critic Bob Mills retreated. "We can’t get out of Kyoto," he concluded (incorrectly), but the Conservatives "would achieve those targets in a realistic fashion." Yet only days later he claimed, "Canada’s emission reduction targets under the Kyoto Accord are unattainable," and more to the point, "The Conservative Party does not support the Kyoto Accord." So which is it? Will the party spend billions on Kyoto implementation?

Opposition to corporate welfare and supply management were once bedrock policy issues for the party. Yet when Ottawa announced it would hand $350-million to Bombardier a spokesman for Conservative leader Stephen Harper outlined the party’s latest thinking on government handouts: "We are Conservatives and we respect contracts." Subsidies will flow whichever party forms government. And a Bloc Québécois motion supporting Canada’s marketing-boards backed by Conservative MPs marked another policy breach.

To date, the Conservative Party has tabulated Liberal pre-election spending at over $26-billion. Yet the Opposition has matched Liberal spending promises, and, in some areas, the government-in-waiting is willing to push the spending envelop further still. Mr. Harper it is time for a timeout and some clarity. A party willing do anything and say anything will not have much success: Look at Mr. Martin’s performance as prime minister.

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com

Municipal GST/HST Rebate Information

Information is now available on the Canada Revenue Agency web site regarding Goods and Services/Harmonized Sales Tax (GST/HST) rebate amounts for municipalities.

"As part of the New Deal for Cities and Communities, the Government of Canada is committed to help all communities secure stable, predictable, long-term funding," stated Minister Godfrey. "Municipalities across this country are benefiting from the GST/HST rebate, which they are using for their most pressing needs. The rebate, delivered in Budget 2004, is providing $7 billion over 10 years. Budget 2005 builds on this commitment to municipalities by providing $5 billion in gas tax funds over the next five years, and committing to renewing and extending programs such as the Canadian Strategic Infrastructure Fund, the Municipal Rural Infrastructure fund, and the Border Infrastructure Fund as they expire."

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/may/0526gst-e.html

Gas Tax Honesty Campaign

CTF Launches 7th Annual Gas Tax Honesty Campaign

- New report shows Ottawa spends only 7.2% of gas taxes on roads.

- CTF critical of federal government’s plans to exclude roadway spending in gas tax transfer.

- CTF repeats call for federal government to dedicate 50% of gas taxes to roadway development and for a gas tax cut of 5 cents/litre.

Ottawa: The Canadian Taxpayers Federation (CTF) today launched its 7th annual Gas Tax Honesty Campaign, marking Gas Tax Honesty Day. The yearly campaign kicks off the summer travel season for Canadian motorists.

The CTF began its Gas Tax Honesty Campaign in 1999 to inform Canadians of the gasoline taxes they pay at the pumps (see gas facts, below, for updated figures), to ensure gasoline taxes are dedicated toward roads, and to pressure Ottawa to cut gasoline taxes not spent on road construction. In 2002, the CTF proposed a Municipal Roadway Trust – a practical model for returning half of the federal gas tax revenues directly to municipalities to spend on roads and highway development and maintenance. The 2005 gas tax report is available at http://www.taxpayer.com/pdf/Gas_Tax_Honesty_Campaign_2005.pdf.

In addition to implementing a MRT-style model, the CTF is calling on Ottawa to eliminate the 1.5 cent/litre deficit elimination tax as a first step; stop taxing taxes by removing the GST (and HST where applicable) charged on federal and provincial gas taxes; and reduce the federal levy by 2 cents. These three measures would reduce the gas tax bite by 5 cents a litre. To date, the CTF has collected more than 115,000 signatures in favour of its MRT and gas tax cut initiative.

This year's gas tax report examines the federal-provincial gas tax transfer deals in place between Ottawa and British Columbia and its municipalities, and between Ottawa and Alberta.

"Sharing gas taxes with municipalities should be commended, yet these agreements miss the mark. The construction and maintenance of roads, highways and bridges are ranked as a secondary priority in terms of funding" said federal director John Williamson. "These agreements fail to acknowledge the burden municipalities face with road construction and maintenance or the importance of using gas taxes to mend roads. It will not be local municipal leaders but federal bureaucrats armed with terrain maps and funding formulas who will determine local funding priorities. Road upkeep is still not a priority for Ottawa."

Canadian Gas Facts:

Of the $4.5-billion collected in federal gasoline and diesel taxes in 2004-2005, Ottawa returned a paltry 7.2% or $324-million back in provincial transfers for road and highway development. In addition, Ottawa collected $1.198-billion in gasoline GST revenues.

Over the past 12 months – the period of May 2004 to April 2005 – the average cost of a litre of gasoline paid by Canadian motorists was approximately 84 cents. This represents a 10-cent increase over last year’s average price. Taxes account for an average 38% of the pump price. Gasoline prices have now jumped to a weekly average price of approximately 90 cents per litre, and have regularly surpassed $1 per litre in parts of the country.

GST is charged on the full pump price, gasoline taxes included. It is a tax on tax. As the pump price increases so too does the GST. Last year, the federal government collected $1.198-billion in gasoline GST revenues. For every 10 cent increase in the price of gasoline, Ottawa’s GST revenues rise by $175-million.

As a deficit reduction measure in 1995, Ottawa increased the federal gasoline tax from 8.5 to 10 cents per litre. The deficit was vanquished seven years ago, but the tax remains and the federal government’s gouging at the pumps continues even with multi-year, multi-billion dollar federal surpluses.

The federal government's priorities are not road maintenance or construction. Minister of State for Infrastructure and Communities John Godfrey stated in the House of Commons on May 19th, 2005, that "the purpose of the gas tax is to invest in environmentally sustainable municipal infrastructure … It could be public transit, waste, wastewater, waste management or community energy systems." Subsequently, he added, "We wanted to direct the bulk of [gas tax] money toward public transit and water projects so that when we had made our investments, we would be able to reduce greenhouse gas emissions and clean up water and air." In February, 2005, the infrastructure minister had stated gas tax revenues could be directed toward roads and bridges.

In 2003, Canadian municipalities spent $6.4-billion building and maintaining roads. More than eighty per cent of all roads in Canada are municipal roads.

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

CTF Commentary: Reforms to protect taxpayers

Après Gomery: Reforms to Protect Tax Dollars

Voters are looking to punish the Liberal party for wasting hundreds of millions of tax dollars and breaking their trust. In the past, whenever a scandal erupted in Ottawa – over say HRDC misplacing $1-billion or the cost of the gun registry jumping from $2-million to well over $1-billion – Liberals could claim they were acting in the best interest of all Canadians although mistakes were made. This will not wash with Adscam and the party might well be drummed from office – and rightly so.

But if voters opt for a change in government, Canadians have few guarantees the next bunch of rascals will behave any better. And if the Grits manage to hang on – with New Democratic Party support – malfeasance will likely continue under the existing system.

Canada’s Parliament is in need of an overhaul. A long string of spending scandals and audits reveal there is a systemic lack of accountability. Taxpayers are too familiar with the headline-grabbing stories of financial irregularities reported by Canada’s auditor-general. But other inspections are no less damning. A December 2004 audit of Canada Revenue Agency, reported by Canadian Press, revealed a casual attitude towards protecting taxpayers and their tax data. Most alarming are four computers stolen in 2003 from a tax office, which contain information on 120,000 Canadians, including their social insurance numbers.

Canadians need a permanent system – beyond ejecting one party from office for another – to ensure greater oversight of lawmakers. Allowing more free votes, vetting major appointments to heads of Crown corporations and agencies is a start, but additional reforms are necessary.

A good start is to hand the auditor-general greater oversight powers. Crown corporations as well as the foundations tasked with spending $9-billion of tax money cannot be inspected by the auditor or even our parliamentarians. At least $7-billion is sitting in foundation bank accounts, yet no one in the Government of Canada can access the funds or review how it is spent. Likewise, Parliament must pass a whistleblower law to protect civil servants who reveal government waste or corruption from retribution by senior officials.

The many shortcomings of Ottawa’s Access to Information laws must be strengthened to include a large swath of government activity currently exempt from scrutiny. Canada’s freedom of information laws were introduced in 1985 and designed to ensure the government is open and transparent. They are the citizens’ tools to enquire how tax money is being spent. Yet this principle is being eroded as information requests are routinely rejected. Bombardier has received $772-million since 1982 in direct government aid, yet Ottawa refuses to report the aerospace company’s repayment record. So-called third party exemptions have placed 15 billion tax dollars beyond taxpayers’ prying eyes.

Another route to end the log rolling relationship between politicians and industry is to stop the practice of subsidizing companies. “No More Boondoggles” legislation will end corporate welfare and ensure politicians focus on fostering a sound economy, and not pick economic winners and losers with handouts.

It is absurd that of Canada’s 413 federal lawmakers – 105 Senate seats and 308 seats in the House of Commons – fully 25% are appointed, not elected. The Red Chamber must be reformed in a manner that gives Canadians, and not politicians, the power through direct elections to decide who will write and pass laws. Failing this, the Senate should be abolished. Recall and citizen initiated-referenda are similarly needed, as are changes to the voting system that ensure 39% of the vote does not translate into a majority government with 100% of the power.

These reforms will not stamp out government corruption, but they will improve the political system. Stronger taxpayer protection laws are an internal watchdog on politicians and bureaucrats who are tempted to believe they can spend tax money any way they wish.

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

PEI: $120 Million for Island Infrastructure

A Government of PEI news release has reported that $120 million will be invested in improving its approach to managing infrastructure.

"Minister of the Atlantic Canada Opportunities Agency, Joe McGuire, and Shawn Murphy, Parliamentary Secretary to the Minister of Fisheries and Oceans, together with Premier Pat Binns and Elmer MacFadyen, Minister of Community and Cultural Affairs, today announced a five-year infrastructure governance framework that will ensure a focused approach to the management of three infrastructure funds on Prince Edward Island."

For more information, see the April 27, 2005 news release at:
http://www.gov.pe.ca/index.php3?number=news&lang=E&newsnumber=4084

Kyoto Cost Rises 100 Per Cent in Seven Weeks

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to the release of Ottawa’s Kyoto Protocol implementation plan. The federal government today pegged the seven-year cost to meet Canada’s Kyoto targets at $10-billion. When the federal budget was tabled – only seven weeks ago – the government unveiled a five-year plan that would cost $5-billion.

"The release of this plan is long overdue and because of Ottawa’s inability to manage this file, implementing the Kyoto agreement is going to cost Canadian taxpayers significantly more," said CTF federal director John Williamson. "The environment minister today admitted the only way to meet Kyoto targets is to subsidize business and buy ‘hot air’ from Russia. In other words, we will pay Russians so we may heat our homes in the dead of winter. Ottawa obviously has too much of our tax money to spend if it can propose and enact such harebrained policies."

The international treaty, which came into effect on February 16, requires Canada to reduce average carbon dioxide emissions to 6 per cent below 1990 levels by 2008-12, but because the country’s output of greenhouse gases has increased by some 30 per cent since 1990 dramatic cuts in energy output are needed in short order. The federal government ratified the Kyoto agreement in 2002.

"Canada will need deeper cuts, over a shorter period of time, and this will have a negative impact on the economy," noted Williamson. "Ottawa will spend billions of dollars, increase the cost to businesses and slow the economy, which will mean lower wages and reduced family incomes. And despite the high cost, Canada will still not meet its targets to reduce greenhouse gas emissions."

The CTF recently updated projections on the cost to Canadian families to implement the Kyoto Protocol to $3,000 per household – per year – by 2010. The update is based on its November, 2002, study Counting the Costs: The Effects of the Federal Kyoto Strategy on Canadian Households. The original report predicted the price increases and wage reductions needed to bring energy consumption down to Kyoto levels would reduce annual real net household income by $2,700.

"The more Canadians learn about Kyoto the less they like it. Particularly when it will mean making drastic changes to our way of life without a corresponding reduction in global emissions or an improvement in our quality of life here at home," concluded Williamson.

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com

And the winner is...

If the glitzy Academy Awards ceremony wasn't enough to hold your interest, the Canadian Taxpayers Federation has issued the results of its 7th annual Teddies Waste Awards honouring "the best of the worst in government spending". A humorous look at the way your tax dollars are spent, the Teddies list federal, provincial, and municipal nominees and winners.

"In the spirit of the entertainment awards season, Teddies are awarded annually to a public office holder, civil servant, department or agency that most exemplifies government waste, overspending, over-taxation, excessive regulation, lack of accountability, or any combination of the five."

You can view the Teddies results on the CTF web site at:
http://www.taxpayer.com/main/news.php?type_id=1&news_id=1937

Alternative Federal Budget 2005

In anticipation of this week's federal budget release, you might be interested in viewing an alternative budget. The Canadian Centre for Policy Alternatives has released its Alternative Federal Budget 2005.

A voice in public policy debates, the CCPA is an independent, non-partisan research institute concerned with issues of social and economic justice. The National (Ottawa) Office has three ongoing projects: the Education Project, the Trade and Investment Research Project, and the Alternative Federal Budget Project.

The Alternative Budget is the CCPA's way of offering a different opinion on how the federal budget -- that is, your tax dollars -- should be spent. In this year's Alternative Budget, the CCPA critizes the federal government's "U-shaped" budget surplus, that being one in which surpluses are projected in the current fiscal year, dropping off precipitously, and then recurring again somewhere down the road. Rather, the CCPA claims that the federal government has forseeable surpluses.

"The federal government will have an estimated $45 billion in surplus over the next three years – money that could significantly reduce poverty and inequalities in Canada and lay to rest overheated squabbles over cash transfers to the provinces, says the 2005 Alternative Federal Budget (AFB)."

The CCPA also critiques where the government is spending its dollars, indicating that the budget could do more to improve federal/provincial relations and make good on past promises to provide a more equitable split between deficit reduction and spending on social programs.

"In order to begin the critical process of rebuilding the federation and repairing fragile federal-provincial relations, the AFB would:

- assure adequate funding for the Canada Social Transfer (CST) by increasing funding for the transfer by more than $13 billion over the next 3 years;

- build in accountability and transparency by dividing the social transfer into separate Social Transfer and Post-Secondary Education funds and having a separate envelope for each social item within the CST; and

- attack poverty in Canada by increasing the Canada Child Tax Benefit, the GST credit, creating a national child care program, enhancing the EI program, creating affordable housing, increasing OAS and GIS benefits and providing significant funds to address the needs of Aboriginal communities."

For more information on the Alternative Federal Budget 2005 and the CCPA, please see:
http://www.policyalternatives.ca

Rae Review Gets a Failing Grade from CTF

According to the Canadian Taxpayers Federation's Provincial Director, Tasha Kheiriddin, taxpayers should be worried by former Premier Bob Rae's recommendations for a substantial hike in spending on post-secondary education.

As the Ontario government forecasts a deficit of over $2 billion, the CTF asks where the extra $1.8 billion over the next two years will come from: higher taxes or higher debt?

Read more at:
http://www.taxpayer.ca/main/news.php?news_id=1912

Federal Budget Coming Feb. 23, 2005

Want to know how your tax dollars are being spent? Minister of Finance Ralph Goodale has announced that the federal budget will be tabled on February 23, 2005. The Minister will present the budget in the House of Commons at approximately 4:00 p.m. EST that day.

For more information, see:
http://www.fin.gc.ca/news05/05-010e.html

Onward Judge Gomery!

Judicial Inquiry’s $60-Million Budget the Price of Accountability

Ottawa – The Canadian Taxpayers Federation (CTF) today reacted to reports the judicial inquiry into the sponsorship program will cost the federal government $60-million. This amount is nearly three times the $21-million originally approved by the Martin government when it named Judge John Gomery to probe the dysfunctional program. It is estimated the commission will spend $20-million by the end of March, and will require an additional $40-million to complete the report by year’s end.

"Should Ottawa spend $60-million to discover how ministerial and bureaucratic oversight of the sponsorship program collapsed, to learn how $250-million of tax money was misspent and how $100-million of this amount ended up in the pockets of Liberal-friendly advertising firms? The answer is an emphatic yes," said CTF federal director John Williamson. "The Gomery Commission is essential to ensure accountability and Canadian taxpayers want it to proceed. Nothing we have witnessed to date indicates tax money is being, or has been, used improperly."

"This amount represents the price of accountability, just like funding the office of the Auditor General of Canada," noted Williamson. "Canadians are demanding answers and spending $60-million on funding this public inquiry is a better use of tax dollars than most of Ottawa’s discretionary budget items, particularly spending on government grants and contributions. Are Canadians each willing to pitch in a toonie to learn the truth? I think they are."

"While Judge Gomery has the best seat in town, every taxpayer has an interest in the outcome," said Williamson. "Canadians expect the inquiry to report what went so terribly wrong, untangle the political and bureaucratic web that resulted in hundreds of millions of dollars being squandered, and assign blame where deserved. So long as Judge Gomery proceeds with this in mind, the public will support his efforts."

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com

CTF Calls for Nominations for Waste Awards

Tuesday, January 25, 2005
Ensuring the Very Worst in Government Spending is Recognized by Taxpayers: CTF Calls for Nominations for Waste Awards

Ottawa: The Canadian Taxpayers Federation (CTF) is seeking nominations in advance of the 7th Annual Teddies Waste Awards from the public, members of the media and government officials.

In the spirit of the annual entertainment awards season, the CTF instituted the Teddies in 1999 to “honour” a public office holder, civil servant or government that most exemplifies government waste, over-spending, excessive regulation, lack of accountability, or any combination of the four. A Teddy may be awarded on the basis of past accomplishments or on the basis of a proposed initiative.

Appropriately, the Teddy statue is a beautifully adorned golden sow. Teddies are awarded in the following categories: Federal, provincial/municipal, and lifetime achievement.

To nominate a Teddy, any Canadian can visit the CTF’s webpage (www.taxpayer.com) and make a submission to the Teddies committee. The identity of those making a nomination will remain strictly confidential.

The Teddies are named after Ted Weatherill, a former senior public servant, who was terminated in 1999 for “expenses incurred by him … incompatible with his position as Chairman of the Canada Labour Relations Board,” according to the Office of the Minister of Labour.

Top nominees, and award winners, will be released through a national news release following the black tie award ceremony on Parliament Hill in February.

Information on last year’s ceremony can be found at: http://www.taxpayer.com/main/news.php?news_id=287

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com