If we’re in an economic war, why aren’t we talking about war taxes? Social solidarity requires fair taxation and shared sacrifice
[The following piece was originally published in Canada’s National Observer here.]
"The one thing that can stop the rise of the far right is the one thing mainstream parties are currently not prepared to deliver: greater equality. The rich should be taxed more and the revenue used to improve the lives of the poor."
- Writer and Guardian columnist George Monbiot
“War-taxes are the only ones men never hesitate to pay, as the budgets of all nations tell us.”
- Philosopher William James, from his 1910 essay “The Moral Equivalent of War”
Many of our leaders rightly say that Trump hasn’t merely imposed tariffs – the US President has declared “economic war” on Canada. We are experiencing an assault on our economy, employment and sovereignty, all aimed at softening us up to accept annexation. In the face of this, much like the early days of the COVID pandemic, we are being invited to make common cause; “we’re all in this together” our leaders implore – elbows up!
But if we are indeed standing on the breach of an economic war, how best to sustain social solidarity – a widespread feeling of shared sacrifice and purpose? And relatedly, why are our leaders failing to institute what is normally understood to be a foundational price of war, namely, tax increases on corporations and upper-income people?
Wartime, after all, is generally financed by special war taxes, with a particular duty borne by those most fortunate. That’s why the First World War saw the introduction of Canada’s income tax.
Yet in contrast, we seem to be entering the current fight with our aspiring leaders doing just the opposite – competing over who can provide the biggest tax cuts, with the largest gains going to the most comfortable.
Is this a serious fight or a phony war?
Successful mobilizations require that people make common cause across class, race and gender, and that the public have confidence that sacrifices are being made by the rich as well as middle- and modest-income people. Meaning, they require social solidarity. And inequality is toxic to maintaining social solidarity (not to mention confronting the far right). In times of crisis, cutting taxes is a backwards impulse; what is actually required is an increase in revenues to pay for the programs that will be urgently needed. As the saying goes, in an emergency, “everyone has to do their bit.”
This is a key lesson from the history of mobilizations, both the successful and unsuccessful efforts.
During the First World War, for example, inequality and grotesque levels of profiteering in Canada undermined social solidarity and undercut recruitment efforts (it’s one of the reasons for that war’s conscription crisis that nearly tore the country apart). After all, how can we expect thousands to voluntarily offer to make the ultimate sacrifice while others are making a killing?
Consequently, at the outset of the Second World War, the Mackenzie King government took bold steps to lessen inequality and limit windfall profits. Not only did the Second World War see the introduction of Canada’s first major income-transfer programs (unemployment insurance and the family allowance), but it also saw new progressive taxes established, including a severe excess profits tax that capped profits at their pre-war average. These measures were pivotal to sustaining social solidarity during WWII.
Fast forward to more recent years, and we can all remember the whiplash of the first year of the COVID pandemic, when as a country we went from low social solidarity prior to the outbreak, to a post-war highpoint of social solidarity (as we gathered in the evenings to bang pots and pans), to pissing away all that goodwill – all in the space of ten months. And how was that solidarity squandered? Because despite the “we’re all in this together” mantra of our political leaders, it turns out we weren’t. Some were making huge sacrifices (working on the frontlines of the pandemic or losing their jobs), while others were making out like bandits – as in the First World War, the pandemic saw rampant corporate profiteering that played a key role in driving up the cost of living (as economist Jim Stanford explains here).
Time to raise taxes on wealth and the well-to-do
“No great fortunes can be accumulated out of wartime profits.”
- J.L. Ilsley, Canada’s Second World War finance minister
“Public scarcity in times of unprecedented private wealth is a manufactured crisis, designed to extinguish our dreams before they have a chance to be born.”
- The 2015 Leap Manifesto
As I wrote in a recent column, the Canadian corporate sector is currently sitting on over $700 billion in cash deposits. It was Mark Carney, when still Bank of Canada governor in 2012, who described such extraordinary sums of idle cash as “dead money.” That money should be “legislated back to work” – conscripted into service – via taxation.
One of Carney’s first acts as Prime Minister (supported by the Conservatives) was to reverse the Trudeau government’s controversial albeit well-advised plan to tighten the capital gains tax exclusion from 50 per cent to one-third, a move that would have improved equality. In justifying this gift to some of the wealthiest among us, Carney said that “our builders should not be penalized.” But by what strange logic should a construction worker – an actual builder – pay income tax on all their income, while someone who makes money from money pay income tax on only half their income?
If this is a moment of crisis, then it is surely a time to institute new taxes on wealth and windfall profits. Yet neither the Liberals nor the Conservatives are proposing this. In contrast, the NDP platform contains robust proposals for both, as do the Greens (although the Green’s most expensive plank is a large and misguided increase to the basic personal exemption, a policy that provides maximum benefits for upper-income households) .
Alex Hemingway, senior economist with the BC Society for Policy Solutions, has published an excellent proposal for a federal tax on the net wealth of the super-rich that could generate $32 billion a year, with “rates of 1% on net wealth above $10 million, 2% above $50 million and 3% above $100 million. A narrow wealth tax of this kind would capture only the richest 0.5% of Canadians, or about 87,000 families.” Hemingway also proposes new progressive taxes on property that would capture a modest share of the windfall benefits that have accrued to property owners in this overheated housing market.
The federal NDP estimates their proposed tax on windfall corporate profits would raise about $1.6 billion a year, while a 15 per cent minimum tax on book profits could raise about $4 billion a year.
And as I’ve written previously, a 15 per cent export tax on Canada’s oil and gas exports to the US could raise $25 billion a year.
The points here being that in a wealthy country such as ours, the options are many to pay for a wartime-scale transformation. While many are indeed struggling to make ends meet, overall as a country, scarcity should not be the guiding ethos.
And the lessons from history — as we face today’s threat and the need for mobilization — are two-fold. First, to appreciate how inequality serves as a barrier to cross-society mobilization. And second, to understand that effective mobilization requires policies that fulfill a promise that we will better look after one another, that we will guarantee good jobs and income supports to all, that people will be treated with dignity and fairness, and that everyone will appropriately ante into the effort. When you’re asking people to share in a great undertaking, that’s how you keep everyone on the bus.