Rethinking Taxes - Is it Time to Feel Better About Paying Taxes?

Introduction

Taxes are often viewed as a necessary evil, a burden that we all must bear. But what if we could change our perspective on taxes and see them as a vital contribution to the society we want to live in? Let's explore why we feel the way we do about taxes and how we might start to feel better about paying them.

Personal Experience

When I started working full-time after school, I was talking to my father and complaining about the amount of money that was deducted from my paycheck for taxes (and other deductions). My father's response, which I still remember clearly, was, "If you are paying more taxes, you must be making more money." His theory was that taxes paid were an indicator of income earned. Unfortunately, in many cases, this logic doesn't seem to hold up as some of the world's highest-income earners and richest individuals pay little or no taxes.

The Desire to Pay Less

I certainly understand the desire to pay less in taxes. In today's environment of a high cost of living, skyrocketing housing costs (both ownership and rental), high food costs, and general difficulty making ends meet, it is entirely reasonable for people to want to keep as much of their hard-earned money as possible.

Justification for Frustration

In addition to people wanting to keep their money, I think there is total justification for feeling like we are both paying too much in taxes and that our tax dollars are not being well spent. Here are just a few of the reasons I think this is an issue:

• So many taxes: federal income taxes, provincial income taxes, municipal property taxes, HST, taxes on gas, alcohol, and cigarettes. And of course, the most recent highlighted tax, tariffs on goods imported into Canada. People are just overwhelmed by the level of taxation.

• Other deductions: On top of taxes, there are, of course, other deductions, such as employment insurance and the Canada Pension Plan (CPP), which reduce your take-home pay even further.

• Government waste: There are numerous examples of government waste through outright corruption or poor management. The City of Toronto MFP computer leasing scandal resulted in a $100M waste on a $40M contract. The Jean Chretien sponsorship scandal corruptly gave away $100M with absolutely no benefit to Canadians. Most recently, the $60M ArrivCan app mess, which should have produced a workable app at a fraction of the price. The list goes on and on, but it certainly leaves people with the strong impression that their taxes are not being well spent by an inefficient and, in some cases, corrupt government.

• National debt: The Government of Canada will spend $54B, 10 cents of every federal revenue dollar, servicing the national debt. This is kind of like an individual using a credit card for 100% of their expenses, only paying the minimum payment every month and racking up more and more interest and debt. Who feels like that is a good idea?

• Spending priorities: Lastly, it is clear that in many cases, people do not agree with the government's spending priorities, and this also leads to frustration. Do I agree with Mark Carney's goal to spend 10% of GDP on the military? Absolutely not, although Canada needs to engage in the world and support its NATO and other global commitments. Do I think the provincial government should spend $130B (yes, that is billion, and it will undoubtedly be more) on Doug Ford's impractical dream of a tunnel under the 401? No way. I supported the Carbon Tax, and in fact, most real, factual economists acknowledged that it was the most efficient way to reduce pollution. The Liberals did an absolutely terrible job of implementing and communicating the tax, its purpose, and benefits, and now, of course, it is gone.

What Kind of Society Do We Want?

So where do we go from here? Well, I think the starting point is, what kind of society do we want to live in, and are we willing to pay for that society? Do we want universal, high-quality healthcare with reasonable wait times? Do we want a prescription drug plan for those individuals not covered by a private plan? Do we want a mental health system that addresses the needs of our population, again with a reasonable wait time? Do we want to reduce/eliminate homelessness through government support for low-cost subsidized housing? Do we want a government that has a sound immigration policy that meets the country's needs, is efficient, fair, and principled, and supports immigrants as they enter our country to ensure their success? Do we want a robust climate change policy that encourages both individuals and companies to reduce their carbon footprint so we don't destroy the world for our children?

My list could go on and on, and your list would be different from mine. But I think there is some degree of consensus in Canada on what we want, but how do we get there? Before I get to a few suggestions, a couple of examples I want to discuss.

Examples of Taxation and Spending

• For 8 years in a row, Finland has topped the World Happiness Report. Are they number 1 because they have low taxes? Absolutely not, in fact, they have high taxes. They do, however, have a robust social support and welfare system, a high degree of trust in institutions and a focus on the environment for both protection and enjoyment

• For term after term, mayors in Toronto did not dare to raise taxes to properly support the services required for its residents. This led to Toronto having the lowest taxes of any city in Ontario and a steady decline in the city. Homelessness has increased, roads are a mess, and public transit service levels are plummeting. When Olivia Chow became mayor in a by-election after John Tory resigned after admitting to having an extramarital affair with a 31-year-old member of his staff, she was clear that to rebuild and maintain services in the city, property taxes would need to be raised. In 2024, City Council approved a 9.5% tax hike, and in 2025, the increase was 6.9%. I am not here to argue that everything Olivia Chow has done or will do is perfect. I do, however, feel that she dared to be honest with taxpayers and make it clear that, without a significant tax increase, the city could not rebuild and maintain city services (it is important to note that, unlike other levels of government, municipal governments by law cannot run a deficit).

• In the state of Oklahoma, they are also required to balance their budget. Given the current trend in politics, the state reduces its state income tax every year. These reductions have minimal benefit to the average person; the greatest savings are accrued by the wealthiest individuals in the state. This persistent focus on reducing taxes has led to a deterioration of the state's infrastructure and a very dangerous longer-term outlook for the state. If you are unfamiliar with the Oklahoma situation, you can read more here.

Addressing the Deficit

I think that any discussion on taxation really needs to start by looking at the deficit. As mentioned above, the massive annual deficits run by both the federal and provincial governments have led to unmanageable debt. As I said above, the federal government is spending $54B (yes, billion!) servicing the national debt. 10 cents of every federal dollar is spent. But when talking about the deficit, you need to talk about revenue and spending. So let's take a look at both.

Spending

• In 2024, the federal government gave the oil and gas industry $29.6B (yes, billion) in various forms of financial subsidies. The same year, the federal deficit was $65.2B. In 2024, the profits on just the four largest oil and gas companies in Canada were $20B. The total industry, approximately 1100 companies, had an estimated profit of $63.1B. So I am no genius, but the subsidies given to the oil and gas industry in 2024 made up 45% of that year's federal deficit, to an industry that made a profit of roughly $63.1B. I understand all actions have consequences, but to me, that looks like $29.6B that can be eliminated from federal spending.

• Between 2013 and 2023 (largely overlapping with Justin Trudeau's time as Prime Minister), federal government employment grew by 36%. During this same time period, private sector employment grew by 13%, and the population grew by 15%. Undoubtedly, some of this growth was required due to the pandemic, but that is over now. In 2020-2021 alone, the federal government's personnel spending increased by 30.9% or $14.4B. Seems like a potential area for savings. The problem with public sector employment is that it seems to grow but never decline. You can see the resistance to reducing federal employment in the pushback Mark Carney is receiving as he tries to reduce the deficit. This area represents a huge opportunity for savings while maintaining the service levels Canadians expect.

• Stop unnecessary spending and revenue reductions. Doug Ford's $200 cheque to all Ontarians cost $3B. Multimillionaires, homeowners in Rosedale, all received this cheque. An allowance targeted at only low-income individuals would have cost a fraction of the $3B. By the way, the Ontario deficit in 2024-25 was $6.6B, so a reduction in this primarily political payment would have had a dramatic impact on the deficit. The Ontario government loses $1.1B by not charging for licence renewals. So again, our friends in Rosedale with 3+, $100,000+ cars don't have to pay for their licence. Really? Again, why not target this program at low-income individuals, small businesses, and people who drive electric cars? That would at least make sense and would substantially reduce the revenue loss. These two items alone would have significantly reduced the Ontario deficit.

Taxes

• Let's introduce a tax on wealth. If a wealth tax were implemented, where wealth over $10M was taxed at 1%, 2% over $100M, and 3% over $1B. This format (there are other ideas) would generate $20B annually in federal government revenue. I know the alarmists will say this will drive wealthy people out of Canada. I don't think that is as big a risk as it is made out to be, but if they want to leave, leave. By the way, most of these people pay very little or no income tax because they don't derive their wealth from income. So this wealth tax would become the primary tax they pay. As a reminder, the federal government deficit in 2024 was $65.2B, so $20B sounds like a pretty good way to reduce that number. For those of you not familiar with wealth taxes, you can read more here.

• (Try to) make the tax system more equitable. Reduce inequitable and inefficient tax loopholes. This action has the potential to raise $18B in tax revenue without increasing tax rates and would include things like eliminating the stock option reduction, taxing capital gains the same as income, along with other changes.

Conclusion

So here are my thoughts in closing. First, let's stop criticizing taxes as some burdensome attack on our freedom. In an equitable society, taxes are a requirement to provide services for all citizens. Let's hold all levels of government accountable for both their spending and their taxation. There are clearly opportunities to improve without having a negative impact on individuals or the economy. We must strive for better.

If you have any questions or comments, you can email me at thethirdperiod.ca@gmail.com.