Public services better deal than tax cuts, says study
Vancouver Sun
BY DAVID AKIN, CANWEST NEWS SERVICE
APRIL 14, 2009   

OTTAWA — Canadians are getting more than just a bang for every buck they pay in taxes, they’re getting a downright bargain, says a new study from the Canadian Centre for Policy Alternatives.

“For the vast majority of Canada’s population, public services are — to put it bluntly — the best deal they are ever going to get,” says the CCPA study, a copy of which was obtained by Canwest News Service.

The study’s authors say their research helps make the case that Canadians would be better off if governments invested more in some services instead of cutting taxes.

“What passes for a tax-cut debate in Canada is really only half a debate,” said CCPA economist Hugh Mackenzie. “The suggestion that we often hear — that taxes are a burden — hides the reality that our taxes fund public services that make Canada’s standard of living among the very best.”

Mackenzie and Richard Shillington, a senior associate at Ottawa-based economic consulting firm Infometrica Ltd., co-authored the study, titled Canada’s Quiet Bargain: The benefits of public spending.

Financial assistance for the study was provided by the Canadian Federation of Students and several unions, including the Public Service Alliance of Canada and the Canadian Labour Congress. The study used data and analytical tools from Statistics Canada.

The study says most Canadians would have been better off if the Conservative government had not cut the goods and services tax, but instead transferred the proceeds of that tax cut to local governments to pay for more and better services. Similarly, it concludes the standard of living of most Canadians would have been improved if provincial governments spent more on health care and education over the last decade or so rather than bringing in broad-based income tax cuts.

“The tax cuts made to sound like free money to middle-income Canadians are anything but,” Mackenzie and Shillington write. “Indeed, the tax cuts implemented in Canada in the last 15 years have had the net effect of reducing the living standards of most Canadians.”

The authors argue that, after accounting for the kinds of services received in exchange for taxes paid, only Canada’s richest taxpayers have benefited from the last decade of federal and provincial tax cuts.

The authors conclude that each and every Canadian enjoys an average benefit of $17,000 from the public services that taxes fund, about the same amount a Canadian working full-time at the minimum wage would earn.

A Canadian household with an annual income of $65,000 a year — the median household income in Canada — receives benefits from all three levels of government worth about $41,000 a year.

And even though members of a household whose combined income is as high as $90,000 year would pay more in taxes, the study says the benefits that household receives is equivalent to more than half of their annual income.

Most of those benefits comes from government-run health care and education, as well as cash transfers payments for things like the Child Tax Benefit, Old Age Security, or employment insurance benefits. But the study also measures the per capita benefits to each household of things such as roads, recreation facilities, waste disposal, regional planning agencies, firefighters and police officers.

The study found that, relatively speaking, the per capita value of public services provided by the federal and provincial governments declines as household income increases. That’s because transfers, in the form of social assistance or old age benefit, are more important to those with lower household incomes.

But the per capita benefit from local governments tends to rise as household income rises. In fact, the richest households in Canada — those with an income of at least $200,000 a year — get the biggest benefit from local governments.

About 20 per cent of all Canadian households have an annual income of at least $100,000.

Those households receive benefits from all three levels of government worth between $13,000 and $15,000 a year.

More than two-thirds of Canadians live in households whose benefit from public services exceeds 50 per cent of the non-public sourced income those households receive.