The tax freedom shuffle

In a letter to the editor printed of the current issue of Maclean’s, Niels Veldhuis, “Director of Fiscal Studies” for the Fraser Institute, accuses me of missing the point with my criticisms of tax freedom day. Of course we get benefits from taxes, he graciously concedes. The question Canadians want to know, he writes, is: “Are we getting value for our tax dollars?” As he goes on to claim, the point of tax freedom day is to provide Canadians with “an accurate and easy to understand estimate of their total tax bill.”

Of course, no sooner does he concede this then he falls back into the rhetoric of taxes as something “imposed by the government”, but let that pass.  I’ll grant that it is entirely possible that Mr. Veldhuis believes what he writes, but my argument against tax freedom day is that it simply cannot serve this educative function he envisions. Why? Because the percentage of our income devoted to public spending has absolutely nothing to do with the question fo whether we are getting value for that spending. They are two completely separate issues. It’s like wondering whether the restaurant you ate at last night was any good by simply looking at the bill.

Of course, I don’t expect any libertarians out there to take my word for the essential uselessness of tax freedom day. So why not ask… Niels Veldhuis. In a recent column typical for its combination of credulity and contradiction, Jonathan Chevreau begins by celebrating the unexpectedly early arrival of tax freedom day, and even quotes some boilerplate from Veldhuis about how taxes are blah blah family necessities blah blah. But then Chevreau turns on the federal government for deigning to take credit for the early arrival, thanks to their tax policies and so on.

Indeed, the real reason for tax freedom day come early, he says, is not good tax policy, but the tanking economy:

“When the economy slows and incomes stagnate or decline, an average family’s tax burden tends to be reduced to a greater extent than its income. The reason for this accelerated decrease in the tax burden compared to income is the progressive nature of Canada’s tax system… Under our progressive tax system, families pay more proportionately in taxes as they earn more income. The reverse is also true. It is this reverse phenomenon that is driving much of the decrease in Tax Freedom Day.”

Who said that? None other than Niels Veldhuis.

So to summarize: Sometimes tax freedom day is a tool for helping us judge whether we are receiving value for the services our tax dollars provide. Except when it’s a tool for measuring economic stagnation under a progressive taxation system.

Like I said, it’s entirely possible Niels Veldhuis believes what he writes.

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