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Dave, we need you!

March 20, 2012

I’m a sucker for fairy tales — the kind where the humble but cheery peasant becomes ruler of the land. So I’ve always had a soft spot for Dave, the 1990’s flick that puts an Everyman played by Kevin Kline into the Oval Office.

In one pivotal scene, Dave is attending a Cabinet meeting. (Go ahead and watch the Youtube clip – it’s just one minute long.) He has just learned that his scheming Chief of Staff has vetoed a bill that would have pumped $650 million into homeless shelters, and he needs to find the money to save them.

He starts by setting his sights on a $47 Million budget to “boost individual confidence in a previous domestic automotive purchase.” He turns to his Commerce Secretary and says,

“I don’t want to tell some 8 year old kid he needs to sleep in the street because we want people to feel better about their cars. Do you want to tell him that?”

And the Commerce Secretary says, “No sir. No I sure don’t.”

Meanwhile in Canada . . .

We too need to find money, not just for homeless kids but to fix crumbling buildings and put more than a measly $13,600 a year into the pockets of people on disability allowances. But we’re told that there simply is no money to spare.

I doubt that. Even within the housing sector there are programs that are the equivalent of simply wanting “people to feel better about their cars.”

Take, for example, the First-Time Home Buyers Tax Credit. The Federal Government initiated this program in 2008 as part of its economic stimulus package.  It hands a one-time credit of $750 to new homeowners.

The public cost of this program? $385 Million from 2009 – 2011.

To give a sense of scale, that is three times the Federal-Provincial contribution to all new affordable housing programs in Toronto over the next four years, including new affordable rental housing construction, new affordable home ownership funds or housing allowances for low-income households.

By 2010/2011, the homeowner tax credit was costing $180 million a year. Imagine if that sort of money was diverted to low-income people.

  • We could give Toronto Community Housing more than it needs to keep all its buildings in good repair (without selling a single house), with enough money left over to maintain the three shelters on the City’s “endangered” list.
  • We could give an extra $600 to every single person in Ontario now receiving a pittance through ODSP.
  • Or if you have your heart set on home ownership, we could use it for truly affordable home ownership. Extrapolating from the Affordable Housing Office’s budget, $180 Million would allow 5,454 low- and moderate-income Toronto families to own their first home. Spread the opportunity to cities where costs are lower and your money would stretch even further.

What $180 million actually bought

And what has been the actual public benefit of the homebuyer’s tax credit? None.

The program did not increase the number of homes purchased. It did not make home ownership affordable for people who could not otherwise enter the market. It simply handed out cash to those who were buying a home anyways. In other words, its chief purpose was to help “people to feel better about their taxes,” or perhaps “feel better about Stephen Harper.”

Why aren’t we talking about this?

It’s because the homeowners tax credit and dozens of other tax credits, benefits and incentives are barely visible. We rarely think about them at all, except at tax time. And we never see their costs stacked up against other, more visible programs, or measured against the public benefits they confer.

A few weeks ago, the ever-helpful John Stapleton pointed me to an article about Cornell political scientist Suzanne Mettler’s The Submerged State. Mettler found that wealthy and middle class people benefit most from government programs, but often have no idea they are receiving any government assistance at all.

When Mettler asked a scientifically selected sample of Americans whether they had ever used a government social program, only 43 per cent said they had. But in fact, 96% had used one or more of 21 publicly-funded social programs – they had just forgotten.

The people who did not forget they were getting government funds lived in social housing or relied on food stamps. That’s because programs geared to low income people are designed to be obtrusive. You need to visit government offices, get on waiting lists, or subject yourself to home visits to get money through these programs.

Subsidies for the wealthy are hidden – so much so that recipients can froth against big government without knowing they are a beneficiary. Says Mettler, “people can benefit a lot from the government but become more anti-government because they’re paying higher taxes and don’t think they’re getting any benefits.”

These benefits can be rather substantial. I don’t have Canadian figures. But the US-based Tax Policy Center estimates the value of tax expenditures to be $931 per person for the bottom 20 per cent of Americans, and $280,000 per person for the top one per cent.

Maybe the tough choices aren’t so tough

These days every level of government is preaching restraint. “We can’t live beyond our means,” we’re told. “We can’t increase the deficit.”

But maybe we don’t have to. Maybe we simply need to look at the tax credits we routinely hand out, and ask ourselves whether this money is going to those who need it most.

Would I personally give up a $750 tax credit to ensure some 8 year old kid doesn’t need to live on the street? Or to fix up old buildings? To ensure a disabled person can buy fruit and veggies? Or help a low-income family buy their own home?

Yes, sir. Yes I sure would.

2 Comments leave one →
  1. Sandra Pimpao permalink
    March 20, 2012 3:10 pm

    Another excellent article! Really puts things in perspective doesn’t it? I too would give up $750 tax credit to ensure a low-income family can buy their own home.

  2. March 20, 2012 8:04 pm

    Preach it sister!
    I wear this button ‘Tax Me…End Poverty’ and the number of times I am stopped by various people: students, fellow transit riders, even people in business suits asking if I have another button to give them has me convinced there is a groundswell of people wanting to see taxation change so those who most need the assistance get it, and those who can live without it, go without it.
    It reminds me of what might called ‘biblical economics’ – where ‘those who gathered a lot had nothing left over, and those who gathered only a little had enough. Each family had just what it needed. ‘ (Exodus 16:18, 2 Cor 8:15)

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