Red flags and red herrings over taxing the rich

Canada's famous Peter Munk debates hold a special place in our national public discourse. That's not just because of the range of questions involved (Religion is a force for good in the world; The European experiment has failed) or the skill and eloquence of debaters invited to take part.

What I think is special about this debate is that it keeps score.

The audience is polled upon entering the theatre, and polled again at the end of the debate; the winning side is that which changes the most minds.

In that regard, the team of Henry Kissinger and Fareed Zakaria set a debate record in 2011, by arguing against the premise that the 21^st Century will belong to China. They convinced a vote swing of 22 per cent.

This year, as Advocate guest columnist Brian Lee Crowley informed us June 11, the question was a resolution that we should tax the rich more.

Crowley wrote against the resolution, but George Papandreou and Paul Krugman managed a 12-per-cent vote swing with their arguments to win the day.

I will hazard that the audience in the Roy Thompson Hall in Toronto was decidedly above-average in income, so a swing to the pro side of the question meant the arguments were quite able to overcome vested interests of the “rich” in the crowd that voted. They must have been pretty persuasive.

Of course, the Munk debates are not expected to be the final word on any issue. Their purpose is to also to stimulate further debate. So let's debate with Crowley.

The first red flag when assessing a debate is an attempt by one side to re-frame the question. Crowley opens his argument with just that tactic.

Instead of looking at “we should tax the rich more,” he wants to debate “how do we get the best value for society out of scarce resources?” His is a good question, but this is not what the night was about.

In fact, I would suggest he might have gone with “what kind of society do we want to live in?” That's an even better question, in my view.

But we're talking about the need for governments to raise revenue here, in an environment of growing polarization of income. Whether government or private enterprise are more efficient at achieving goals is a side issue.

Crowley takes us further down the side road, not with a red flag, but with a red herring. Seemingly out of the blue sky, he asserts that every dollar taxed from the rich costs society $1.20 in lost investment.

Those lost investments are obviously recovered, then, in the billions of dollars rich Canadians have been hiding from the taxman in secret offshore bank accounts, right? I sincerely doubt Crowley — or anyone else — can show a benefit to the poor (or even to Canadian society in general) from that.

Rather, we should remember one of the first laws of economics: every dollar eventually gets spent.

Crowley asserts that paying civil servants to manage tax funds for projects that democratically-elected governments deem important, is waste. It's part of that 20 cents he tacks on every tax dollar.

But we know that civil servants pay taxes on their income. They pay down their mortgages, the power bills, school fees and grocery tabs. Every business that receives payment from a civil servant pays taxes, and wages to people who in turn pay taxes and buy stuff.

How is the employment of a civil servant — at whatever their salary — a waste, when the multi-million-dollar bonuses to CEOs and upper management of private enterprise is not? Especially if many of these people hide their income offshore?

All money gets spent somehow, sometime. So a taxed dollar is not $1.20. It is a dollar, no more, no less.

The question the Munk committee wanted to examine regarded the fairness of specifically targeting the top percentile of wage-earners for a greater share of government revenue. On this question, the pro side wins.

The top income percentile already pays a lion's share of the income tax revenue that all governments collect. As Crowley quoted, that's where the money is.

We can also see that the current top-weighted tax regime has not affected the increased share of national wealth that the top income earners possess. Quite the contrary, the rich get richer, faster, than ever before these days.

Therefore, if we in our democracy agree that some income redistribution through “tax-and-spend” government is a good thing, government will have to go where the money is.

We can debate how much redistribution is actually warranted, and get angry at how much money is siphoned off through inefficiency and corruption. But that was not the question asked May 30 at the Munk debate, no matter how much Crowley wishes it might have been.

Red flags and red herrings did not win this one.