Tuesday, March 29, 2011

A Taxing Problem:: The Issue of Political Rhetoric & News Headlines

Globe & Mail front page, 4 April 2009, ©Patrick Tam, via Flickr
John Ibbitson's article, "Parties agree: Tax breaks trump social programs," uses a technique I call "headline persuasion". Just like the shock and awe of the above decree that Obama turns left, which there was no evidence of from day one, Ibbitson tries to convince us that there is a political consensus on tax cuts—they're better than social programmes.

The problem is that his analysis doesn't go beyond a headline quip. He uses the NDP's GST heating oil exemption proposal as proof positive that even the Dippers support tax breaks::
"And what is the NDP proposal to cancel the GST on home heating fuels? A tax break, pure and simple.
There are good reasons to do things this way. Experience shows that government-run programs are prone to waste and red tape. Direct payment is more efficient and less personally intrusive."
What? He mistakenly treats all tax breaks as the same, under the mantra that government-run programmes are wasteful by definition.

On the other side of the Globe {and Mail}, Stephen Gordon offers a more level-headed take:: "The truth behind tax cuts: You might not be better off".

One problem is one of scalability or what he calls the fallacy of composition. While the effect of tax cuts on the individual raises disposable income, the link dissipates in aggregate. What I found the most illuminating was his quoting of Columbia University economist Xavier Sala-i-Martin::
“The size of the government does not appear to matter much. What is important is the ‘quality of government’ (governments that produce hyperinflations, distortions in foreign exchange markets, extreme deficits, inefficient bureaucracies, etc., are governments that are detrimental to an economy).” [pdf]
Moreover, Gordon links to his blog post that states all tax breaks are not created equal, bringing us full circle to Ibbitson's treating of all tax breaks as good—or at least not being critical about what the parameters are with tax policy. Let's face it, when one is painting with such broad brushstrokes saying government is wasteful as a res ipsa loquitur, there's no reason to expect nuance.

Ibbitson fails to make the distinction that the NDP is interested in addressing an income issue with respect to pricing of a necessity within a political reality. Here's an interesting discussion of the economics and politics of the GST heating oil issue on Gordon's blog from last October. 

I'll address the issue of the hows of taxation in a later blog, but those interested might be interested in this blog post on the Nordic experience of paying for the welfare state, which is a whole different Oprah. I feel that the demonizing of government spending and programmes as justification for tax cuts is woefully short-sighted. A role of the government is to provide where there are market failures and a good example of this is infrastructure. If there's a problem with the efficiencies of government—fix the damn government, don't throw the baby out with the bathwater. The private sector has no monopoly on good management, lest we forget the subprime crisis and the financial meltdown in the US and countless other examples.

At the end of the day, I feel the larger problem is one of political rhetoric and agency over sound economic policy, where by agency I mean that one's self-interest informs decision-making and setting up win-lose scenarios. Ibbitson is parroting a simplistic conservative mantra, although his bread and butter is being hard to peg. I get that. Nevertheless, he's communicating a party line that speaks to an individualist doctrine that I feel is gaining traction. Society doesn't want to pay taxes and rhetoric like this gives it an economic justification that lacks an empirical basis. Moreover, the taxes we do pay, we want to cherrypick where it goes. This is one of my quibbles with Stephen Harper—he has failed to stick to his own ideological Libertarian roots and talks from both sides of his mouth. He says he doesn't like taxes, but has no problems with spending on what he wants to spend on.

Twitterversion:: [blog] 2 sides of the Globe{&Mail} on taxes. Ibbitson blows smoke that parties agree on tax breaks. Gordon offers nuance. @Prof_K

2 comments:

Matt said...

At most papers, the editors write the headlines, not the reporters/columnists.

Kenneth M. Kambara said...

Which begs the question if they really read/comprehend the articles or of that even matters in the pageviews sweepstakes.