The Thursday Question 2:28. The tax reform task force
Advice for outside advisors
Careful readers of The Globe and Mail and Taiwan News will know I was in Taiwan recently. I traveled a guest of Taiwan’s Foreign Ministry with a delegation of former Canadian national security officials. I am grateful to the Ministry and to Dick Fadden for letting me tag along.
Taiwan is as far from Ottawa as you can get, mentally. The real risk of a broad-scale war is not a top concern in our capital, but it is in potential front-line capitals like Taipei and for our allies. I will have more to say about my visit in future issues of The Thursday Question.
The last issue of The Thursday Question set out how PCO gets the vast ecosystem of egos, agendas, expertise and power that we call “the Government of Canada” working for the PM. PCO’s tools for playing that role were developed under Mr. Trudeau’s father. Ever since, successful PMs have succeeded when they figured out how to use those tools. The PMs who flopped thought they could rely on PMO alone.
Which brings us to tax reform. Late last spring, Mr. Poilievre promised that, if he is elected, he would name a citizens’ panel of entrepreneurs, inventors, farmers and workers to review Canada’s tax laws. This “tax reform task force” would offer him advice about how to “lower taxes on work, hiring and making stuff.”
Paul Wells has expressed his skepticism about this promise:
He thinks Mr. Poilievre already knows what kind of tax reform he wants to pursue and will shape the task force to get the recommendations he wants it to make. That’s possible. Governments usually rely on people they trust when looking for outside advice. The advice from this task force might not be terribly surprising.
But that doesn’t mean the task force will be a useless exercise. Let me suggest two ways it could help a new government.
One, it will defer pressure for tax reform until a possible Poilievre government’s second or third budget. Buying time will be helpful. Mr. Poilievre, if he wins, will inherit a fiscal mess – bloated spending, unsustainable deficits, huge liabilities coming due once he is elected (pay equity, Indigenous rights litigation, Crown corporation commitments, and the expectation of trade partners that Canada will move more quickly to get to 2% of GDP on defence spending), and a divided citizenry. He will need to take quick, smart and early action or see his government sunk by ten years of bad fiscal decisions.
Secondly, tax policy is hard. The federal tax system reaches into every nook and cranny of Canada. That makes it hellishly complex. Getting tax policy wrong has severe consequences. Many of the institutions we take for granted – Parliament, the United States, the modern state – were created because of tax revolts. These days, I wonder if the Pontiac MRC survives the little tax revolt going on in Alleyn-Cawood.
Tax reform is more complicated today because tax expertise is widely dispersed. Private firms, industry associations, think tanks, universities, and international organizations like the IMF and OECD all have experts on tap. Some of them answer to entrenched interests with billions of dollars at stake. Some also answer to ideological agendas with prior assumptions about what a perfect tax code would try to achieve. They will be loud and assertive about whatever a tax reform task force recommends and they will have millions at their disposal for the ensuing policy fight.
An example of how this works on a small scale: