CONTRIBUTION: Time to tackle poverty

There is no question that we Canadians live in one of the safest and most prosperous countries in the world. We have our predecessors to thank for their hard work and sacrifices, making our country such a wonderful place to be. At some point, however, it is our turn to pick up where they leave off. We owe it to them, to each other, and to the next generation to pick our neighbours up, and make our way of life better.

The first thing that we need to do better is caring for our most vulnerable. In our great country, there is no reason that some are not given a fair chance at success like everyone else. While it is easy to say that everyone already has that fair chance, there are areas that our governments actually get in the way of hard-working people just trying to live a good life. It’s time for our governments to do better.

Solutions don’t always come in the form of adding something new. Sometimes, we need to take a look at what’s already here, and either get rid of it, or replace it with something different.

Here are two specific policy measures that we need to consider and act upon in order to help those that need it most:

1) Eliminate the Property Tax in favour of a fair Municipal Income Tax

Property taxes are the main source of revenue for municipalities in Ontario, generating over $16 billion annually. In London, property taxes account for approximately 64% of the city’s annual operating revenue. Essentially, citizens pay property taxes based on a percentage of the value of all property that they own in their city.

The problem with property taxation is that it is regressive, which means that taxpayers who have less money end up paying more than those who have more money. Property taxes do not adequately consider citizens’ ability to pay for their consumption of municipal services. Instead, property taxes reduce all of these relevant factors to the value of citizens’ homes.

People who live in homes of equal value can be – and usually are – from very different economic circumstances. If you own your home, consider your neighbours: do they all live in the exact same financial situation as you? For example, one $180K home can house a retired widow, while the $180K house next door is home to an employed, middle-aged couple with no kids. Property taxes push homeowners near the poverty line closer to it, and pile on those that are already there.

One potential alternative would be to use what the other levels of government in Canada use: an income tax. A Municipal Income Tax, of course. Why is it appropriate for federal and provincial governments, but not municipalities?

For example, many cities in the United States, such as Birmingham, St. Louis, Kansas City, and Cleveland, impose a 1% flat income tax on their citizens. Considering London possesses a total labour force of approximately 265,200 people, and about a $36,510 personal income per capita, a 1% flat income tax could generate over $95 million per year for the city. This would represent over 15% of London’s current annual operating budget. For those earning above an appropriate cut-off point, why not consider a flat income tax of about 3-4% alongside some consumption taxes?

Surely there are economists and other experts in this field that could develop a more nuanced and detailed solution. The point is that fairer alternatives to property taxation exist, and we owe it to our neighbours to develop one that’s right for us.

2) Eliminate supply management of dairy, eggs, and poultry.

The federal government manages the supply of dairy, egg, and poultry products in Canada. Through restrictions on the domestic supply, and tariffs on the foreign supply, governments artificially raise the price of these foods and protect domestic farmers from foreign competitors.

The spirit of supply management is noble: ensuring that Canadian farmers are adequately compensated for their hard work. In practice, however, the only reason supply management still exists is due to the political desire to maintain the financial and electoral support of the dairy, egg, and poultry farming industry. Supply management benefits very few Canadians at the expense of many, many more.

Dairy, eggs, and poultry are foods that are consumed by citizens of every economic circumstance: both the rich and the poor have these foods in their diet. But considering the fact that tariffs and a mandated low supply of these products artificially raise their price, the poor are forced to pay a much higher proportion of their income for these quasi-necessities of life.

But don’t ask me. Ask Ryan Cardwell, Chad Lawley, and Di Xiang: economists from the University of Manitoba who published a study in March. Their research concludes that: “Canada’s [supply management] policies are highly regressive, imposing a burden of approximately 2.3 percent ($339) of income per year on the poorest households, compared to 0.5 percent ($554) for the richest households.

Put simply, just like the property tax, the current application of supply management in this industry amounts to a regressive tax that costs the poor much more than the rich.

The solution to this problem is quite simple: eliminate this practice of supply management. First, eliminate the tariffs imposed on the foreign supply of farmed products like dairy, eggs and poultry, so that they can enter the Canadian market, thus increasing the supply, and lowering their price. Second, eliminate production restrictions so that domestic farmers can produce and sell as much of these products as the market will bear. This will substantially lower the price of these products as well, and provide relief to those that need it most.

These solutions are not the shiniest and most attractive ideas, and they will not come about without their fair share of political pushback, but it is time to recognize just how necessary they are, and take action.

Nathan Caranci
Nathan Caranci

Nathan Caranci is a contributor to the London Institute. He is a graduate of Western University, and a Master’s student at the Clayton H. Riddell Graduate Program in Political Management at Carleton University.

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