In 1848 Marx and Engels proposed that progressive taxation be used “to wrest, by degrees, all capital from the bourgeois, to centralize all instruments of production in the hands of the state.” Although Marx's communism failed, the idea of progressive taxation, as a means of achieving “social justice,” remains ingrained in the modern liberal psyche. Because there is no objective way to measure social justice, there is no end to the redistribution that can occur under a progressive tax system. Under such a system, neither persons nor property are safe from the hand of the state. Conservatives and liberals alike try to justify some progressivity in order to satisfy the majority’s preference for greater income equality. Elevating the principle of democratic rule above the protection of individual rights to achieve equality of result, however, violates the very rules of just conduct that lie at the heart of a free society.
Under progressive taxation, on the other hand, there is a constant temptation to raise tax rates on the so-called rich to pay for new programs, foreign aid, globalist agendas, or to simply buy votes during an election. In 1994, about one in eight Canadians (12.2 per cent) were on social assistance, and welfare benefits reached levels comparable to what a full-time minimum wage job would pay. This according to the Financial Post, is what happens when you offer 'basic income' for not working, people stop working. The problem is, that over time, government spending tends to increase year over year and rarely goes down. At the limit, persons, small businesses and corporations who earn high incomes may face a marginal tax rate of 100 percent, while those with lower incomes pay little to nothing. Some taxpayers believe envy, not justice, is at the root of the argument for what they call discriminatory taxation.
Most governments impose fiscal burdens on economic activity through taxation and legislation; however, socialist governments, emphasize redistribution of private property to equalize outcomes over individual rights to keep the fruit of one's labour. If the economic pursuits of private sector institutions and individuals are stymied by confiscatory taxes, it can inhibit economic growth and result in permanent job losses. For example, some suggest that Canada’s Federal Liberal carbon tax discourages business, while others suggest it could create temporary jobs while saving the planet. The Fraser Institute believes Canadian businesses will become less competitive as a result of higher energy costs and some will relocate to lower cost nations. Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness finds that Canadian workers across the income spectrum and across the country pay significantly higher personal income taxes than their American counterparts.
With regard to economic freedom, Canada ranked eighth in the world. This is according to the Heritage Foundation’s Index of Economic Freedom. Based on the economic system outlined in Adam Smith’s seminal work The Wealth of Nations, the index aims to measure whether each nation’s tax structure, government spending and laws stymie or promote the economic freedom of institutions and individuals using 12 factors that they divide into four key markers:
Rule of law. Property rights (physical and intellectual property rights and protection), the power/quality of the courts (access to, decisions of the courts), and government integrity (transparency and level of corruption).
Government size. Tax system, GDP/debt, and government spending.
Regulatory efficiency. Business freedoms (fees, costs, licensing, and regulations), labour freedom (min. wage, regulations for hours), and monetary freedom (inflation/price controls).
Market openness. Investment and financial freedoms.
These markers are used to determine whether economic freedom is achieving its three key outcomes:
the creation of healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination,
the establishment of an environment that welcomes ambitious, aspiring, enterprising, and highly qualified individuals, and
the encouragement of private sector investments into research and development, production and manufacturing operations.
The purpose of the current assignment it to determine whether or not Canada’s tax system and socialist spending are an economic burden, with a particular focus on Canada’s manufacturing sector. In short, you will answer the following question: to what degree does Canada’s tax system and government spending promote or inhibit economic growth?