William Watson: For lower taxes, more elections?

As voters, we should insist on hearing tax news before voting

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After a holiday weekend that for many Canadians will have been a warmer reminder and more normal days are not far away, it is no pleasure to raise the subject of taxes. But, along with dying and returning to work after long weekends, they are part of life’s inevitable. And with all the spending our governments have been making lately, you must be thinking that this is another thing that is not far in our future either.

A new research paper by economists at the University of California (Irvine), Northeastern University in Boston, and the Federal Reserve Board of Governors may provide insight into the unfolding of the next 18 months in Canadian political life. Readers who like their mundane headlines will appreciate the title of it: “Politicians Avoid Tax Hikes Around Elections.”

You might think it was so blatantly true that you don’t need confirmation. But in this age of constantly suspended beliefs, it is good to subject even bromides to an empirical test. And the test that the four economists impose is rigorous. They examine the timing of the promulgation and implementation of gasoline and corporate tax changes in the 48 continental United States from 1960 to 2016. This allows them to verify the potential effects of 2,800 gubernatorial elections – a completeness that before computers would have required a lifetime of monk dedication to it alone.


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The researchers’ results are clear and expected. “The gasoline tax and corporate income tax are the least likely to pass in an election year and are more likely to pass in the year following an election.” As for implementation, the timing of elections has no effect on increases in corporate income tax, while the increase in gasoline taxes is consistently lower in election years than the following year.

Why is there any gasoline tax increases during election years? The increases could be the result of indexation or a legislated staggering of previously planned increases, which would allow troubled politicians to deny responsibility.

And why the difference between the two types of taxes? Researchers argue that taxpayers – especially drivers, presumably – are more aware of changes in gasoline taxes than changes in corporate tax rates. They may also care more about gasoline taxes. Moreover, unlike ordinary citizens, companies can “pay constant attention to policy making, which makes the timing of tax implementation a less relevant outcome of their lobbying and political influence.” . Of course, given the anti-business animosity of the past few years, we may soon reach a point when corporate tax hikes take center stage in election years.

Could this less likely enactment of tax increases in a political year simply be the result of election year legislatures being preoccupied with electoral politics and making fewer promulgations of all kinds when the election year? campaigns are underway? It seems not. The researchers tested this possibility by examining the average output of laws, using pages of legislation as an index. They found that in fact, states adopted an average of 24 After pages of legislation in election years, based on 2,090 pages of legislation per year.


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So: Politically sensitive tax hikes and all tax laws are rarer in election years than in the year following an election. So what? If the winning candidates had campaigned on platforms that promised to introduce this or that new expense and pay it with such and such a tax, this otherwise suspicious correlation could simply be an example of a democracy working as it should.

It is suspected, however, that this is a case of democracy working the way it should – politicians filling in tax blanks after securing a commitment to new spending without saying much, if anything, about how from which they would be financed.

Canada is not the United States, of course. One obvious difference is that, despite a trend in recent years to legislate on fixed election dates, the election schedule remains heavily influenced by incumbent leaders – which raises an interesting possibility: if we had more frequent elections. , and therefore more years in which politician wanted to raise taxes, would we have lower taxes?

Date fixed or not, we have a federal election somewhere in our not too distant future. And the government in power has spent the pandemic making good spending announcements. At some point, all of this good news will have to be paid for. You would think that a government that claims its core philosophy is to take a long-term view on things like climate change would not want to push the financial burden onto future generations.

Election first, taxes afterwards seem to be a reasonable forecast. As voters, however, we should insist on hearing tax news before we vote.

Financial post


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