Friday, June 26, 2009

Progressively worse

Following up on last night's post, let's take a closer look at what the Sask Party's most-touted new organization has done, with Enterprise Saskatchewan publicly releasing its "progress report", consisting of equal parts policy recommendation and glossy self-congratulation.

Sadly, though, the "self-congratulation" portions appear to be far better researched and explained than the parts which are nominally supposed to offer useful recommendations. So let's focus in on a particularly egregious passage to see just how much wishful thinking is passing for serious policy analysis in the Wall government:
Rather than increasing revenue to the Province, high taxation can drive revenue away. This is already evident when comparing the high end of personal income tax in Saskatchewan (15%) with that of Alberta (10%); the 5% discrepancy has motivated some high-income earners in the province to find ways to divert their income into our neighbouring province. It also discourages top income earners in all disciplines from moving into Saskatchewan.
Now, the point would seem to be one which can be readily proven or disproven by actually looking at whether income is being systematically diverted from Saskatchewan to Alberta. And all recent indications are that the difference in income and corporate taxes hasn't made a whit of difference in either Saskatchewan's trend of success or Alberta's newfound status as a pariah.

But apparently, considering any actual evidence is beyond Enterprise Saskatchewan's mandate. So far better to say "it is evident" and hope nobody notices that no actual evidence is forthcoming.

Onward...
Saskatchewan’s marginal personal tax rates on labour income and savings, especially for individuals with modest incomes, are high.
An interesting theory to be sure. But in addition to the continued lack of evidence, it's hard to escape noticing that the report's recommendations are explicitly targeted away from "individuals with modest incomes", favouring instead a 10% flat tax which would give the greatest benefits to those who make the most.

Mind you, the Sask Party seems to be entirely on board with that idea. In fact, as only a slight aside, take a look at this stunner from Finance Minister Rod Gantefoer in response to the report:
“You can also make the argument that some of the higher-income people are the people that are more likely to be generating significant revenue by their economic decisions and activities,” he said.
Yes, that is a trickling-down sound you're hearing. But it has nothing to do with income distribution.

Back to the report...
There is sound evidence to show high marginal tax rates deter people from investing in education, discourage savings and negatively impact on an individual’s decision to become a self-employed entrepreneur.
Once again, it's not clear where the "sound evidence" comes from. But far be it from the body charged with developing public taxation policy to mention whether its sources include anybody worth listening to, or consist solely of the Fraser Institute's Random Anti-Tax Spin Generator.
High taxes also act as a deterrent to reporting income.
Note the importance of the word "high" here. Because while people are rationally willing to risk prosecution to avoid paying a 15% income tax, they'll be so overcome with civic pride at the 10% level that they'll probably declare some extra income just for the privilege of contributing to the theory that "lower taxes raise revenue!". Speaking of which...
Ironically, lowering personal income taxes (PIT) could in fact lead to increased overall tax revenue.
Similarly, a billion-dollar investment in a publicly-owned Pog factory could in fact spur the resurgence of what was once a popular fad, bringing the province untold riches. So can we agree that the two ideas are equally well-founded?
Furthermore, lowering personal income taxes will also have positive impacts on quality of labour (skilled workers wanting to work in Saskatchewan) and productivity (there will be a greater incentive to work and to perform well).
Which brings us full circle: we're right back to the same unsupported claims as were made two paragraphs ago, only now in the form of unfounded speculation rather than half-baked analysis.

So in a span of just three paragraphs which are intended to form the basis for Saskatchewan's tax policy, we have multiple evidence-free assertions (including two which falsely point to themselves as evidence), several theories taken from the works of the Underpants Gnome School of Economics, and a complete disconnect between the explanation of the supposed need for change and the report's actual recommendations.

Of course, it surely says something when even the Sask Party is running from most of the recommendations. But the Wall government can't get off the hook that easily. After all, it made the choice to leave major portions of Saskatchewan's public policy in the hands of what was obviously a flawed structure to being with, and even most of the running consists of pointing to promises not to do what the report recommends rather than any recognition that the report itself might be something less than a message from on high.

So the report should send a strong signal as to both the direction where the Sask Party wants to take the province, and the complete lack of anything but blind faith that the same corporate-friendly excesses which have led to disaster elsewhere can be relied on to create an unburstable bubble in Saskatchewan.

Update: Oh, the hilarity of right-wing groupthink. The Canadian Taxpayers Federation's Lee Harding points to exactly the same passage as "(making) the case well".

Update 2: Fixed typo. And welcome to the visitors from Dog Blog.

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