Ted Rechtshaffen
Aug. 20, 2020
“My rent should be waived!”
“Tuition should be free!”
“You can’t take away CERB!”
It seems that more and more Canadians are expecting income support from the government, and increasingly, the government is delivering with direct payments to Canadians. This was already happening before COVID, but the pandemic appears to have accelerated the trend.
It isn’t surprising that people like getting something for free. In tough and unprecedented times such as these, some degree of emergency support can be necessary.
The problem with free, however, is that you usually end up paying for it somehow. But what happens if you can manage to get things for free and always have others pay?
As my 18-year-old daughter reminds me, she is more than happy for me to pay for things. All things being equal, she is very happy for me to continue to spend my money on her.
Hopefully, although not always, as a young adult grows up they become fully financially independent of their parents. They no longer look for or expect their parents to pay for things that they want or need.
This is what I think was once the financial relationship between an adult citizen and their government. Once a citizen reaches a certain age and stage, they were no longer looking for or expected their government to pay for the things that they wanted or needed.
This has really changed. It has changed a lot over the past few years, but it looks like this change will speed up even further, especially if the economy takes a long time to recover. Politicians have learned that the most effective government largesse involves putting cash straight into voters hands. Increasingly, many Canadians have the belief that the government is supposed to take care of us in some way, maybe even for our entire lives.
I used to believe that there was a disconnect in thinking here. After all, the government is just collecting our money in the form of taxes and redistributing much of this money in a variety of forms back to us. I never understood these increasing demands for more from the government, more cash back, more things for free, more support of various kinds. After all, if this is simply going to cost us more money, then why do we keep asking the government for more?
I thought this thinking might be caused by a lack of fundamental financial education. Maybe if people had a better understanding of the various taxes that are being collected, and then could see what it was being spent on, they might simply want less to be collected and less to be spent.
I now understand I was wrong. It wasn’t others’ lack of financial education, it was mine. Most people who want more government support realize that they will not be paying for it. It will come out of other people’s pockets.
According to a study from the Fraser Institute in 2017, when looking at income taxes alone, the bottom 50 per cent of Canadian taxpayers pay nine per cent of all income taxes. Based on the way Canada’s various benefits work (Old Age Security, Child Benefit Plan, etc), this same group of 50 per cent of taxpayers will also receive more than 50 per cent of the benefits.
To better understand this, you can check out the government’s child family benefits calculator online.
I entered a family with 3 children, with the exact same scenarios and ages. At $50,000 of income, the benefit calculator said I would receive $18,814. At $100,000 of income, I would receive $8,648.
Just as an added component, most of that $18,814 in benefits comes in tax-free as part of the Canada Child Benefit.
Not surprisingly, people especially like free when they understand that someone else ultimately pays the bill. Whether you agree or disagree with our tax policies and benefits, I do think it is important that people understand how taxes and benefits are working today because they speak volumes about Canadian values, priorities and votes in 2020.
People especially like free when they understand that someone else ultimately pays the bill.
It is also good to remember this when we see who is out there asking for things and why.
A lot of thought has gone into what changes will happen in society after we get through COVID-19. My concern is that the demands for more from the government will continue and move us further from where we were. Governments will have to pay for these demands with a combination of higher taxes from a small segment of the population, and increased debt which we seem to believe can be kicked down the road indefinitely.
Is there no hope for a citizen/government scenario like the one we envision for our children, in which the child eventually becomes financially independent? Will Canadians be reliant on the government their entire lives?
While it is entirely expected and acceptable for this to happen in some situations, it can’t be our hope in most cases.
What type of Canada are we creating when more and more Canadians expect to be reliant on the government? Everyone will have times of need in their lives. Ideally, they will find support at those times from family, friends, and their community. Government should be the last resort. How did we get to a point where we want and expect free from the government, and how can we turn this around?
The one thing I am sure of is that the more benefits that some get for free, the bigger the bill will eventually be for those who have to pay.
