Policy Forum: Tax Reform in Canada's 43rd Parliament—Politics, Policy, and Second-Best Choices

Sean Speer ()
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Sean Speer: Munk School of Global Affairs and Public Policy, University of Toronto

Canadian Tax Journal, 2020, vol. 68, issue 1, 35-47

Abstract: A minority Parliament in Ottawa will require that the government and the opposition parties search for areas of policy convergence. One area where there is potential for cooperation is action on a comprehensive review of the federal tax system, which was an election commitment by multiple political parties. There is scope for a review exercise that ultimately can enhance the efficiency and equity of the federal tax code. But such a review will need to recognize that tax policy and politics cannot be divorced from one another. This article presents a critical analysis of calls for a royal commission or adoption of the "big-bang" model for tax reform. These approaches to tax reform assume that politics is a major barrier to evidence-based tax reform and that political impulses need to be minimized or excluded from the process. This perspective neglects the normative aspects of tax policy and the extent to which policy choices are shaped by a complex mix of interests, preferences, and values. Instead, the author argues for a reform exercise that is rooted in political institutions and processes. In particular, he proposes an incremental yet systematic model for tax reform that draws from the 2007-2011 experience with "strategic reviews" of program spending at the federal level. This model would envision the government conducting thematic reviews of tax expenditures (focusing, for example, on home ownership, retirement and savings, and clean energy investments) on a regular, ongoing basis, in order to gradually rationalize the federal tax system by consolidating and redesigning current tax expenditures. The results may be less transformative in the short term than those potentially achievable by alternative approaches, but will ultimately lead to more durable reform over the long term.

Keywords: Tax reform; tax policy; tax expenditures; efficiency; equity; political economy (search for similar items in EconPapers)
Date: 2020
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DOI: 10.32721/ctj.2020.68.1.pf.speer

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