Tax Cuts: Draining Revenues and Widening the Gap
Harper’s administration pursued aggressive tax reductions, framing them as relief for families and businesses. The Goods and Services Tax (GST) was cut from 7% to 5% in two phases, corporate income taxes plummeted from 22% to 15% by 2012, and various boutique tax credits were introduced for families. These moves were touted as stimulating the economy, but in reality, they deprived the federal government of billions in annual revenue—estimated at $17.1 billion yearly from personal income tax cuts alone between 2005 and 2013. From a viewpoint skeptical of tax lowering, this was a misguided strategy: it shifted the tax burden toward regressive measures, favoring the affluent while underfunding public services like healthcare, education, and social supports.
The corporate tax cuts, in particular, failed to deliver the promised investment boom. Despite claims they would boost job creation, business investment remained lackluster, and the revenue loss—around $15 billion per year—contributed to persistent deficits. Inequality worsened under Harper; the top 1% captured a larger share of national income, while the bottom 60% saw minimal benefits from measures like income splitting, which disproportionately aided high earners. For instance, income splitting provided an average of just $50 annually to the poorest 60%, compared to substantial gains for wealthier families. This regressive shift eroded Canada’s social safety net, leading to cuts in public sector jobs and services, all while corporate profits soared without trickling down.
To be fair, the tax cuts did provide some cushion during the 2008-2009 global financial crisis. The pre-recession reductions, combined with a $61 billion Economic Action Plan stimulus, helped Canada avoid a deeper recession, with GDP contracting less than in the U.S. or Europe. However, post-crisis austerity—driven by the revenue shortfalls from tax cuts—prematurely slowed recovery, sacrificing investments in infrastructure and social programs for deficit reduction.
Underwhelming Economic Performance: Growth Stagnates, Debt Mounts
Harper’s tenure is marked by the weakest economic growth of any post-World War II Canadian prime minister. Real GDP grew at an average annual rate of just 1.6%, barely outpacing population growth and lagging behind the previous two decades. Per capita GDP growth was even worse, at 0.4% to 0.5% annually, reflecting stagnant living standards for many. Job creation was uneven, with much of it in part-time or low-wage sectors, and unemployment recovery was sluggish.
The tax cuts played a role here: by hollowing out revenues, they forced eight consecutive deficits, adding over $150 billion to the federal debt and pushing the debt-to-GDP ratio up to 33% by 2013. Critics argue this ideological commitment to lower taxes ignored the need for robust public investment to drive productivity and inclusive growth. External factors like falling commodity prices contributed, but domestic policies amplified the issues, leaving Canada less competitive and more vulnerable.
The 2015 Budget: Smoke and Mirrors for Electoral Gain
Harper’s final budget in 2015 claimed a $1.4 billion surplus, fulfilling a 2011 election promise and positioning the Conservatives as fiscal hawks. However, this “balance” relied on one-time tricks rather than structural improvements. The government raided the $3 billion contingency reserve—intended for economic uncertainties—slashing it to $1 billion and using $2 billion to pad the books. Without this dip into the rainy-day fund, the budget would have shown a deficit.
Additionally, the surplus hinged on selling the remaining stake in General Motors shares, a one-off transaction that realized gains but came at a loss compared to the original bailout investment. Critics labeled it “sleight of hand,” arguing it masked ongoing fiscal challenges and depleted assets without addressing revenue shortfalls from tax cuts. From a progressive standpoint, this was emblematic of Harper’s approach: prioritizing the appearance of balance to appeal to voters while undermining the government’s ability to fund vital services in uncertain times.
Reflections on the Harper Legacy: Missed Opportunities for Equity
In fairness, Harper’s government achieved some positives, such as expanding trade agreements and implementing maternal health initiatives abroad. The stimulus during the recession prevented worse outcomes, and Canada emerged relatively strong compared to peers.
Yet, for those who believe taxes should support a strong social fabric rather than being minimized, the Harper years represent a setback. The tax cuts fueled inequality, starved public services, and left a legacy of debt and slow growth. True economic management requires investing in people through fair taxation, not hollowing out revenues for ideological gains. The Harper era wasn’t so rosy— it highlighted the perils of prioritizing tax relief over shared prosperity.
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