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Justin Trudeau's Father Paid A Heavy Political Price For Tax Reforms

The earlier Trudeau-Benson experience should inform today's initiative.

09/28/2017 15:07 EDT | Updated 09/28/2017 15:09 EDT
John McNeill / The Globe and Mail via CP
From left: Pierre Trudeau, Jean Marchand and Edgar J. Benson at the Federal Provincial Constitutional Conference in Ottawa on Feb. 11, 1969.

In the dead of summer in July, Justin Trudeau's government introduced new income tax proposals that will result in Canadian small business owners paying more tax. Finance Minister Bill Morneau called the proposals "The Fair Tax Plan," which he says is directed at ensuring every Canadian pays his "fair share of taxes — with no exceptions."

The process the government is using to turn those proposals into legislation is eerily familiar: Pierre Trudeau government's strategy to bring about tax reform nearly 50 years ago was similarly well-intentioned yet acrimonious and, ultimately, damaging to Liberal fortunes.

In my recent book, Trudeau's Tango: Alberta meets Pierre Elliott Trudeau, 1968-72, I told the story of the federal white paper on tax reform, released by the elder Trudeau's government in November 1969, in the first half of his first term and while still enjoying a honeymoon with most voters.

Then-finance minister Edgar Benson announced that the government intended to pass tax reform legislation based on the Carter Commission report that concluded low-income earners were paying more than their fair share of income taxes. Therefore, any reform of the tax system should aim to treat them more fairly, it said.

Much political capital may be lost for very little legislative success. The longer the current public debate festers, the more the Justin Trudeau government has to lose.

Leading up to legislation, Benson introduced government proposals in a White Paper, followed by a period for public input that would improve the proposals, which would then be presented to Parliament as a tax reform bill. This was a practical application of "participatory democracy," a much-ballyhooed idea of the 1960s to boost grassroots involvement in the legislative process.

Benson's initial proposals included a capital gains tax, tax reductions for low-income earners, tax increases for some middle-income earners, and ending tax loopholes involving expense accounts and dividends, all of which Benson said were designed not to raise more revenues for the government but to make the tax system more fair for working men and women.

What followed was a nasty year-long attack on the white-paper proposals by businessmen, academics and opposition politicians, which cost the government considerable support. There were allegations of socialist, and even communist motives on the part of Trudeau, and there were dire predictions of the loss of investor confidence in Canada if the proposals were implemented. The government received only tepid support from a few unions and middle-class professions, such as teachers and nurses. Even some voices from within the Liberal caucus were critical of the white paper.

Chris Wattie/Reuters
Finance Minister Bill Morneau takes part in a news conference in Ottawa, July 18, 2017.

In June 1971, the government finally introduced its tax reform legislation. The celebrated reforms ended up being much less rigorous and effective at achieving their main goal — fairness for lower-income Canadians. The government paid a heavy political price as a result of the fierce and prolonged assault by white-paper opponents. The public battering was one of the factors that hobbled Pierre Trudeau's first term to the point that he was barely able to eke out a thin minority government in the 1972 election. In my home province of Alberta, that election saw the Liberals lose all four seats that they won in 1968 whereupon a drought of federal Liberal seats set in which lasted for the next 21 years.

Justin Trudeau and Bill Morneau's argument that the current system favours the rich has merit: lower-income Canadians are subsidizing the tax benefits enjoyed by the wealthy. But it is very likely that the only voices that will be heard belong to the wealthier opponents of the reforms. They are the ones with the money and communications platforms to shout the loudest, even in this era of social media access for all. That negative carping by the establishment grows daily in ferocity and volume.

The earlier Trudeau-Benson experience in tax reform should inform today's Trudeau-Morneau initiative that the government must not only hone its message, but also work fast to get the proposals through Parliament. Otherwise, much political capital may be lost for very little legislative success. The longer the current public debate festers, the more the Justin Trudeau government has to lose.

Darryl Raymaker is the author of "Trudeau's Tango: Alberta meets Pierre Elliott Trudeau, 1968-72" (University of Alberta Press), examining Liberal party fortunes in Alberta. He is a retired lawyer and political figure in Calgary.

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