By Jack Mintz, October 4, 2022
With recent elections in Italy, Sweden and the U.K., a shift to the right is gathering pace in Europe. The same may occur in the mid-term U.S. elections if the Republicans win back the House and a Senate majority.
Many issues affect an election but right now inflation is top of the agenda. To combat it, many politicians on the right are pushing for tax cuts. A recent OECD review of anti-inflation policies reported that 74 countries have provided almost US$250 billion between May and December 2022 in new tax or non-tax relief. About two-thirds is fossil-fuel support (excise or VAT tax reductions, price controls and reduced electricity charges). So much for climate change! Twenty-one countries reduced personal income taxes and 18 cut corporate income taxes. Only seven reduced social security taxes. Initially, many tax cuts were temporary but, given continuing high prices, many have been or will likely be renewed.
In Canada, Ottawa and some provinces (e.g., Quebec) are providing income support. Several provinces are reducing gas taxes, including Ontario and Alberta. B.C. has reduced taxes on electric vehicles and electric bikes. On the other hand, the federal and provincial governments are raking in billions of tax dollars due to inflation, in part because of a meagre indexation factor of just 2.4 per cent for 2022 (despite year-over-year inflation of almost five per cent in 2021). No wonder workers are feeling squeezed.