hy Canada Is Able to Do Things Better
Most of the country understands that when it comes to government, you pay for what you get.
Decades later, the United States presents visitors from the north with a different impression. There hasn’t been a new major airport constructed in the United States since 1995. And the existing stock of terminals is badly in need of upgrades. Much of the surrounding road and rail infrastructure is in even worse shape (the trip from LaGuardia Airport to midtown Manhattan being particularly appalling). Washington, D.C.’s semi-functional subway system feels like a World’s Fair exhibit that someone forgot to close down. Detroit’s 90-year-old Ambassador Bridge—which carries close to $200 billion worth of goods across the Canada-U.S. border annually—has been operating beyond its engineering capacity for years. In 2015, the Canadian government announced it would be paying virtually the entire bill for a new bridge (including, amazingly, the U.S. customs plaza on the Detroit side), after Michigan’s government pled poverty. “We are unable to build bridges, we're unable to build airports, our inner city school kids are not graduating,” is how JPMorgan Chase CEO Jamie Dimon summarized the state of things during an earnings conference call last week. “It’s almost embarrassing being an American citizen.”
Since the election of Donald Trump, there’s been no shortage of theories as to why America’s social contract no longer seems to work—why the United States feels so divided and dysfunctional. Some have focused on how hyper-partisanship has dismantled traditional checks and balances on public decision-making, how Barack Obama’s rise to power exacerbated the racist tendencies of embittered reactionaries, and how former churchgoers have embraced the secular politics of race and nationalism.
The Organization for Economic Co-Operation and Development (OECD), a group of 35 wealthy countries, ranks its members by overall tax burden—that is, total tax revenues at every level of government, added together and then expressed as a percentage of GDP—and in latest year for which data is available, 2014, the United States came in fourth to last. Its tax burden was 25.9 percent—substantially less than the OECD average, 34.2 percent. If the United States followed that mean OECD rate, there would be about an extra $1.5 trillion annually for governments to spend on better schools, safer roads, better-trained police, and more accessible health care.
Among the American right, by contrast, the conversation about taxes often seems infused with magical thinking. Specifically, it is imagined that even severe and abruptly implemented tax cuts will serve to actually increase government revenue, thanks to the turbo-charging effect on economy growth. As T. R. Reid of The Washington Post writes in his recent book, A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System, there is scant evidence that supports this idea—and much that opposes it. Denmark, with a tax burden of 49.6 percent, stands atop the OECD index. It also happens to be a wonderful place to live, with a high standard of living funded by a diversified, high-tech, export-driven economy.
By contrast, when Kansas Governor Sam Brownback abruptly slashed the state’s top income tax rate by 26 percent in 2012, state revenues went into a freefall. Yet the notions that government is always a plague upon the economy and that lower tax rates will lead directly to growth and prosperity—which have together accreted into a core plank of U.S. conservative ideology since the Reagan years—still remain popular. And Donald Trump seems intent on steering the country onto the same downward trajectory as Kansas: His “Taxpayer First” budget plan, released in May, proposed enormous tax cuts that, his administration claimed, would pay for themselves through the economic boom they’d bring about. (In an analysis released last week, the Congressional Budget Office took a much dimmer view.)
Has Canada figured this all out? Of course not. Some of its communities, especially remote indigenous reserves, are afflicted with poverty and squalor that stain the national conscience. But when I recently interviewed Canadian business leaders about the challenges they perceive, the word taxes didn’t get mentioned much. Instead, I heard a lot about the need for high-skilled workers, the lack of affordable real estate, dangerously high household-debt levels, and the importance of mass-transport infrastructure.
In these discussions, Canada’s universal health-care system was often described as a plus. Because Canadian entrepreneurs can quit their day jobs without their spouse losing access to dialysis, or their children losing access to pediatricians, such a system allows business-builders more professional freedom. (Under this system, Canadians tend to live longer than Americans, though they also spend more time, on average, waiting for treatment.)
What does that 10 percent premium buy for my family? Aside from universal health care, there’s world-class public schools, a social safety net that keeps income inequality at rates well below America’s, and an ambitious infrastructure program that will help Canada keep pace with its swelling ranks of educated, well-integrated immigrants. Oh, and I also get that new bridge. Naturally, it will have a bike lane, and be named after the hockey legend Gordie Howe.
Canadians tend not to talk about making their country great again. Canada never was particularly great—at least not in the sense that Trump uses the word. Unlike Americans, Canadians haven’t been conditioned to see history in epic, revolutionary terms. For them, it’s more transactional: You pay your taxes, you get your government. That might not be chanted at any political rallies or printed on any baseball hats. But it works for Canada. And it’d work for America too.