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Opinion: Canadians won’t accept Swedish-style taxes

Commentary

According to a recent poll, 42 percent of Canadians agree that socialism is the ideal economic system, as defined by increased government spending and/or a guaranteed annual income. In many ways, the poll responses, particularly from younger people, mirror the arguments made by self-described “social democrats” who believe Canada should be more like Sweden. But there’s one problem—Canadians are highly unlikely to accept Sweden’s taxes.

Simply put, Sweden has a larger government than Canada. According to data from the International Monetary Fund, government spending in Sweden (as a share of the economy) was 46.8 percent compared to 41.5 percent in Canada in 2022, meaning that Sweden’s government sector was almost 13 percent larger than Canada’s (again, relative to the size of the economy).

The challenge for social democrats in Canada is how to pay for this larger government. In Sweden, contrary to rhetoric that the wealthy pay a disproportionate share of taxes, government spending is paid for by much higher taxes on middle-class workers and families. 

For example, Sweden’s top personal income tax rate of 52.3 percent is comparable to Canada’s top rate of 53.5 percent, but Sweden’s top rate applies to income starting at roughly US$62,000 compared to Canada’s top rate, which kicks in at almost US$177,000. Clearly, the top personal income tax rate in Sweden applies to many average Swedish workers and families.

Moreover, Sweden’s national sales tax rate (25 percent) is one of the highest in the industrialized world, which again applies to average workers and families. The combined federal GST and provincial sales tax rates in Canada range from 5 percent in Alberta to 15 percent in the four Atlantic provinces. And Sweden also has comparatively high payroll tax rates at 31.4 percent.

The consequence of these three tax policies is clear—average Swedes bear the burden of higher government spending.

Here in Canada, the polling data is also clear—Canadians do not want to pay higher taxes to finance more government spending. In fact, while more than four-in-ten Canadians favour more government spending, only 31 percent are themselves willing to pay higher personal income taxes to pay for it, and even fewer favoured a higher GST (16 percent).

In response to this aversion to higher taxes, governments in Canada, particularly the federal government, have chosen to borrow money to finance more spending. The expansion of existing programs such as the Canada Child Benefit, which provides tax-free cash payments to eligible families with children under 18, and the introduction of new programs such as $10-a-day daycare and national dental care, have been entirely financed by borrowing, meaning future generations will have to pay for these programs.

However, many social democrats in Canada may be surprised to learn that this type of borrowing is not permitted in Sweden. According to Swedish economist Johan Norberg, Swedish government spending is constrained by fiscal rules that the Swedish people strongly support. Specifically, the national government is required to establish spending targets three years in advance that result in a small surplus over the business cycle, thus avoiding debt accumulation over time. Any spending increases must be offset by equivalent spending cuts in other areas to remain within the overall targets. In addition, municipalities and regions are prohibited from running deficits. In other words, the rules in Sweden require current taxpayers to pay for current government spending, which means higher levels of spending require higher taxes.

As noted above, Canadians do not support higher taxes for themselves to pay for more government spending. A 2022 poll found that support for various federal initiatives collapses when accompanied by proposed increases in the GST to pay for them. For instance, when linked with an increase in the GST, support for $10-a-day daycare drops from 69 percent to 36 percent, and support for dental care falls from 72 percent to 42 percent.

Finally, according to the recent poll, most Canadians agree that other Canadians—particularly higher-income workers—should pay more taxes to fund government spending. But further disproportionately taxing high-income earners, along with borrowing to finance current spending, is not sustainable and is certainly not based on the Swedish experience where the middle class bears the burden of higher government spending and fiscal rules prevent the type of borrow-to-spend policies we see in Canada. 

All Canadians, including social democrats, should understand the fiscal realities in Canada and beyond when advocating for larger government and increased spending.

Steve Lafleur: Taylor Swift ticket prices are breaking people’s brains

Commentary

The post-COVID economy has been a little nuts. After two years of mostly sitting at home trying not to die, people are living it up. And the global economy is running hot. Central banks around the world have sharply increased interest rates in part to cool off consumer demand. Consumers aren’t having it. 

With everyone with any disposable income trying to make up for two years of lost experiences, the cost of leisure has skyrocketed. Hotel rooms in mid-sized American cities are running around three hundred American dollars. Flights have tapered off a bit from last year, but they’re still not cheap. But if you really want to see the excesses, look no further than Taylor Swift’s Eras tour. 

I’m not exactly up to speed on pop music. Frankly, it’s been a decade since I’ve paid attention to new music. So I didn’t really grasp the magnitude of the Taylor Swift phenomenon until I was booking a hotel room in Cincinnati a few weeks ago. Reasonably normal-looking hotels had suspiciously negative reviews. So I decided to dig into it. 

It turned out the Eras tour had blown through town two days before, leaving behind a trail of negative hotel reviews. Since everyone in Southwestern Ohio and Northern Kentucky with a pulse wanted to go to the concert, hotel prices ballooned. Swifties were not happy. Prices doubled, and normally abundant but temporarily scarce parking spaces went for fifty bucks. Reviews for the hotel I booked took such a temporary beating that I was able to lock in a room for about twenty percent below the current weekday rate. Thanks, Swifties!

Of course, hotel prices aren’t the whole deal. Usually getting and staying somewhere is the most expensive part of a vacation. Not if you’re going to see the hottest show in the world. Even in Cincinnati—hardly the biggest concert market—ticket prices climbed to over a thousand dollars, with last-minute tickets dipping to the eight hundred dollar range. 

Fans are understandably frustrated. After all, not everyone can shell out a thousand dollars for a concert ticket. The trouble is, there’s not enough Taylor Swift to go around. Someone is going to miss out, no matter the price. 

To illustrate this, let’s consider the recently announced Toronto leg of the tour, set to take place in 2024. The tour will include six shows at the Rogers Centre, which has a capacity of just over 50,000 people. In other words, there will be around 300,000 seats available. In other words, fewer than one seat for every ten Torontonians, or enough for around one percent of Canadians. It’s not a surprise that tickets are going for thousands of dollars on the resale market. 

No matter how you distribute tickets, some people are going to be left out. Who gets left out will be determined either by prices or by some form of arbitrary rationing. We can argue about whether it’s better that some people are able to profiteer by reselling tickets for several times face value, or whether it’s better that people are excluded by some arbitrary, non-monetary means (say, by picking people at random and preventing resales). But there isn’t really a third option—we can’t make more Taylor Swift. At least not with current technology. 

Sadly, Taylor Swift won’t be young forever. One day the stadium lights will go out. Some people are going to miss out. That sucks. But there’s no way around it. We can’t all be there for the big moment. Not always, anyways. 

What interests me about the Eras tour isn’t the tour itself or even the entertainment business. It’s about how people think about scarcity. We see it in everything from concert tickets to housing. When there are more potential buyers than sellers, prices tend to go up. People often conclude that it’s simply a matter of greed. Building one more “luxury” condo I can’t afford won’t solve this! And that can very well be true when there’s a severe shortage. 

Unlike unique, unrepeatable events, most things aren’t inherently that scarce. We can actually build our way out of housing shortages—if we choose to. There’s a reason why housing prices are much lower in fast-growing cities like Phoenix and Dallas than they are in prestige cities like San Fransisco and New York. They build way more houses!

On the other hand, Taylor Swift could probably double the number of shows and tickets would still be expensive. There are just so many people who want to see the tour, and who would be willing to go several times. By contrast, there are only so many houses anyone will buy. Even speculators. 

I worry that we learn lessons from these edge cases that aren’t really applicable to normal situations. The fact that there isn’t enough Taylor Swift to go around should tell us precisely nothing about public policy. Most things aren’t as scarce as concert tickets for the biggest musician of a generation at the height of her popularity in the wake of a global pandemic. 

Supply and demand usually works just fine, when governments stay out of the way. There’s no lesson here, as tempting as it is to search for one. 

Hopefully, as the COVID hangover wears off, things will continue to normalize. Travel and leisure have become rather expensive. Hopefully, the era of $300 Radisons is over. But the hottest concert tickets in town will probably always be expensive. There’s just no way around that. Not until we figure out how to clone Taylor Swift.