Taxes and public services help build a better city

Jim Stanford, Economist, Canadian Auto Workers

A word of caution: just cutting taxes won’t do the trick in this regard. That rote advice reflects a deep, old-fashioned misreading of the determinants of competitive success in modern, high-value industries. If low taxes guaranteed success, then Alabama, Arkansas, Oklahoma and Louisiana would be the economic hot spots of the continent (since they have the lowest property taxes of anywhere in Canada or the U.S.). In reality, they are depressed backwaters, which can’t even fund good schools.

Successful industries need positive inputs, not an absence of taxes. Skill. Quality infrastructure. Clusters — so specialists can meet and learn from each other. Strategic supports for investment. And markets. Big markets.

Public-sector jobs help to lift benchmarks through the rest of the labour market (which is exactly why private employers complain endlessly about them). Public services help to stabilize and support the neighbourhoods that make up the city — instead of watching some thrive, and others sink, according to the market’s logic of polarization. And private non-tradable businesses ride on the coattails of those investments, relying on factors like transit, safety and local buying power to maintain their own businesses.

Here, too, conservative business lobbyists have exactly the opposite path in mind. They’ve pushed forward loudly with yet more calls for spending cutbacks and corresponding tax reductions. But when your house is showing signs of wear and tear, it is time to invest more in it — not less.

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