MONTREAL — One of Canada’s top bankers is advocating that taxes be reduced for lower-income Canadians instead of the more well-off to help encourage employment.
TD Bank chief executive Ed Clark said lower taxes for the poor can be the best way to help Canadians who bear a disproportionately larger brunt of the slow economic recovery.
Those wanting to move off welfare to work face a disincentive with virtually a 100 per cent marginal tax rate, Clark said.
“That’s not a good thing from an economic point of view and it’s not a fair thing from a people point of view,” he told a news conference Thursday after addressing a business audience.
The first instinct is for government to offer stimulus spending, but Clark said it’s structurally more important to have the working class bear a little less of the tax burden.
“What you want to do is lower costs of labour in any way you can and induce people to try and find jobs, not have labour taxes, employment taxes or have barriers where they face high marginal tax rates and I think that’s just as good as most of the government programs that we launched to spend money on,” he told reporters.
Clark also joined the growing chorus of business leaders who have called for a national “adult conversation” to address the impact of the aging population on health-care spending.
While not advocating a specific proposal, he said a Canadian solution must be found to preserve a universal system and ensure the burden of growing health-care costs don’t always fall on government.
User fees and expanding private health care are among the topics that need to be discussed, Clark said.
“What we shouldn’t do is say: ’I’m going to close my eyes and hope that in five years or 10 years these trends won’t be there,” he told reporters.
The aging baby boom generation, which funded increased government revenues in the past few decades, will soon force health-care costs to explode.
It’s a complex issue that the federal government and every province faces. Refusing to make any changes will mean that health-care will eventually account for 70 or 80 per cent of provincial budgets, he said.
The Conference Board of Canada made the same point in a report last week urging Quebec to act before it hits a fiscal wall because of the province’s heavy debt burden, weak demographic growth and high health-care spending.
Clark said he doubts there the end result will be one national health-care solution.
“I would not be surprised if we end up with a commonality in its core but a lot of different solutions around that commonality.”
Quebec has often been an innovator in many of these areas and could once again lead in this area as well.
Earlier, the chief executive of North America’s sixth-largest bank and the second biggest in Canada, called on Canadian governments to make tough decisions to balance their budgets and improve productivity levels.
Clark said the federal government’s timeline to eliminate its $56-billion budget deficit in five years is “about right.”
Provinces should also set clear target dates, perhaps longer in some cases, but ones that could be realized, he told the Canadian Club of Montreal.
Clark said Canada’s stronger performance than many other countries shouldn’t leave it complacent about longer-term challenges such as improving its weak productivity in a high dollar world.
“My concern is that we will focus on the immediate issues, at the expense of those just over the horizon. That would be a grave mistake,” he said, adding that Canada can gain a permanent competitive advantage by tackling the long-term issues.
The big lesson of Japan’s lost decade is to not let structural issues fester.
While the U.S. economic recovery is underway, it won’t be robust any time soon and Canada can’t rely on the external environment to support its own recovery, he said.