Referendums vs. democracy: tax policy edition

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The August 4 episode of PolitiCoast has an excellent interview with Professor Lindsay Tedds, a tax economist at the University of Victoria’s School of Public Administration (and a blogger at Dead for Tax Reasons). The interview takes up almost the entire running time and covers a wide range of topics that will interest regular readers of this blog, including basic income, the minimum wage, the NDP leadership contest, and some sharp but fair criticism of the new provincial government’s tax policies. It’s well worth a listen!

Here I want to focus on Tedds’s comments around the 29 minute mark, where she argues forcefully for replacing the outmoded Provincial Sales Tax with a value-added tax — effectively reintroducing the Harmonized Sales Tax. There is already a political consensus that the PST is seriously flawed and in need of reform. And as Tedds points out, two independent reviews of BC’s tax system have recommended replacing the PST with a new VAT. This recommendation is consistent with conventional wisdom on tax policy that cuts across the political spectrum. During the politically charged debate over the BC HST, progressive economists like SFU’s Krishna Pendakur and the CCPA’s Iglika Ivanonva both expressed support for the principle of value-added taxation. And as I have noted previously on this blog, all of the Nordic social democracies fuel their comprehensive welfare states with value-added taxes at far higher rates than the short-lived HST.

Regardless of VAT’s merits, it is generally assumed that this option is political poison. Tedds’s frustration at this fact is evident:

I really hate that we can’t go back to this simply because — what was his name? — Gordon Campbell screwed up the implementation of that. The PST is a terribly inefficient tax to have; we would do much better with a GST/HST and we could implement it such that it was [progressive].

Campbell’s disastrous implementation of the HST is an important part of the story. But the main problem, I think, is the fact that the HST was repealed in a referendum, and referendums are perceived as uniquely authoritative democratic instruments. This perception is, however, deeply misguided.

The normative core of democracy is not government by ballot, but government by discussion. In representative democracy, even when even when it is said that “the people have spoken” in determining the outcome of a general election, the verdict is always provisional and in any case concerns only the composition of a body selected for the purpose of carrying on discussion. But all too frequently, the purpose and function of referendums is to end discussion by means of the ballot. In a referendum, the conceit is that “the people” speak rather than discuss, and that having spoken, further discussion is superfluous at best, and an affront to popular sovereignty at worst.

The idea that referendums represent a purer form of democracy, then, could not be further from the truth. Democratic government depends on mutual recognition that our judgments are fallible and thus subject to revision. Certainly there are some key features of a democratic regime that are, as Rawls put it, “not subject to political bargaining or to the calculus of social interests.” But these are rare exceptions, and I find it hard to believe that certain technicalities of the tax system are among them. When prominent political actors treat the public as though we are incapable of conscientiously revising political judgments after further consideration or in light of new information, they treat the public as though we are incapable — or unworthy — of democratic government. It is up to us to determine whether this treatment is warranted.

One thought on “Referendums vs. democracy: tax policy edition

  1. Pingback: Reasons for optimism about democratic reform in BC | Popcorn Machine

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