The great Canadian CEO tax heist

Every so often I’m reminded there’s a ridiculous loophole in Canada under which individuals can deduct 50% of the income earned through stock options (in other words, people compensated with stock options pay tax on *only half* that income.)

The loophole is predominantly taken advantage of by highly compensated people, often high-ranking executives at large firms (in 2014, for example, three quarters of all deductions claimed through the loophole were from 8,000 very high-income Canadians).

We’ve effectively created a system in which people who quite literally earn 200x the average income don’t have to pay taxes on their total earnings.

The chart below shows what Canada’s highest paid executives made in 2017. Now compare the base salaries to the actual take home pay (which often includes stock options). I don’t have a figure for how much the deduction was used in 2017, but in 2014 the loss of tax revenue from this loophole alone was $750 million.

Rank Name Company Base Salary Other Compensation* Total
1 Michael Pearson Valeant Pharmaceuticals International Inc. $182,902,189 $182,902,189
2 Donald Walker Magna International Inc. $415,462 $26,124,238 $26,539,700
3 Hunter Harrison Canadian Pacific Railway Ltd. $2,803,522 $17,098,931 $19,902,453
4 Steven Hudson Element Financial Corp. $1,200,000 $18,077,385 $19,277,385
5 Mark Barrenechea Open Text Corp. $981,787 $16,988,255 $17,970,042
6 Donald Guloien Manulife Financial Corp. $1,723,671 $13,889,848 $15,613,519
7 Brian Hannasch Alimentation Couche-Tard $1,356,260 $13,458,456 $14,814,716
8 Linda Hasenfratz Linamar Corp. $605,839 $13,608,995 $14,214,834
9 James Smith Thomson Reuters Corp. $1,981,433 $11,730,709 $13,712,142
10 Bradley Shaw Shaw Communications Inc. $2,500,000 $10,641,235 $13,141,235

It’s an obvious point (made forcefully by Quebec writer Alain Denault) but one that somehow eludes a lot of public discussions around taxation:

Every dollar of tax revenue not collected from a CEO means a longer hospital queue, another pothole; another day a toddler has to wait before receiving a critical operation; another delayed renovation in a public housing unit; another15 minutes a worker has to stand at the bus stop before she can be at home, spending time with her kids and enjoying her life.

Chart source: CCPA

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Punditry and the Canada syndrome

It’s pretty widely understood that one of the consequences of being a small country like Canada – inundated with news and entertainment from larger countries, particularly the United States – is that a disproportionate number of cultural signifiers and reference points are, in a sense, imported from elsewhere. One area where I think this is particularly acute – and I sense that this is less well understood – is politics and political commentary.

Take the recent Conservative leadership race.

The whole thing happened in the shadow of Trumpism, with various candidates positioning themselves in relation to recent developments south of the border. As such, all Kellie Leitch had to do was make certain gestures and tweet “Sad!” once or twice and she became “The Canadian Trump”, with the cover of a prominent national magazine issuing the sweeping proclamation that she had “touched off a culture war”. As it turned out, Leitch was very much a candidate of the CPC establishment with little grassroots support. Both her campaign and the media that covered it basically got the whole thing wrong.

And I think this phenomenon is also visible in how pundits talk about Canada’s parliamentary left.

Things tend to be posed in relation to familiar and lazy frames (“pragmatism vs principle”/”party of government vs party of protest”/”centrism vs leftism” etc) that largely ignore the actual experience of the NDP over the past few decades (which is quite different from either British Labour or the American Democrats). To take one recent example, I think there’s been a tendency to view the ongoing leadership race in relation to the experiences of other countries as if the party is simply going to reproduce what’s happening elsewhere, either through an embrace or a repudiation of it.

From what I’ve seen so far, there seems to be a reasonably strong consensus among all the candidates around a variety of pretty major issues with some scattered disagreements (around the OAS issue, for example) and differences in emphasis/degree. Every candidate has postured to the left in one way or another and no right-leaning current is represented. The debate being held simply isn’t a repeat of UK Labour’s 2015 race or the 2015-2016 Democratic primaries.

Not to say, of course, that there’s no debate going on or that there isn’t plenty to discuss or disagree about. But wherever one stands on the race, both the New Democratic Party and Canadian politics more broadly have their own histories and internal dynamics.

These are what should be at the forefronts of our minds when we’re trying to understand what’s going on in either.

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Missing the forest for the trees

In the course of my work I engage a lot with the ongoing public policy debate around raising the minimum wage to $15 an hour. And the deeper I get into the innumerable studies, blog posts, and media coverage the more I’m convinced the issue represents pretty much a textbook version of how political debates have tended to play out over the past 30 years or so.

On one side, you have an assorted coalition of low-wage workers, activists, and trade unions who see raising the wage floor as a natural way of improving material conditions for much of society. On the other, there’s the Chamber of Commerce and the usual right wing wonks and movement conservatives.

Both are acting in a sense on the basis of self-interest, but much of the official debate (in the press especially) is played out in fairly dry and wonkish terms. Officialdom on both sides states that their favoured policy direction “makes good economic sense”, trotting out various statistical studies and analyses to bolster their claims. The thing is then waged on an academic level and through a competition for standing and media legitimacy.

Now, obviously these things are going to be important components of any political campaign from the left or the right. I work at a social democratic think tank that does this kind of work (with, dare I say it, quite lethal effectiveness) and I believe strongly in what we do. Professionalization can’t simply be dismissed (overprofessionalization, of course, is a problem – but that’s for another post altogether). 

But what’s sometimes missing from the public policy foray is any implicit sense that the debate represents an actual struggle between two competing visions of the world. In reading this stuff it often seems like there’s minimal awareness from the interlocutors involved that power dynamics are at play, or that the arguments produced are a kind of formalized agitprop designed to make publicly legible or respectable a position that’s ultimately ideological. Even the worst ideologues on the right seem to have internalized their truisms and talking points so thoroughly that they’re unable to extricate themselves from the morass.

This is one reason why the minimum wage debate is so interesting and instructive. Because while I think left wing economists and others have been very effective at combatting the familiar right wing rhetoric and spin, we’d doubtless be a lot further behind without the organization done by activists, community groups, the Fight for 15, etc., which has helped lay bare the struggle for power at the heart of this whole thing.

No special insight here, but I think it’s important for anyone who spends their time thinking about, debating, or covering public policy to remember that what’s ultimately at stake is who wields power in our society and to what ends it’s applied.

Let’s not miss the forest for the trees.

Photo: 15 and Fairness.

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Jeremy Corbyn and the radicalism of possibility

Today tens of millions of people in my mother country will vote in an early general election few expected and almost nobody wanted.

Throughout all the emotional vacillations of the past few weeks, the one thing I continue to feel is a sense of hope and possibility that until recently would have seemed very alien. It’s not simply the hope of an outright Labour victory that’s keeping me going (unfortunately, this remains somewhat distant possibility) so much as a sense of possibility created by what Jeremy Corbyn has achieved in rejecting the ossified conventional wisdom of pundits and political gatekeepers.

Virtually all the politics I’ve known in my lifetime have been concerned with contracting the horizons of possibility rather than expanding them. Corbyn has succeeded in the face of all odds by explicitly rejecting the hallowed neoliberal premise that nothing can ever get better; that poverty and inequality are metaphysically hardwired into our societies; that the state can tinker but never transform; that democracy is an inconvenience to be managed rather than an enterprise to be embraced; and most of all that the only appropriate response to 30 years of defeat and retrenchment is to accept, adapt, and continue the march into decline. For once, the possibility of change on offer is the real kind: not the hollow elite spectacle of a Trudeau, Clegg, or Obama, but an electoral program that would qualitatively improve tens of millions of lives with a genuine mass movement at its back.

That such a thing could happen in Britain of all countries, especially after the frankenstein duopoly of Thatcher/Blair, still seems surreal. There is a strange sadness about the place, a haze of resignation and decline that has hovered over every decade since the war in one way or another. It is partly this, I believe, that accounts for the cultural stranglehold conservatism has enjoyed since the late 1970s: it’s what preserves all of the old class hierarchies and the insidious logics that justify them; keeps alive the nativism of Mosley and Rivers of Blood; makes culturally admissible the bourgeois racism of a Farage or a Griffin; it’s what maintains the Victorian moralism which says that the only value more important than Pavlovian deference to aristocracy is pathological contempt for the licentious lower orders; it’s the subtext behind every piece of tabloid grotesquery or Murdoch monstrosity, behind every bogus cultural shibboleth from The Aspirational Society to Alarm Clock Britain; it’s what kept democratic socialism in check even when the working classes were organized in their factories and their mines. 

I have no idea what’s going to happen tonight, of course. But win or lose it feels like something genuinely beautiful has been uncorked.

So, with a few hours to go, here’s to the radicalism of possibility and to the future it might bring for us all. 

Photo: https://twitter.com/emilyafai/status/872183750981017600

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A few thoughts on the Conservative leadership race

A few quick and somewhat scattered thoughts on the Conservative leadership race:

-The results demonstrate that the media almost completely misread the race from the get-go. This has become something of a theme in the past few years, though in the other notable instances it’s the more orthodox candidates and narratives that have fallen victim to media misperception and suffered in the final result (here, a relatively orthodox candidate with caucus support ended up winning, contra the dominant media narratives).

-At least four candidates got considerable press, beginning with Kellie Leitch and followed by Kevin O’Leary and Maxime Bernier (with Michael Chong standing in as the ostensibly respectable figure boasting cross-partisan appeal). Without exception, punditry and reporting was moderately to wildly off in its framing/characterization of these campaigns and their overall standing among the public and the CPC rank and file.

-The most notable case here is Kellie Leitch, whose race-baiting immediately won her a Macleans cover story and fostered hyperbolic media narratives about a “culture war” ignored or misunderstood by elites. This turned out to be completely incorrect. Leitch’s donor base (which I wrote an investigation about some months ago) was overwhelmingly wealthy and Toronto-centric and her 7th-place finish suggests that even considerable help from the Ontario PC party machinery couldn’t win her significant support within the Conservative base. Given this, it’s quite extraordinary Leitch received so much attention and that the media was willing to legitimize her candidacy to the extent that it did.

-Kevin O’Leary’s candidacy was harder to read than Leitch’s, but it seems quite obvious in retrospect that he wasn’t really prepared to make a serious effort at winning the job. His less than 20-week career in Canadian politics will be little more than a footnote to a footnote. What a joke.

-Both Chong and Bernier enjoyed a real constituency among op-ed writers, largely thanks to their mutual willingness to speak wonkishly about riveting topics from carbon taxes to dairy-market deregulation. For different reasons, this attention proved to be misplaced.

-As for Chong it should have been perfectly obvious how small the constituency was for his bipartisan pitch (same-sex marriage OK, carbon taxes GOOD, etc.) the main reason being that there already exists another political party reflecting these very principles (“socially liberal but fiscally conservative”[!!!!]). Why a figure like Scott Gilmore is trying to drum up support for a new party along these lines while one already exists is simply beyond me.

-As for Bernier we were almost universally assured by the various opinion-makers of #cdnpoli that his victory was inevitable. (True, the Conservative voting process is complex and somewhat inscrutable. But that the actual winner Andrew Scheer was barely on the radar is testament to just how badly the media misread this thing.) Bernier’s initial pitch seemed targeted mainly at Campus Conservative types (especially of the bowie-wearing variety) and the more wonkish denizens of the pundit brigade (the types of op-ed writers who have turned agitated thinkpieces about supply-management into a cottage industry). That this latter constituency is so easily seduced speaks volumes, given that several of Bernier’s other positions are so transparently ridiculous (e.g. bringing back the Gold Standard). Late in his campaign, Bernier clearly recognized that the wind was blowing in a more alt-rightish direction and pivoted appropriately. While this got him enough votes to nearly carry the thing, some of his more eccentric policy positions seem to have alienated potential support in caucus – which probably helped secure the relatively bland (but also SoCon-approved) Scheer the leadership crown.

-Scheer seems very much in the mould of Stephen Harper, as in: a figure with quite conservative instincts and beliefs that will largely be overridden in the pursuit of respectability. The Conservative message in Parliament and across the country seems unlikely to change (i.e. that the Liberals are a tax-and-spend regime whose deficits will plunge the country into debt, etc, etc.). This messaging often helps the Liberals reinforce their core narrative with progressive voters (that they’re pro-middle class and pro-activist government, neither of which is really true). Plus ça change…

-The Conservative Party remains what it’s been since inception: a centre-right coalition that houses SoCon and libertarian factions and is committed to an agenda of tax and spending cuts and right wing nationalism.

In other words, the story here seems less about the actual result and more about what the paid opinion-makers got wrong. The status quo in Canadian politics will continue for now but may find itself disrupted at any time, particularly as global events unfold.

If such a shift does happen, on the right or left or both, don’t go looking for a good account of it in a mainstream newspaper.

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Who’s to blame for Brexit?

It’s genuinely upsetting to witness the triumph of a Leave campaign fronted by reactionary figures likes Nigel Farage and Boris Johnson in last night’s referendum (what occurred yesterday conceivably marks Britain’s sharpest shift to the right since 1979, a fact upsetting enough on its own…). But I’m seeing far too many examples today (admittedly from the predictable sources) of people taking out their anger, fear, and confusion on Leave voters – who keep being caricatured as a feral rabble (“old, angry, white people” – Esquire).
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I understand the impulse to blame “democracy” for the result of the vote, but this isn’t constructive or accurate. People living in the northern and eastern parts of England, who overwhelmingly backed Brexit, have seen their living standards fall, the quality of their political representation decline, and their jobs disappear for the past three decades. Many of them may be misguided in believing a UK independent of the EU will give them a better deal, but they have a right to be angry and it would be hugely surprising if they weren’t.

The British establishment – encompassing the Westminster political class, financial elites, and much of the media – offers these people very little and frequently tries to manage their concerns for its own opportunistic ends rather than actually address or represent their needs (Cameron promising the referendum in an attempt to stave off the threat from UKIP and his own hardliners is evidence of this). It’s these people, not those in Yorkshire or the West Midlands, who deserve the blame for the referendum and the ire of those upset about its final result.

Right wing populism of the kind which carried the Leave side to victory last night flourishes in societies that have become unequal and unfair, where most of the wealth and power is monopolized by small groups of self-replicating elites.

In other words: Brexit is not the product of “too much democracy”. It’s the product of not enough.

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Liberalism without the left

Lately – and probably in no small part due to the US presidential race – I’ve been thinking about the extent to which the robustness of liberalism as a political ideology depends on the forces pressuring it from the left.

Today, when pressed on questions of economic justice, many liberals respond with tired market dogma, redbait, or simply wilt. Some try and conflate a caricatured “political correctness” with “cultural Marxism”, as if class politics are just an organic extension of the cultural politics found today on many campuses (or vise versa).

In the 1960s liberalism was deeply engaged with questions of economic and distributive justice. The patron saint of liberal political theory, John Rawls, wrote a hugely influential book on the subject which even conceded some ground to socialist theories of public ownership (revealingly, Rawls’ second major book – published more than two decades later – virtually abandoned economic issues and instead attempted to reconcile liberal and communitarian identity politics).

The political and economic backdrop for Rawls’ thinking was very different from what exists today: the US (and most liberal democracies) still had relatively powerful labour movements; the civil rights and antiwar movements loomed large; New Deal welfarism had yet to collapse; Keynesianism was still the economic orthodoxy du jour; a good portion of the world was officially committed to communism and Western socialist parties were still present as both a political and ideological force.

generalstrike1926

The British general strike, 1926

By the 1990s liberals no longer had to engage with communism, socialism, or social democracy out of necessity and responded to the right instead. The resulting political settlement combined the neoliberal economic theories ascendent since the 1970s with a cultural politics that broke with conservatives in some respects around issues of pluralism and identity, while globalization and the resulting upward redistribution of wealth continued apace. The social bases and institutional structures that had sustained and empowered the left for generations, so brutally and effectively assaulted by the right throughout the 1980s, withered.

In other words, liberalism seems to be at its most robust when it’s been forced to grapple with a strong and mobilized left for an extended period of time: In the absence of one, it sets itself in opposition to the right (a much easier and more comfortable task); when suddenly confronted with one (as it’s starting to be now), it is unprepared and retreats into tired old truisms and cliches.

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