Trudeau's Pig Tax Economy 

February 1st, 2014 | K. McGregor

 

The decision by the Supreme Court of Canada to strike down the existing basic laws governing prostitution, the legal sales of recreational marijuana to those 21-and-old in Colorado and bill C290 (the gambling bill), that will eventually pass and is backed by Liberal senator, Terry Mercerhave, must have the Liberals dancing in the streets at the prospect of new taxes if they win a majority in the 2015 election.
 
Personally, I think government interference on these issues only creates monopolies for criminals and corporations, since they are the only ones with the resources to circumvent government regulation. Also, the problem I see with depending on so-called "sin taxes" as sources of revenue to run our economy is that neither pot, gambling or prostitution actually produce any new wealth. The government just recycles money taken out of Canadian pockets while getting more and more of the pie in taxes. Presently, over 40% of our income is going toward taxes and fees for three levels of government.  Even with this stunning figure, the Liberals still want more. Redistributing wealth instead of creating wealth appears to be the Liberal's calling card. There's going to be a bleak future ahead if Canadians adopt this dogma.
 
The idea of the sin tax (Pigovian Tax) was brought about by Arthur Pigou, an English economist from the 1920s who theorized that people who create negative effects to others through legal activities, like smoking, drinking, gambling etc., should be taxed to pay for the social harm they cause. At first glance this seems to be a good idea. Unfortunately, putting this money and taxing power in the hands of the government has had some bad side effects, since they don't accurately gauge the social cost. 

Firstly, as I mention above, Government taxes and regulations create monopolies, leaving the little free trader out in the cold, who doesn't have the funds to get through red tape. Secondly, the government seems to be collecting more than they require to cover the cost of sins and using this money on other pet projects. It's just so tempting, they can't resist. This over taxation (or PIG Tax - named after Pigou)  just drives up costs, again leaving the  little guy unable to compete while taking excessive money out of the hands of the consumer that would otherwise be used to purchase goods and services. 

Liberal Leader Justin Trudeau and his friends all feel that legalizing marijuana and other sins for Canadians is a good idea, and I agree. Where we differ is in the application of excessive sin taxes. Trudeau should be more open to the idea of allowing the free market to dictate the price and allowing the exporting of the product to bring foreign currency into Canada and create employment, instead of just collecting tax dollars and recycling them. Same goes for gambling and prostitution. If these industries are going to be legal, let free enterprise take over and build up the industry and make it tough for criminal monopolies to compete, or even exist at all. Take the crime out of the sin and stick with one tax: income tax.

Unfortunately, I believe Trudeau and his Liberals are just using the marijuana issue to gain votes without fully understanding the impact of their sin tax grab. I also believe that most Canadians are already taxed to the max and that it's time for governments to stop the tax hikes and live within their means. Looking at Quebec and Ontario with their massive debts ($450+ billion) run up by Liberal governments, I doubt that Mr. Trudeau and his Liberal Party (Pigou groupies) will be any different.

Latching on to one economic theory like a Keynes, Pigou or a Friedman just doesn't cut it in today's complicated economy. Canada needs a government that is open to all, and believes in less government and freedom. Today, the NDP and Liberals don't qualify for the job.