If you’re like me, this past holiday season was one of relief with a sense of normality. Unlike years prior, Ontario wasn’t in lockdown, or on the verge of one, which meant that finally we could celebrate with our family and friends as we did prior to the pandemic. For many, part of those celebrations include enjoying their alcoholic beverage of choice (responsibly of course), and taking advantage of some much needed time off.
All that said, for those who were holiday shopping, whether that be for gifts, or food, higher prices were prominent across the board. Grocery bills were approximately 11 per cent more expensive in 2022 than they were in 2021, while overall food inflation came in at 10.1 per cent. These are staggering figures, and especially regressive for those with modest or fixed incomes.
These inflationary pressures are the primary reason why the Bank of Canada has been aggressively raising rates, which has drastically increased the cost of borrowing for businesses, and hit hard for anyone trying to qualify for a mortgage, or on a variable rate mortgage.
Unfortunately, the inflationary pain doesn’t end there. Because of the federal government’s escalator tax on alcohol, the price of your favourite drink will increase on April 1 by 6.2 per cent, because the government indexes alcohol taxes to inflation. Add this tax hike to the fact that taxes alone account for around 50 per cent of the price of beer, 65 per cent of the price of wine, and 75 per cent of the price of spirits. This is cruel punishment for the crime of wanting to enjoy an alcoholic beverage and socialize, or relax.
The escalator tax removes that discussion from the democratic process and eliminates consumers from the discussion all together. And by indexing taxation to inflation it uncomfortably punishes consumers for inflationary pressures not caused by consumers themselves.
Now, there are opposing views on the root cause of inflation. On the Conservative side, they’ve argued that inflation is an outcome of poor monetary policy, primarily the Bank of Canada injecting the economy for far too long than the pandemic required. On the other side of the aisle, there is the argument that overall inflation is high because of lingering supply chain issues, and exacerbated by the disruption of Putin’s disgusting invasion of Ukraine. Whatever your view is, it seems incredibly unfair for the government to punish alcohol consumers because the BOC kept their finger on the money printer for too long, or because the pandemic gummed up the global economy with Putin making it worse.
And ironically, having taxation automatically increase prices puts continued upward pressure on overall inflation, and the longer these inflationary times persist, the more aggressive the BOC is going to have to be to avoid a run away scenario. This is a vicious cycle where inflation indexed taxation fuels the problem of inflation, driving rates higher, making mortgages more expensive, and leaving everyone poorer in the long run, except the federal government.
And when we compare how alcohol is taxed in the United States versus Canada, it feels like we’re rubbing salt in the wounds of Canadian consumers. For the average American, buying a case of beer has $4.12 in taxes associated with it. For the average Canadian, the tax paid on that same case of beer is over five times higher, at $20.31. The federal tax rate on beer in Canada is 2.8 times higher than in the United States, while the average provincial tax rate is over six times higher than the average U.S. state tax rate. Of course, there have to be taxes on alcohol, but do taxes really need to be this high?
The government needs to stop its hammering away at the disposable incomes of Canadians, and give alcohol consumers some much needed tax relief. It’s time to say no to the escalator tax.
Originally published here