On Wednesday, June 26th, 2013, the Canadian Senate passed Bill C-304, a bill striking Section 13 of the Canadian Human Rights Act from law. This was cause for rejoicing because Section 13 was a terrible law, one which enabled individuals so inclined, to drag Canadian citizens before specially appointed tribunals where they would not enjoy the protections of the regular court system, and prosecute them for nothing more than their words. (1) The Senate, in voting to approve Bill C-304 and get rid of this odious law, clearly did the right thing. Whether or not another decision they made on that same day was also right is far more open to question.
The other decision was regarding Bill C-377. (2) The actual title of this bill is “An Act to amend the Income Tax Act (requirements for labour organizations)” but it is better known as the “Union Transparency Act”. Like Bill C-304, Bill C-377 is a private member’s bill. Russell Hiebert, the Conservative MP who represents South Surrey-White Rock-Cloverdale in British Columbia introduced it in the House of Commons in December, 2011. Unlike Bill C-304, this bill was backed by the Harper government. The bill is, as its title indicates, a proposed amendment to the Income Tax Act, one which would require labour unions – which qualify for tax exemption under the Income Tax Act – to report all of their spending above $5,000 and the salaries and benefits of union leaders above $100,000 to the Canada Revenue Agency which would make the information available to the public.
The Senate’s decision was to pass a series of amendments to the bill. The bill, with the amendments, must now return to the House of Commons which will have to decide whether to accept or reject the amendments. If the amendments are accepted, unions will only have to report spending above $150,000 and salaries above $444,000, and only unions with a membership of over 50,000 will be affected. The amendments, in other words, nullify the bill.
So what are we to make of this?
Bill C-377 was drawn up to address a real need. Labour unions are workers’ associations organized for the purpose of negotiating labour contracts with employers. Their activities are supported by dues paid by their members. In Canada, these dues are 100% deductible from a union member’s taxable income. (3) The unions themselves are tax-exempt. Canadian labour law allows for contracts that make union membership a condition of employment. It also allows for contracts that make the payment of union dues mandatory for all employees whether they are union members or not. (4) This is supposedly to prevent free riders – non-union employees who benefit from union negotiations without paying the costs of union membership.
In their tax exempt status and the tax advantages given to their contributors unions are similar to charities. Charitable donations, however, are purely voluntary. In their legal power to compel contributions from their members and even employees who are not members, they are more like the government. Yet they are legally less accountable for how they spend their funds than either charities or the government.
The law requires charities to make their financial records available to the Canada Revenue Agency and holds charities, as tax exempt organizations, accountable to the public. (5) Unions have the same tax exempt status as charities. Union members receive tax advantages for the dues they are required to pay, just as those who voluntarily contribute to charities receive tax advantages, albeit of a different kind. Those who pay union dues receive a full tax deduction, whereas those who donate to charities receive a partial tax credit.(6) Yet unions are only required by the Canadian Labour Code and provincial labour legislation to report their finances to their own members, and even then what is required by the law is far short of full disclosure.
Unions should be held more accountable than charities not less. Charities are organizations that do benevolent work, to serve others. The law gives them tax exempt status because this work is deemed to be of benefit to the public. Unions, by contrast, exist only to serve their own interests. That is their very nature. Unions are formed by workers for the purpose of getting higher wages, better hours, better benefits, and better working conditions for themselves. In this unions are similar to businesses. Businesses are built up and operated for the purpose of earning a profit for their owners.
Now there is nothing wrong with a worker’s desire for higher wages and better working conditions. Nor is there anything wrong with a businessman’s wish to turn a profit. The latter, however, is routinely condemned as selfishness by the kind of self-proclaimed “enlightened” intellectuals who typically act as cheerleaders for the unions. Nobody has ever suggested that a business should be given tax-exempt status. Yet businesses, to achieve their end of earning profits for their owners, must do so by providing the public with goods and services they desire at a price they can afford. Unions, on the other hand, achieve their goal of higher wages and better benefits for workers by threatening their employers with labour strikes. When they follow through with these threats – which they cannot avoid doing from time to time if they wish the threats to remain effective – it is not just their employers who suffer but the public as well. (7) It would seem that a better case could be made for making businesses tax exempt than for making unions tax exempt.
Unions are also like businesses in that they have a tendency to get involved in politics. Note that the law forbids registered, tax exempt, charitable organizations from getting involved in partisan politics. (8) Businesses and unions both contribute to political parties and campaigns and both lobby government for legislation that they would like to see pass and against legislation they would like to see defeated. Businesses and unions both have legitimate political interests. The government, through its power to tax and legislate, can make it easier or harder for a business to operate and earn a profit. Businesses would naturally prefer that it do the former rather than the latter. There are also laws governing such things as wages, workers’ safety and other workplace conditions, and the whole labour negotiation process. Unions, which exist to be advocates for workers, would understandably want these laws to be written in the way that benefits their workers the most. Here again, the legitimate political interests of businesses and unions are both intrinsically selfish. Contrary to the thinking of the kind of people who identify themselves as progressive or forward thinking, the businessman’s selfish desire to see laws enacted which make it easier for him to run his business and turn a profit is no more selfish or less legitimate than a union leader’s wish for laws that raise wages or improve the union’s bargaining power at the negotiation table.
Alas, unions and businesses have yet one more similarity. The involvement of both in politics extends far beyond the legitimate interests described above. Often these political activities are harmful to the public good.
Back in the eighteenth century, Scottish liberal philosopher Adam Smith noted the tendency of businesses to conspire to raise prices against the good of the public. (9) The extent to which they are able to do this, however, has always been limited by the fact that they can only raise prices so high before they become prohibitive to sales and injure the businesses themselves. In the last seventy years or so, a far greater threat to the public good has been posed by large corporations operating across national borders and hence known as multinational or transnational corporations. These corporations have been working with major world governments to integrate the markets of the world into regional markets and ultimately one big global market. A global market creates greater fluidity for capital, resources and labour, allowing transnational corporations to move these things around the planet and thus avoid strict accountability to the laws of any one nation. This harms the public good of all nations involved. (10)
Unions are no better. If anything they are much worse. They have a long history of throwing their weight behind political causes that either have nothing to do with their role as workers’ advocacy organizations, are harmful to the public good, or both. In 1921, the Communist International founded a Canadian branch of the Party that had just seized power in Russia and which would be responsible for so much death, suffering, and misery in Russia, China, Cambodia, and throughout the world in the twentieth century. (11) In the 1920s, 1930s, and into the early years of the Cold War, there was a close relationship between the Communist Party and the more radical Canadian labour unions. Many of the leaders of the Communist Party had been union organizers and the Party infiltrated the leadership of several existing labour unions and organized others. (12) Communism, out of power, is a subversive and revolutionary movement, and in power is a totalitarian system that produces universal slavery and misery. Although the history of this era is often written in a way that portrays the Communist movement as the innocent victims of a paranoid “Red Scare” promoted by Prime Minister R. B. Bennett, Quebec Premier Maurice Duplessis, and the RCMP, the government had good reason to be concerned about the Communist movement. To the extent that they cooperated with Communism the labour unions were clearly working against the good of Canada.
Labour unions were also involved in the founding of the Cooperative Commonwealth Federation in 1932 and its successor the New Democratic Party in 1961. The CCF was a socialist party. It differed from Communism in that its modus operandi was to work within the system legally and that it was built upon a Christian heresy, the social gospel, rather than the atheistic, materialistic, philosophy of Marxism. Otherwise there was little difference. It wanted the government to take ownership of major industries and to take responsibility for providing material security for all Canadians from the cradle to the grave. To this day, in every federal election, the NDP tells us how it, if elected, would expand government social programs and benefits. It never tells us where it will get the money to pay for all this. Either it will have to raise taxes, destroying the illusion that the benefits it offers are “free” or it will have to borrow the money, which in the sort run will create inflation and in the long run will end up bankrupting the country. Either way, higher taxes or inflation and national bankruptcy, the people that will be hurt the most will be the working classes for whom the NDP and its union supporters claim to speak. Just this year the NDP government of Manitoba raised the provincial sales tax, despite a law requiring them to call a referendum before doing so. Those who are hurt the most by this are those who are least able to afford an extra one percent tax on their purchases, the poor and the working classes.
The NDP continues to portray itself as the working man’s party and continues to receive the support of the labour unions. Yet the policies it supports are frequently those that would harm the working classes. Take its immigration policy for example. (13) In the last federal election, the NDP promised that if elected it would speed up the immigration application process, streamline the recognition of foreign professional credentials, and devote more federal funding to the settling of new immigrants. All of these actions would have the effect of bringing more immigrants into the country and into the Canadian labour market faster. One of the effects of this would be to depress wages. This is clearly against the interests of Canadian workers. (14)
The NDP is a radically feminist party. (15) Feminism, which insists that women and men should compete with each other in the same labour market and regards the role of wife/mother/homemaker as an instrument of male oppression, like liberal immigration, depresses wages by expanding the labour supply. This creates the situation in which getting an outside job ceases to be an option for working class wives and mothers and becomes a necessity, as two incomes are now needed to make ends meet. This is harmful to the working class family because they must now rely upon others – such as public day care centres, television, and, heaven forbid their children’s peers – to raise their children for them. That is assuming that they have children. The NDP is also in favour of abortion on demand. Indeed, it takes the strongest stand in favour of legal, state-funded, abortion, of all the political parties. (16) It believes that abortion is a fundamental human right. Its candidates are not allowed to dissent from the party line on this subject and it apparently does not believe anyone else should be allowed to dissent either. (17)
These NDP policies are harmful to the working class. They are also harmful to the country as a whole. In a healthy country, the laws support strong families, in which parents with strong marriages, raise the children who will become the next generation. It is only a very unhealthy country that allows and even pays for its children to be killed while yet unborn, that encourages or even forces mothers to join fathers in the labour force and leave those children that weren’t aborted to be raised by others, and which brings in masses of immigrants to replace the children that were not born, to depress wages further, and to keep the Ponzi scheme of socialist social programs going a little while longer. The policies the NDP supports are bad for Canada. This is the party that recently demanded that a man born in Canada but raised in Pakistan be brought back into our country and made eligible for release back into the public even though he was captured fighting against Canada and her allies on behalf of a terrorist organization in Afghanistan. (18) But then, what else would you expect from a party that each election year insults the Canadian public by offering to buy us all sorts of “free” goodies with our own money in exchange for the privilege of being allowed to form the government in Parliament, despite displaying utter contempt for that body and the tradition upon which it stands, by officially supporting the abolition of one of the three institutions that comprise its key elements, the Senate, (19) while the party’s members, such as Pat Martin, privately champion the severance of Parliament from another of those key elements, the monarchy.
In addition to the Communist movement and the CCF/ NDP, Canadian labour unions have been involved with various other highly questionable political causes. Some, such as the mammoth Public Service Alliance of Canada have supported separatist parties, like the Parti Quebecois, (20) which exist to tear the country apart.
Then there is the Canadian Union of Postal Workers. For years it has been involved in pro-Palestinian activism. (21) CUPW has declared its support for an international boycott against Israel and demanded that the Canadian government increase its humanitarian aid to Palestine. This may very well be the most bizarre example of a union’s extracurricular political activities. At least PSAC, in supporting the PQ, maintained that it did so because they liked what the party had to offer their workers. There is no plausible connection between the Israel-Palestinian conflict and the rights and labour contracts of Canadian postal workers. Heck, one has to really wrack one’s brain to think up even an implausible connection.
Although the Palestinian cause is utterly irrelevant to the Canadian postal worker, in whose name CUPW purports to speak, the fact that CUPW, a tax exempt union, is supporting this cause is relevant to the taxpaying Canadian public. Whatever arguments might be made in favour of either side in the Israel-Palestine conflict, the fact is that for decades the Palestinians’ self-appointed leaders sought to advance their cause by means of terrorism, and that seven years ago, when given the chance to choose their own leaders, the Palestinians voted Hamas, an even more extreme terrorist organization than the PLO, into power. Hamas continues to cling to power in the Gaza Strip. Furthermore, Palestinian terrorist groups frequently have connections with the terrorist groups that have targeted other Western countries, including the UK, Canada, and the USA. Is it really appropriate that a tax exempt organization, representing the employees of a Crown corporation, is taking up this kind of cause and demanding that the government turn over Canadian tax dollars in aid to Palestine?
To summarize what we have seen so far, labour unions receive at least as many tax benefits as charitable organizations even though their basic reason for existence is to get more for themselves, rather than to give to others in a way that benefits the public. Unlike charities they are held accountable only to their own membership and not the public despite being heavily involved in the kind of political activities other tax exempt organizations are forbidden to participate in, some of which are highly dubious.
This is what Bill C-377 was designed to address.
I think that from what we have seen, the main goal of Bill C-377 was a good one. There is clearly a need for labour unions to be made more accountable for their actions and, if possible, to behave more responsibly. Having said that, that does not necessarily mean the bill was the right way to go about accomplishing that goal.
Section 94.3 of the Canada Labour Code (22) forbids an employer from refusing to hire, firing, suspending, transferring or otherwise discriminating against a person because of his membership in a union or involvement in union activity. Suppose that a bill were put forward that proposed to amend the Canada Labour Code to include a Section 94.4, forbidding employers from discriminating against someone because he is not a member of a union and does not pay union dues. Would not such a bill go much further towards striking at the heart of the problem with unions than a bill requiring unions to turn over their records to the Canada Revenue Agency?
Such an amendment would, of course, require other labour laws to be tweaked. If the rule against discrimination were made to run both ways there could be no more requirements that someone join the union or pay union dues in order to keep his job. It would have the same basic effect as the “Right to Work” laws that various American states have passed.
This after all is the real problem, that unions have the power to force membership or dues on workers as conditions of their employment. If that power were taken away and union membership was made to be completely voluntary the unions would have to act more responsibly in order to retain their membership. They would automatically be more accountable to their membership which would leave only the matter of their accountability to the general public because of their tax exempt status. A much simpler amendment to the Income Tax Act, bringing the accountability requirements of labour unions in line with those on other tax exempt organizations, could accomplish this.
This would avoid what I see to be the major drawback to Bill C-377, namely, the dangerous precedent set by altering the tax code for the purpose of “getting” somebody.
This drawback does not seem to have been the main reason the Senate nullified the bill. Conservative Senator Hugh Segal, who led the Senate in passing the amendments, argued that the bill was flawed in that it was unconstitutional, that it violates the constitution, by placing under federal authority what the British North America Act assigned to the jurisdiction of the provinces. (23) While the Senator’s concern for preventing the federal government from usurping the constitutional authority of the provinces is most laudable his application of this worthy principle in this case does raise a question or two.
If an amendment to the Income Tax Act requiring labour unions to report financial transactions to the Canada Revenue Agency violates the constitutional assignation of unions to the jurisdiction of the provinces, why is their having been exempted from paying income tax in the first place considered to be constitutional? Furthermore, if bill really does violate sections 91 and 92 of the BNA, the Senate’s amendments do nothing to change that. Would not the appropriate action, if the Senator truly believed the bill to violate the constitution, be to reject the bill altogether?
The Senator also objected to the bill on the grounds that it would require labour unions to disclose information at a lower level than is required of any of the employers with which they negotiate. This, he maintains, would be unfair. While I can see why he would think this, I don’t agree, and would argue that if anything, the bill would correct an already existing imbalance in the state of labour negotiations that is in favour of the unions.
Whatever the strengths and weaknesses of Senator Segal’s position, he convinced a majority in the upper chamber to vote with him. The bill is now back in the hands of the House of Commons and we will have to wait until they sit again this fall to see what they will do with it.
(3) What this means is that if you have a net income of $40,000 a year, and pay $5,000 in union dues a year, the full amount of your union dues will be deducted from your income before taxes are calculated, so that you will only pay taxes on $35,000.
(4) This is called the “Rand Formula” after Ivan Rand, the Supreme Court Justice who thought up the idiotic idea in 1946.
(6) The difference between a tax credit and a tax deduction is that a tax credit is taken off of your total tax bill whereas a tax deduction is taken off of your taxable income before taxes are calculated as described above in note three. Therefore, if you have a tax credit and a tax deduction of equal size, the former will reduce your total tax bill by a larger amount than the latter. Say, for example, you have a $40,000 income. That would place you in the 15% tax bracket, giving you a tax bill of $6,000. A $500 tax credit would reduce your tax bill to $5,500. A tax deduction of $500 would reduce your tax bill to $5,925. A tax deduction can reduce your tax bill in an additional way, however. If your income were above $43,561, a tax deduction equal to or larger than the amount by which your income is over $43,561 would keep you from being bumped into the next tax bracket and having to pay 22% on everything you earned over $43,561, increasing the overall amount by which the deduction reduces your tax bill. This would still not reduce your total tax bill by the same amount as a tax credit of equal size. While a tax credit gives you a better tax break than a tax deduction of the same size, in comparing union dues and charitable donations you also have to remember that you do not get near as large a credit for charitable donations as you get a deduction for union dues. You get a 100% deduction for your union dues. Your charitable donations give you a tax credit of 16% on the first $200 and 29% on everything above that, up to a cap of 75% of your taxable income.
(7) If teachers go on strike, it is not the school board that suffers the most, but the students – although this is a bad example because the students probably won’t see it that way. If public transport workers go on strike, it is not the city that suffers the most but everybody who relies upon busses to get to work, to school, or the store. If hospital staff go on strike it is not the Health Authority that suffers but those who need healthcare.
(8) See note 5.
(9) “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, (1776),Book One, Chapter Ten, Part Two, paragraph 82.
(10) The harm is multifaceted. For countries like Canada and the United States, globalism means a loss of jobs and productive capital as transnational corporations remove these to other countries with a larger, and hence cheaper, labour supply and/or less burdensome laws and the depression of wages as large numbers of immigrants are brought in to the domestic labour market. It also undermines the national sovereignty and identity of every country involved, erodes social capital, atomizing societies and dissolving communities.
(11) For an extensive description of the evils of Communism see Stéphane Courtois, ed., The Black Book of Communism: Crimes, Terror, Repression, (Harvard University Press: Cambridge, Massachusetts, 1999) a translation of a work, by European scholars, originally published in French in 1997.
(13) See sections 4.3 and 4.4 of the NDP Policy Book: http://xfer.ndp.ca/2013/policybook/2013-04-17-PolicyBook_E.pdf Note that 4.4 b) calls for an annual immigration level of one percent. If we calculate one percent from Canada’s 2011 population of 34.48 million, this would mean 344,800 immigrants per year. This is a little under 100,000 more immigrants per year than we are already taking in.
(14) NDP Immigration Critic Jinny Sims has rightly criticized the temporary worker program of the present Conservative government for bringing in thousands of workers, at time of high unemployment, driving wages down and sending money out of the country. http://www.ndp.ca/news/immigration-policy-should-build-stronger-canada-not-exploit-vulnerable Her own party’s immigration policies, however, would do the exact same thing on a larger scale, with the possible exception of sending money out of the country.
(15) See Section 6.1 of the NDP Policy Book.
(16) See Section 6.1. (d) of the NDP Policy Book.
(19) See Section 5 of the NDP Policy Book.
My Last Post
5 months ago