: MF was right?... GST and taxes....


ArtistSeries
Sep 4th, 2007, 09:08 PM
Just read this
OTTAWA -- Last year’s GST cut did not stimulate increased consumer spending or the economy and, unlike some other tax cuts, will not pay for itself in the long run, a new analysis has concluded.

“A cut in almost any other kind of federal government tax would have been more effective in stimulating economic growth and would have resulted in it getting more of the lost revenue back,” Dale Orr, the think tank’s chief economist, and author of the report, said in an interview.
Among the tax cuts that would be the most effective in stimulating economic activity and boosting future revenues would an income-tax cut, which as well as leaving people with more money to spend, would encourage them to work longer and harder to earn more, Orr said.
However, he noted that the Conservative government instead raised personal income taxes in its first budget.
“That was done specifically to finance the GST cut,” Orr said.
The analysis found that the cost of the GST cut in lost government tax revenues was about $5.4 billion.
Had the government not cut the GST, it would have collected $34.4 billion in GST revenues in the following 12 months instead of the $29 billion it pulled in, the report estimated.
“We estimated that GST revenues would have been about 4.5 per cent higher than they were in the previous year had the government not cut the GST,” it said, adding however that revenues came in about 13 per cent lower than in the previous year and about 18 per cent lower than they otherwise would have if the tax hadn’t been cut.

http://www.canada.com/topics/news/politics/story.html?id=93c025c5-0782-4d09-9fdf-34463c2b066e&k=58191

Beej
Sep 4th, 2007, 09:17 PM
This is news? It was quite well known that cutting the GST (a value-added sales tax) was one of the least effective ways to cut taxes. This is why, upon proposing the GST, all three major parties should have been in complete support, with the caveat of the GST tax credit. But they did not support it (if I recall correctly).

It was and is a political football to be used as needed to grab a few votes. From "axe the tax" to "reduce the GST", politicians will use dumb ideas to get votes if they think that it will work. And, with regards to the GST, it has. A smart policy whereby the cheap tricks that follow get votes for holding a knife to the tax.

Realistically, do you think that there are more than a few die-hard hacks out there that were opposed to the GST when Mulroney proposed it but quite voluminous when Harper cut it? Same goes the other way, but to a lesser extent because it seems like almost every Canadian hated the tax. ;)

ArtistSeries
Sep 4th, 2007, 09:23 PM
I was commenting on the note that Conservatives had raised personal income taxes....

As for the GST, I think that we both agree. I saw it more as a populist move. I'm not sure what some hacks think.
When that tax was introduced, I had wished that all income tax be abolished and that we move to consumption tax.

Beej
Sep 4th, 2007, 09:40 PM
When that tax was introduced, I had wished that all income tax be abolished and that we move to consumption tax.

With some sort of credit/basic income to correct the regressive nature of sales taxes.

As for personal income taxes, the Cons put in some strange working income tax credit to further complicate the tax code, so the majority of people net of all tax changes, paid less tax. Also note that the late 2005 plan that was put in place only affected people that actually paid income tax; not the poorest.

Both the 2005 Liberal and 2006 Conservative plans included mention of fixing the "welfare wall" that results from grossly overlapping muni-prov-fed means tested programs (if I recall correctly...things are vague), but very little has been done that I am aware by either federal government.

To be fair, this sort of thing would be largely done province-by-province in backrooms and only mentioned with a fancy unveiling (10+ unveilings, actually). This is a far more important problem than 0.5% on the lowest tax bracket or 1% off the GST, in my opinion.

I have been clear from the start that cutting the GST was stupid policy (smart politics) but I'm not sure how interesting the topic still is unless the twits go for 5%, as promised. As with one or two of McGuinty's stupider promises, I really hope they decide to break that one.

HowEver
Sep 4th, 2007, 09:59 PM
Cutting the GST sure helps people with lots of disposable income making large purchases all the time.

Cutting the middle level of income taxes, though, helps the majority of Canadians. Unfortunately, that is not the intention nor the practice of Canada's 'new government.'

Beej
Sep 4th, 2007, 10:05 PM
If they raised the GST and cut the middle income tax bracket they would get accused of attacking the poor. Of course, raising alcohol and cigarette taxes is even more regressive than raising general sales taxes. Cut through the sloganeering and many tax changes are not all they're often spun to be. I would say, "all" but there must be at least one that is everything it is spun to be. ;)

Macfury
Sep 4th, 2007, 10:21 PM
While I favour any tax cut, I think we're in agreement here. Shift all taxes to consumption and help the poor through consumption tax credits.

Beej
Sep 4th, 2007, 10:27 PM
While I favour any tax cut, I think we're in agreement here. Shift all taxes to consumption and help the poor through consumption tax credits.

As strange as it may seem, I do not favour shifting, "all" over "most" or "much of".

Same goes for corporate taxes; theoretically silly taxes (aside from foreign-owned shares), but I would not eliminate them. Free agents have a way of really mucking about with such all-or-nothing paperwork opportunities.

But as to direction yes, AS, myself and you do seem to be in agreement. I would add that, despite how nice it is for provinces to be able to customise their PSTs, harmonising with the GST would be a much smarter move. Silly provinces.

Macfury
Sep 4th, 2007, 10:38 PM
I'm in favour of moving in the general direction of one policy or another with those with whom I agree--then stabbing them in the back as necessary so that I can implement the complete agenda.

Beej
Sep 4th, 2007, 10:40 PM
You certainly have an avatar with the right look for such things. My avatar looks like I'll just honestly and forthrightly rope people into doing horrible things. Oh how I love the taste of regret and fear.

And now for Canada's basic income and universal non-monopoly child care, dental care and optical care... beejacon

SINC
Sep 4th, 2007, 10:41 PM
But as to direction yes, AS, myself and you do seem to be in agreement. I would add that, despite how nice it is for provinces to be able to customise their PSTs, harmonising with the GST would be a much smarter move. Silly provinces.

Good heavens, I too have to agree. What the hell is going on here? Too many of us agreeing on a single issue is just weird. Or not.

Vandave
Sep 4th, 2007, 10:41 PM
Speaking of provinces and shifting the tax burden.... not one province increased their provincial taxes to level off the GST cut.

Beej
Sep 4th, 2007, 10:44 PM
Their cowardice still galls me, VD. To do nothing and then whine about "fiscal imbalance". Kudos to them for playing the politics well but, as usual, at the expense of good policy.

[Edit: Can Hitler cat be retired? That thing keeps looking at me.]

ArtistSeries
Sep 4th, 2007, 10:48 PM
Speaking of provinces and shifting the tax burden.... not one province increased their provincial taxes to level off the GST cut.
No, we just waited and Harper gave Charest (and the province) lots of cash :D

But don't worry, Charest will not be around much longer and rumour has it, he's been offered some patronage position...