Tax Cuts Are The Wrong Approach
Nov 01, 2007
On October 30, Federal Finance Minister Jim Flaherty tabled the government’s economic statement. It calls for $60 billion worth of tax cuts over the next five years, including a further one percent reduction of the GST to five percent. Personal income taxes will be retroactively cut to January 1, 2007, and the lowest marginal tax rate will decrease as well. The basic personal tax exemption (the amount Canadians can earn before paying tax) will also be raised by $700 to $9600.
The Finance Department estimates that surpluses will surpass $16 billion this year and next. Of the $60 billion in tax cuts, $34 billion will come from the GST reduction, while $11 billion will come from personal tax cuts, and $14.4 billion from corporate tax cuts. A further $10 billion of this year’s surplus will be used to pay down the federal debt.
These tax cuts are not just historic because of their sheer magnitude, but also because of the financial straitjacket they will force on Ottawa over the coming years in terms of dealing with social and infrastructure problems that challenge the country. Save the marginal increase in the lowest tax rate, nothing has been done to help those least fortunate. Nothing was committed to public transit or other municipal infrastructure. Imagine what cities could if the government had given them the one percent of the GST that will be cut on January 1, 2008.
So these savings must then be significant to individuals and families. Well, no. The average Canadian will save somewhere around $200 annually on their taxes. Those in the lowest income bracket will save about $180 a year. That works out to less than $7 a paycheque. Sure, every penny helps, but what can someone reasonably get for that, a few cups of coffee? Taking $60 billion dollars and putting it into health care and other social programs or into infrastructure repair would have a much bigger payoff. Who’s going to notice $7 extra in their pockets every two weeks compared to the potential impact of better roads and bridges, or reduced wait times at health care facilities?
On top of that, consumption taxes are the worst type to cut, as they at least allow consumers to decide with their wallets what exactly they will be paying taxes on. So we’re not only getting tax cuts which we don’t need and are losing funds which could be directed to social programs or much-needed infrastructure, but we’re getting the wrong kind of tax cuts on top of that. It’s definitely not a mini-budget that inspires confidence.
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Cutting the GST is the wrong way to go. If ANY tax should be cut, it should be the income tax. Why are we being punished for working hard ? Leave money money in people's pocket and pay for stuff like roads and health care with consumption taxes. The gas tax alone is more than enough for roads. GST and PST the other stuff. I would also like to see a small fee ( $10 ) for seeing a doctor. Tommy Douglas even supportted user fees, and I think it would help control health costs.
JimCotton - 2007-11-10 17:33