The reason I asked you earlier if you remembered the MST was because prices did not drop when it was eliminated. Prices did increase with the introduction of the GST, which was applied far more broadly. The price increase was the addition of the GST itself. The MST was not applied at the retail end.
It is somewhat tricky to determine whether the level of taxation increased or decrease when the MST was replaced with the GST. The MST taxed exports, so that portion was not borne by consumers, but rather investors, and more likely, wage-earners. The GST was first proposed at 9%, to be revenue neutral. However, due to politics, it was introduced at 7%, implying that the tax burden decreased with the introduction of the GST.
While prices rose, I haven't seen any evidence that that was because of the tax or because of the stickiness of prices downward. Similar to how the Canadian dollar appreciated, yet US-priced goods did not immediately decrease in price in proportion, or goods in the eurozone increased in price when the euro was introduced versus the previous currency. This 'stickiness' slows to process of squeezing the reduced cost out of the supply chain as each player along the chain tries to profit on the decrease in cost (taxes). Nonetheless, competitive pressure will eventually drive the price down.
In other words, it isn't so black and white, as you suggest.
First off, people who are low income earners would not really see any appreciable savings on lower income or investment taxes. Since consumption will differ from one household to the next, the GST rebates won't necessarily figure equally from one household to the next, either.
No, but they would benefit from proportionately increase GST rebates. And it's actually a good thing that the rebate isn't a true rebate (exactly offsets the amount of GST paid) but a transfer based on income. This rewards low-income earners who consume less (and save more) than expected by the transfer, while penalizing those who do the opposite.
But going beyond this, you have provided only the most broad outline of a "plan" with no numbers.
Why should I, hydrogen? I'm not running for office. You have in past discussions also failed to provide a level of, say, atmospheric CO2 which would be 'too high'.
But, I think that ideally, tax rates on business investment would be low (10% marginal tax rate, say). Consumption taxes should be in the neighbourhood of 25%, and personal income taxes should be at some level to generate what revenue necessary to maintain the welfare state that Canadians want.
You have offered up an assumption that a presumed tax reduction in one area and a tax increase in another will automatically result in more savings. You have not provided any evidence whatsoever that this would occur other than you believe it would occur. For all you know, most people will simply spend any such tax savings - even if such a savings is to be found.
Well, not quite right. Plenty of economists hold this view, as well. I'm sure there are empirical studies that support the theory, and I welcome you to research them if you are feeling skeptical.
First you've argued that the GST was partly aimed at reducing consumption. Now you suggest it is supposed to help generate savings.
Yes. That isn't more than one idea, so the 'now' seems odd. Rates of savings and consumption are 'zero' sum, so if one goes down, the other increases.
The purpose of taxation is to raise revenues for the government - which is why a pro-market conservative government introduced the GST. I highly doubt that they were interested in reducing consumption.
Yes, raising revenue for government is an important function of taxes. All taxes distort economic incentives to some extent, so if we want to raise revenue for government expenditure, we might as well tax in such a way to either cause the least disruption to the economy, or achieve some socially desirable outcomes. You know, 'two birds with one stone'.
