Harper promises to...

[dan e 1980]

Harper promises to cut GST
Cut would reap $400 per family, cost $4.5B, Tory leader says
Dec. 1, 2005. 10:26 AM

MISSISSAUGA - Conservative Leader Stephen Harper is promising that a Tory government would reduce the GST by two percentage points to five per cent.

He said the tax would drop to six per cent immediately and to five per cent within five years.

Prime Minister Paul Martin retorted that it's better to cut income taxes than lower the GST.

Harper said there are more Tory tax cut promises to come later on in the campaign.

"I believe that all taxes are bad," he said. "Better taxes are lower taxes."

Harper said the first GST cut would cost the federal coffers $4.5 billion. He said the average family of four would reap $400 a year.

The cut is the fairest way to deliver broad tax relief, he added.

The Liberals promised billions in income tax cuts in the waning days of the last Parliament and Martin said that's the way to go.

"I believe that we should cut personal income taxes," he said. "I want to see Canadians keep more of their pay cheques."

That's a fairer way of providing tax relief, especially for lower and middle-income earners, he said.

Martin has been stressing his government's rosy economic record in the early days of the campaign for the Jan. 23 federal election.

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what effect would this have on our services?

 

[EnviroTO]

Re: Harper promises to cut GST

GST is 15% of all federal government revenues (28.3 billion). The entire federal budget after removing transfers to people (i.e. Old Age, EI, etc.), transfers to provinces and cities, and debt interest is only about $55 billion (including the $9 billion or so surplus) so GST pays for about half of that. If GST was the only tax lowered, a one percent reduction would eat $4 billion and a 2% reduction would eat $8 billion... basically the entire surplus. Of course there are corporate tax cuts and personal tax cuts already planned so cuts to programs will be required unless transfers can be reduced or revenue can be increased to fully cover the cut.

Revenues $186B

Expenses outside government
Debt interest 19%
Old age security 14%
EI 8%
Health & Social Transfer to Provinces 11%
Equalization 5%
Other transfers 12% (First Nations, farmers aid, foreign aid, R&D, arts)
Total outside government = 69%

Expenses outside government are mostly non-discretionary if agreements with various groups and governments are upheld and EI and Old Age are protected. Only aid, R&D, and culture projects which amount to about 6% are flexible.

Expenses inside government
Defense 6.5%
Public Safety 2.5% (RCMP, prisons, borders, etc.)
Revenue Agency 3%
Other Operations 10%
Crown Corporations 3%
Total inside government 25%

This is where efficiency improvements could find savings but without a government ready to roll up their sleves and really get into the efficiency of government the savings will not be found.

Budgetary surplus 5%

The money available for repaying the debt (whose interest alone could cover most federally delivered programs), tax cuts, or fixing what is poorly maintained in this country unless there are revenue increases beyond expense increases, efficiency increases, or services / transfer cuts.

 

[EnviroTO]

Re: Harper promises to cut GST

GST is a tax which can still be a revenue stream when most goods are made outside Canada... as the developing world produces more of our products it will be increasingly important that our social programs are paid for by sales tax rather than income tax or we end up making ourselves less competitive. A product made in Canada will have the corporate income taxes and payroll tax charged to the company as well as higher salary paid to counter personal income tax built into the price. This means that the cost of goods made in Canada are further pushed up and are made less competitive to foreign made goods which cycle into lower jobs and lower revenues for Canadian companies and the government. Sales tax is a more equalizing tax so it makes more sense that it not be lowered.

The best tax to lower are corporate income taxes which lead to more jobs and investment in Canada... specifically by making reinvestment in Canada a deduction (taxes should be still collected on corporate income flowing out of the country). If a personally paid tax is to be lowered it should be firstly reductions in capital gains taxes on capital gains from Canadian investments, followed by capital gains on foreign investments (these keep money in Canada, invest money in Canada, and bring money to Canada). Lastly, personal income tax reductions make more sense than sales tax reductions. The only reason the Liberals have a surplus and balanced the books is the GST which Mulroney brought in.

 

[mpolo2]

Re: Harper promises to cut GST

My reading of it was it was the Conservatives GST reduction (consumption tax) vs the Liberal's income tax reduction. Neither party seems to be promising both. In that sense the conservatives tax reduction would probably favour lower income people more as consumption spending makes up a larger proportion of their total income, whereas income tax reduction tends to be more of a middle class perk.

 

[EnviroTO]

Re: Harper promises to cut GST

If reducing the tax paid by low income Canadians is the goal then a larger GST rebate for them, raising the personal exemption, or lowering their income taxes in other ways would still be a much better idea. When Canada looses steelworking jobs and paper producing jobs it isn't because the world market for these products is gone... it is because foreign companies are doing it cheaper. We aren't going to equalize that by focusing on sales tax reductions and sticking to income tax. In a global economy the GST is the better tax. It isn't applied to goods Canada sells to the world and it is applied to goods imported from places that are taking manufacturing jobs. This is just another right wing non-sustainable policy the conservatives are coming up with... how can consumption (i.e. using up resources) be more sustainable than income (i.e. adding value).

 

[spmarshall]

Re: Harper promises to cut GST

I'd rather have no tax cuts, and put that money into infrastructure, cities, education and health - as those areas would help keep Canada competative (a highly skiled, healthy workforce, with good transportation and lower health care costs to employers).

Once those areas are addressed, then income tax cuts are superior to sales taxes, the only caveat is that sales taxes are regressive - as in the poor pay a higher proportion of their income than the more wealthy, while income taxes tend to be much more progressive and fair.

 

[mpolo2]

Re: Harper promises to cut GST

EnviroTO if your concern is with what I presume are "good union jobs" in the forestry sector or steel (though that is not a depressed industry right now) then arent you promoting tax relief for those companies or reducing the cost of labour to make them more competitive (ie lower wages)? that sounds pretty right wing -no? You are right though in that cutting income and corporate taxes wil make us more globally competitive than slashing the GST would. How about increased depreciation rates for capital expenditures to make these workers more productive also?
In addition, I dont think measured tax cuts are mutually exclusive from increased spending on education and infrastructure, etc. BC is currently doing it. Cutting taxes, buildind subway lines, and increasing education. if only all Liberals were like that...

 

[bizorky]

Re: Harper promises to cut GST

Conservatives=deficit.

Frankly, I'd prefer an income tax cut over a consumption tax cut.

But I agree with the above; we have the cash for much needed investment, so long as that money is not pissed away or redirected by provinces to their pet projects. Hell, I'd even like to see the debt get reduced because when the conservatives get elected, the deficit they run up won't hurt as much at first.

 

[mpolo2]

Re: Harper promises to cut GST

I also agree with the above, also - I sometimes feel like I am some sort of standard bearer for the right on this website only because on UT centre-left is rougly b/w Castro and Lenin. for what it is worth, I didnt vote conservative last time and I doubt I would this time. The conservatives last platform was retardedly republican. All the liberals spending (the 41 billion) plus tax cuts - but of course our real focus is protecting families from destruction at the hands of a couple gay men formalizing their monogomy in law.

 

[EnviroTO]

Re: Harper promises to cut GST

EnviroTO if your concern is with what I presume are "good union jobs" in the forestry sector or steel (though that is not a depressed industry right now) then arent you promoting tax relief for those companies or reducing the cost of labour to make them more competitive (ie lower wages)? that sounds pretty right wing -no?

I am an environmentally aware pro-corporation, pro-social services, and pro-tax to pay for those social services person... label that if you will. Regardless of whether or not those workers are unionized they would be less competitive in an environment that focuses on income taxes for revenue versus a tax like GST. When we talk about competing with the world we will have a tougher time with high income taxes (corporate or personal) than we will with high GST. GST doesn't get charged on goods we sell to the world but other taxes indirectly do because they push up the price of our goods. On imports we loose the manufacturing income in taxes and in salaries, but with GST we can collect tax on imports to pay for social programs.

GST is not that regressive a tax because it isn't applied evenly. GST is not applied to many necessities so the higher the portion of a low income family's budget that goes to groceries, medical care, or rent the lower their taxes. The higher the portion of a family's expenses that go to X-Boxes, TVs, alcohol, cigarettes the more tax they pay. I think the wasteful wealthy will see a greater benefit from a GST reduction than they would from a basic personal exemption increase.

 

[EnviroTO]

Re: Harper promises to cut GST

How about increased depreciation rates for capital expenditures to make these workers more productive also?

That doesn't increase worker productivity... either does lowering corporate income tax. Increasing worker productivity involves getting more out of each worker and the only way you can do that is work smarter or work harder. Talk about tax has nothing to do with worker productivity unless you are comparing employed to unemployed. Worker productivity is an important part of being competitive on the world stage too of course but assuming equal productivity between Canada and another country, if Canada gets all of its tax revenue from corporate or personal income tax it will have a higher price for its goods than another country which collects the same revenue but from internal sales taxes.

Increased depreciation rates reduce corporate income taxes which lower the prices of goods it sells making corporations more competitive. It also reduces it in a way that promotes capital investments in the country rather than having increasing amounts of money being taken out (perhaps out of the country and into an individuals pocket). This leads to more jobs in the country which is obviously a plus.

 

[bizorky]

Re: Harper promises to cut GST

I am an environmentally aware pro-corporation, pro-social services, and pro-tax to pay for those social services person... label that if you will.

I'm sort of like that myself. My more sort of conservative friends snicker like I'm naive, my dipper friends just get angry at the injustice of it all. Kinda nice to have no label, though.

 

[Antiloop33rpm]

Re: Harper promises to cut GST

I get this feeling that Harper and Co. are going to have a rough ride this election. Add Kim Campbell to the list of Conservatives who dont seem to think Harper is going to win. And, basically echoing the same points that have been made above, economists are not too keen on Harpers plan to cut the GST.

www.cbc.ca/story/canadavo...51201.html

Kim Campbell says Harper won't win
Last Updated Thu, 01 Dec 2005 20:08:12 EST
CBC News
Former Tory prime minister Kim Campbell says she doesn't think Stephen Harper will win the federal election because Canadians are too afraid of his party's social conservative agenda.

Campbell made the comments in an interview Thursday at her alma mater, the London School of Economics.

"Their (the Conservative party's) positions are too socially conservative, I think, to form a government in Canada," said Campbell about the Jan. 23 election. "People may like their fiscal policies but they're frightened by their social conservatism...It's a pity because it denies people a choice on policy issues."

Campbell served as the first female justice minister and defence minister before becoming prime minister after Brian Mulroney stepped down as party leader.

But she only held the post for just more than four months after calling an election in 1993, when the Progressive Conservative party was reduced to two seats in the House of Commons. Campbell lost her own Vancouver seat and she retired from politics.

She was later appointed to a four-year term as consul general of Canada in Los Angeles.

Campbell teaches in the United States and is currently the secretary general of the Club of Madrid, an organization of former heads of government and state who work to promote democracy.

www.cbc.ca/story/canadavo...51201.html

Economists dump on Harper's GST-lowering plan
Last Updated Thu, 01 Dec 2005 20:13:03 EST
CBC News
Some economists have come out against Conservative Leader Stephen Harper's election campaign promise to lower the GST.

"From an economic point of view, it wouldn't be my first choice," Bill Robson, senior vice-president of the CD Howe Institute, told CBC Newsworld on Thursday.

"If you want tax cuts that are going to promote work, going to promote saving, help us invest more and raise living standards in the future, the GST is not the tax you would go after."

Robson said it would be better to cut personal income taxes.

Earlier in the day, Harper announced he would lower the seven per cent goods and services tax by one percentage point immediately and by another point within five years if he becomes prime minister after the Jan. 23 vote.

Jason Clemens, an economist with the Fraser Institute, said he also opposes reducing the GST.


Jim Davies, who teaches economics at the University of Western Ontario in London, also said he would prefer income tax cuts.

"Most serious work done by economists who specialize in public finance indicates that the GST is a more efficient tax source than the income tax," Davies told the Canadian Press. "If the income tax cut is designed properly, it can provide similar benefit to lower-income taxpayers."

"Stupid, stupid, stupid, stupid," he said.

The Liberal party also challenged Harper's mathematics.

The Conservative leader said that for an average family of four with an income of $60,000 a year, the GST reduction would mean about $400 less in taxes.

Liberals said first-year savings would be closer to $250, based on Statistics Canada numbers indicating a typical family earning $60,000 makes taxable purchases worth about $25,000 a year.

But John Williamson, head of the Canadian Taxpayers Federation, came to Harper's defence.

"I think it's a fine idea," Williamson said of Harper's plan. " A lot of economists are suggesting that is it an unacceptable tax cut and I don't think anything could be further from the truth."

He said economists are evaluating the Conservatives' tax plan differently than the Liberals' tax plan.

Williamson said that when the Liberal plan came out to reduce personal income taxes, there was no talk among economists about whether their specific proposals were the best ideas.

"They are looking at the Conservative plan at what is the best tax cut measure and they are not doing the same for the Liberal tax cut plan."

He agreed, though, that the preference is to cut income taxes, but added he is waiting to see more tax cut proposals from the Conservatives.

 

[blixa442]

Re: Harper promises to cut GST

what effect would this have on our services?

Less money for Quebec ad agencies?

 

[Antiloop33rpm]

Re: Harper promises to cut GST

Less money for Quebec ad agencies?

Maybe with some luck blixa Quebec might one day no longer be such a problem for Canada.