Decision Canada 2006

Thursday, December 01, 2005

GST vs Income Tax cuts

Today Conservative leader Stephen Harper announced he would lower the GST to 5% if elected a move which bought sharp criticism from many analysts. Liberal leader Paul Marin has announced that he would cut income taxes in lieu of a GST cut.

Cutting the GST would have some benefits to Canadians, it might prompt spending to increase slightly yet overall it won't have much of an effect on the economy in the scheme of things. The only main incentive is the fact that the additional dollars are more likely to be spent in Canada rather than south of the 49th parallel.

On the other hand, cutting income taxes would put more cash into people's bank accounts which could either prompt Canadians to spend their extra "earnings" or to save them for a rainy day. An income tax decrease would provide the same net but would provide a more fair and balanced way to provide tax relief.

On the third hand, why not restructure the GST. Adding additional exempt items to the list, bicycles being one item that comes to mind would permit Canadians to buy "essentials" while taxing "luxury goods."

Of course, would we be better off keeping current tax levels and reducing debt. Sure, I would like a few extra bucks in my wallet, yet putting Canada in a stronger economic position might be best for us all.

Harper's strategy might buy some additional votes this time around, but in the long term, it's not in Canada's best interest.

2 Comments:

  • We are in such a surplus we can reduce the gst reduce income taxes and still reduce the debt. When you reduce taxes people spend more and the gov't makes more revenue as most of the studies have shown. So we can reduce gst and income tax and at the same time reduce the debt. Money is not the problem. It is the incorrect use of our money that is the problem.

    By Blogger polytick, at 10:48 PM  

  • More slant from the left. Economically, no tax is a good tax. The GST is politically a good one to cut - and a shaving of 2% will not preclude other tax cuts, unlike the Liberal promise of eliminating the GST in 1993, and again in 1997.

    It is funny how the Liberals hated the GST in the 1993 campaign, with Paul Martin calling it a "regressive" tax - however in 2005 the GST suddenly is a "fair and equitable" tax.

    By Blogger Greg P, at 10:30 AM  

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