Tax cuts: Let's have the full debate
The Windsor Star
Tue 06 Dec 2005
Page: A6
Section:
Editorial/Opinion
Byline:
Source: Windsor Star

Conservative leader Stephen Harper's pledge to trim the
hated GST is a shrewd political gambit that resonates with every taxpayer, and
cleverly highlights the Liberal's broken 1993 promise to scrap the tax. There
can be no debate it is good politics although there can and should be a debate
over whether it is good economics.

But the debate over whether the proposed GST cut is the most efficient tax
reduction, whether the tax promotes savings and investment while discouraging
consumption or whether the tax is an unfair and regressive one should form only
one part of a much broader debate about this country's oppressive tax structure.

A 56-day election campaign is the ideal forum for the different parties to
lay out tax cut agendas that will encourage innovation and investment, leave you
and your families with more disposable income and help ensure Canada remains
globally competitive. This debate is long overdue because our economy is
performing strongly despite, not because of, our tax system.

A report issued last week by Global Insight, a private sector think- tank,
concluded "the federal government is acting as a drag on our economic growth"
because of gross overtaxation. Overtaxation under the Liberals has created
multibillion-dollar surpluses year after year, robbing the economy of the fuel
it needs to expand. The report concluded Canada's economy was underperforming
compared to the U.S. because of it.

The Global Insight report comes on the heels of a September report from the
C.D. Howe Institute
concluding Canada's effective tax on business capital was the second highest
among 36 leading and developing countries. A report earlier that month from the
Canadian Chamber of Commerce called for broad tax cuts because the excessive
corporate tax rates placed Canada in an uncompetitive position internationally.

The Liberals, who hadn't introduced a measure to cut personal

income taxes in nearly five years, had an 11th-hour conversion on the eve of
the campaign and announced $30 billion in personal income tax cuts over six
years including meagre corporate tax reductions.

The Conservatives countered with the promise of a two-per-cent GST cut over
five years and are expected to unveil cuts to income and business taxes as the
campaign continues. The Tories are also considering "income splitting," which
would divide taxable income between spouses in single-income families .

Harper, a trained economist, called the GST cut "broadly based, progressive,
fair tax relief to every single Canadian." The initial one-per-cent cut would
cost the federal treasury $4.5 billion over the first year. Not only can the
country afford to cut the GST, Harper said, it can't afford not to.

The GST is a regressive tax in that lower-income families are forced to pay a
disproportionate share of their income on every taxable item compared to more
affluent families. It is only progressive in the loose sense more affluent
people might spend more money on more products. But it gives everyone more
disposable income.

Critics of the proposed GST cut are only criticizing it on the basis that
personal income tax cuts and business tax reductions are better and more
efficient. They argue these tax cuts promote saving which in turn leads to the
investment and boost in productivity that spawns innovation and new jobs.

A cut in the GST yields savings only on purchases, but a cut to personal
income and business taxes yields savings on the money you earn and the money you
save. Some might benefit more than others but all would benefit.

The politicians should lay all their tax-cutting cards on the table and let
voters choose the best hand.

Edition: Final
Story Type: Business; Editorial

Length: 596 words