Beyond The Commons

 Beyond The Commons

Aaron Wherry covers all the goings-on in and around Parliament Hill. Follow Aaron on Twitter: @aaronwherry

Categories: Beyond The Commons, Capital Read

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by Aaron Wherry on Friday, August 27, 2010 11:46am - 0 Comments

From the Globe’s epic profile of Jim Flaherty, the Finance Minister explains why cutting the GST was a good idea.

Flaherty is unrepentant about the GST cut. Over the G20 weekend, he says, he had a spirited debate with his British counterpart over the issue of consumption taxes. George Osborne, a Conservative, had just laid out plans to raise Britain’s version of the GST as part of the new government’s program to narrow a massive budget deficit. “I know the argument about consumption taxes,” says Flaherty. But what economists fail to take into account, he says, is the psychological value in cutting a highly visible levy. “There is something else that goes on too, and that is, middle-class people don’t believe that governments reduce their taxes,” Flaherty says. “But if you do it on a consumption tax, people see it. That, in part, restores faith in government. Taxes don’t always go up, they can go down, and they see it every time they buy something.”

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  • WDM

    Shorter version: It's good because we bought some votes with it.

    • Louie DelGrande

      As opposed to buying votes with voter's money through social programs? Get a life.

  • YYZ

    A highly logical perspective.

    Unfortunately, it's tantamount to saying "we did it for political reaons."

    At least he finally said so.

    • TJCook

      It's a scary prospect, our Minister of Finance justifying policy decisions based on his anticipation of peoples' feelings.

      The Minister of Finance is supposed to be one of the smart guys, right?

      • Blacktop

        No, the smart guy is the Deputy Minister of Finance. The minister is only smart if he listens to the deputies and their specialists. Like Martin did in respect to getting rid of the deficit and paying down the debt.

  • tobyornotoby

    "highly visible"

    Yes I can see the pennies from here. I'd rather see more $ on my net pay or on my income tax return, though. That's pretty visible too.

    • TedTylerEzro

      You aren't a small business owner.

      • Jenn_

        What? The GST cut had absolutely no effect on small business. Unless you figure that people bought more because they saved a percent or two. I would estimate that the vast majority of small business would see no effect of that beyond the first weeks, and would have seen a corresponding decrease in the month leading up to the cut.

        • TedTylerEzro

          It all depends on the business you are in as well. Not everyone is in retail after all.

      • tobyornotoby

        Gee how did you figure that out Ted? When I mentioned a pay cheque?

        Is that okay with you, by the way, or do I need to go back into business to express opinions?

    • DPT

      why not try a simple experiment? Estimate your GST applicable expenditures for the last year and and see what the impact of the 2% cut was. You may (or not) be surprised. If your GST applicable expenses are say $25,000 per year, the 2% reduction has saved you $500 annually.

      • Amateur Hour

        But this kind of spend-to-save thinking is the stuff of TV commercials. If a $100 item is "on sale" for $98 and you buy it, you didn't save $2 – you spent $98!

        Your only savings under the GST cut comes when you consume, not when you earn.

        On the other hand, a $500 increase in the allowable income before tax is calculated would let you keep an additional $500 of your own money.

        That's a real tax cut. You could then elect to spend it or save it or invest it as you see fit.

  • Jenn_

    I read that this morning, and after I got over the fawning tone of the piece, and wondering why it was published now–long after the G20 events referred to had taken place, I got to thinking.

    So, was Flaherty just saying "Yes, sir" to every hare-brained idea Harper came up with previously? Until the FU crisis, I mean. At that point, did Flaherty maybe realize the press was, you know, singling him out as a bumbling idiot (and they were) and figure out that if he didn't do something he'd go down in history that way?

    Because I tend to agree with the article's conclusion that he hasn't been that bad in recent days.

    • Poker Face

      I had trouble parsing the meaning of FU, until I thought: Fiscal Update.

      • Jenn_

        Same difference really, isn't it?

  • Phil_King

    It's just so ironic. Mulroney decided not to bury the tax because he considered it a principled stance that people should know what tax they're paying.

    What Flaherty is saying is that the virtue of the form of taxation is less important than the perception of it.

    We should be reducing income taxes and increasing consumption taxes so that people can choose to save and spend less on non-essential items which are more likely to be taxed. There is no tax on a loaf of bread, or milk, or rent etc.

    This makes for a more resilient populace and reduces the need for social programs by making people more self-sufficient.

    Taxing spending rather than income is simply a more ethical approach all around, and yet again we see that real values aren't the primary concern of this government.

    • Louie DelGrande

      Consumption taxes hurt the poor disproportionately, they'll spend a larger part of their income to pay the tax than a rich person would.

      You want to create self-sufficient? Kill the GST and lower income taxes and then cut wasteful spending from social programs.

      I guess we have the same goals, just a different way of getting there.

      • McC_

        "Consumption taxes hurt the poor disproportionately" sort of, which is why we have GST and HST rebates which are distributed quarterly to low income families and individuals (who file their taxes): money back in the pockets of those who need it most, on a regular basis.

      • Phil_King

        That's why we have GST rebates for the poor, upwards of $400 a year or more. One would have to spend more than $13000 on taxable items before they'd actually be paying any tax, and as I've pointed out, basic groceries and rent are GST/HST exempt.

        I certainly think that we want people to be as self-sufficient as possible, rather than rely on government. Ultimately though we're always going to need some kind of taxation for the neccesary operation of government such as police forces, military, healthcare etc etc, and I'd rather we get that from discretionary spending rather than taking it out of people's pockets before they even see it.

        Especially since a lot of money is held hostage for a year by the government, and then returned as a "refund". This is money people should have access to and be able to use or save and make interest on throughout that year.

        • Mike T.

          As someone with a very high income and little discretionary spending, I think your idea is wonderful!

      • Sean

        GST rebates for low income Canadians sort of nullify your first point.

        Do you have credible evidence to support the claim that 'wasteful spending in social programs' is of a scale that could realistically offset both the loss of GST *and* some income tax revenue? Really? Harris tried that in Ontario, and failed.

        • Phil_King

          It's simply a way of exempting people under a certain income threshold from paying taxes on that lower income. It's far simpler and less expensive to do that than to create an entire bureacracy to deliver a service IMO.

          It's gives choice and mitigates the effects on the poor. Ultimately the refund simply offsets the gains on the taxes, so it's zero sum, while still providing the other benefits noted in my previous comment.

          I'm not saying all social programs are wasteful per se, only that a taxing mechanism that leaves more money in the pockets of people to save or spend, gives them choices that allow them to be more self sufficient, and reduces the need for those programs, which are inherently expensive, even if efficient.

          Programs will always be needed to some degree, but if we choose a form of taxation that makes people more self sufficient, obviously it is going to relieve pressure on the system and save money.

          • Sean

            I wasn't arguing against the refund, and I understand why it exists and how works.

      • Phil

        Can you provide a link (or something similar) that shows some a chart or a graph or an equation of the relationship?

        Or maybe just two examples:
        - what is the average percentage of income that people with a net income of $20K pay in GST, vs
        - what is the average percentage of income that people with a net income of $80K pay in GST?

        I'm having a tough time figuring out why the percentages would be different at all.

        • Phil_King

          Some things are taxed and some aren't, while the 20K person receives about $400/year in rebates. The percentage of income eaten up by basics like food, clothing and rent is very high for the 20K person but taxed less, while the 80K individual likely has more discretionary income, and if spent, will likely spend it on something taxed. So the percentages are bound to be different all things told.

          The percentages would even be different even between two individuals making 80K, depending on their spending patterns, so it's hard to really nail down.

          I assume, perhaps foolishly so, that the rebate is based on some sort of analysis of spending patterns and what amount of GST those individuals would still pay on neccesary items, but I don't have any specific graphs or charts depicting this.

          • Phil

            Your description seems reasonable to me. So, if we were to do the math it seems to me that the people with $20K income would effectively pay very close to 0% GST whereas the $80K folks would pay much closer to 5% of their income in GST.

            That is the exact opposite of LDG's contention that the GST hurts low income people disproportionately relative to wealthier folks.

            I'll be interested to read if LDG concurs, or has some material to backup his claim.

      • Mogul

        Consumption taxes also hit the young disproportionately as well. They're in their accumulation stage as they leave the nest, and are doing so at the bottom end of their lifelong income range.

        • Phil_King

          I don't think so. The "young" generally make less money and therefore receive GST/HST rebates. In fact they can deduct the interest from student loans from their income and in this way recieve more in terms of rebates.

          Like any other group they're affected based on their income levels.

  • Olaf

    I know that prior to the GST cut, I thought that taxes always go up. Mostly because I was in a coma during the years directly preceding the Harper government.

    He's basically saying "this tax cut is good because Canadians are way too stupid to realize that taxes have throughout history and will continue to be revised up and down as necessary in any number of areas (income, corporate, property, consumption, etc.), and as such, we're going to make the dumbest, most inefficient and most obvious tax cut in order to pander to their ignorance".

    Annnnd it worked.

    • Jenn_

      It's sad to me that you are so very right on this issue. I really wish I could argue.

      • Olaf

        It also makes me sad when I'm so very right. And confused. And a bit scared.

        Lets just call chalk this up to a once-in-a-lifetime fluke and forget it ever happened.

        • brooster

          A red-letter day. I'm taking the rest of it off and annually hereafter…Olaf's Day…commemorating the event).

          • TJCook

            Hmm – better check with the Pope, there might already be a St. Olaf's day.

            In which case, we can just celebrate our Olaf on that day :)

    • Crit_Reasoning

      we're going to make the dumbest, most inefficient and most obvious tax cut

      By this logic, raising the GST back to 7% would be the most efficient and smartest tax increase. Yet it's hard to imagine Ignatieff (or anyone else, for that matter) having the stones to do this.

      • McC_

        although NS and QC are (belatedly) eating up the tax room vacated by the feds and increasing their VATs

        • Crit_Reasoning

          … making the GST cut essentially a transfer of tax dollars from the feds to the "have-not" provinces.

          • McC_

            belatedly, yes.

          • madeyoulook

            And any province that was whining "fiscal imbalance" SHOULD have taken the tax points. They were there for the taking.

      • Olaf

        It would be the greatest. My extremely limited and perhaps entirely made-up understanding of the "Scandanavian model" is that they can have such generous welfare spending without become Greece in part because the have very low corporate and income taxes and high consumption taxes, which allows them to maintain investment and limit disincentives to improving ones spending power, while ensuring sufficient government revenues, respectively.

        • Sean

          One example
          http://en.wikipedia.org/wiki/Economy_of_Denmark

          VAT of 25%

          only 40% of full time workers pay income tax, but those rates range from 43% to 63%

          Off to search out info on the Danish underground economy now…

          • Crit_Reasoning

            It's stunning that Denmark's tax revenues are almost 50% of its GDP, which is the highest tax level in the world according to that wiki link.

          • TedTylerEzro

            Well, that's what you get when the public sector is 38% of the country's full time employment.

            You can be assured that if that happens here in Canada, conservatism in this country will be truly dead forever.

        • TedTylerEzro

          If that's true, it definitely a tax system I could get behind. I've always been a fan of both high consumption taxes and low income taxes. I'm generally in favour of taxing those that can afford it, and consumption is generally a sign of discretionary income.

          I wasn't particularly pleased with the GST cut myself, because I know that the GST is an expensive tax to administer (we lose over 50% of the money collected that way) and the lower the GST is, the less value we are getting for the amount of bureaucrats we need to hire.

          • Mike T.

            I'm generally in favour of taxing those that can afford it, and consumption is generally a sign of discretionary income.

            If you are really in favour of this, you got it completely backwards. Utterly, one hundred per cent completely backwards.

      • ColdStanding

        No, what you suggest would be illogical, as it has been established in practice that making the illogical move is the logical move.

        Bring it back to the other columns by Macleans authors are suggesting is Harper's MO: take what the experts are saying is the logical and right thing to do, then do the opposite. My thesis is that Harper suspects most experts are liberals (true), Harper isn't a liberal, therefore he seeks to act in an anti-liberal fashion so as to shake the populous from it's liberal dragon chasing (Opium addicts are said to be "chasing the dragon").

      • brooster

        I guess so…half Olaf is better than no Olaf at all.

        • brooster

          disregard this…inserted in wrong place…D-UH!

          • Olaf

            I don't think it can be stressed often enough.

  • Andrew (not PorC)

    This isn't a terribly credible explanation. Who can reasonably argue that Tory strategy has been working toward improving faith in government?

    It was cynical vote-buying with a dash of 'starve-the-beast'.

  • madeyoulook

    I think the admission (that this was "retail politics") has been pretty well established, from the mouths of many Conservatives themselves.

    Yes, 7-to-5-percent was a dumb move, only a lot less dumb than scrapping the GST altogether. But it was tangible "thing" that every Canadian could notice, and feel, during every commercial transaction.

    I think it was John Geddes, not too long ago, who expanded on the absence of political gain felt by the Tories for proposing smarter tax policy that would encourage business efficiency, profitability and jobs. So, if the people want a shave off the GST, and if that's what gets the Tories mileage as the "tax-cutting" party, so be it.

    They've also done the impossible by making an even bigger mess out of the personal income tax system, with all these cute widdle microcredits for bus passes and swimming lessons.

    That's retail politics. And it is a reflection on us, the electorate.

    • Phil

      They've also done the impossible by making an even bigger mess out of the personal income tax system, with all these cute widdle microcredits for bus passes and swimming lessons.

      True tax reform would be something that would make me take notice (ie as something promised during an election campaign). It can't be impossible for about 90% of the populace to file their income tax return on a post card sized form.

      • Mike T.

        It's possible, but very very likley people won't end up paying any tax.

        • Phil

          Sorry, why would that be the case?

          • Stewart_Smith

            If the income tax form comes single spaced with a 2pt font next year… I am blaming you.

          • Phil

            IF that happens you can send it to me, along with all the information slips and I promise to do my best.

            But fair warning, I only just sent my 2009 return to Winnipeg about one week ago, so your refund might be especially late next year.

          • Mike T.

            Because a great deal of the income tax act is made up of sections which prevent people from unduly reducing their income tax.

          • Phil

            Still not following your line of thought…

            Let's take a concrete line item on the tax return…..like Line 363 on Schedule 1, the Canada employment amount, which allows someone who listed income on Lines 101 or 104 to possibly deduct up to $1044. To determine if you can make a deduction here, and the amount, you need to refer to the Guide.

            Why can't we get rid of this line and make an adjustment to the basic personal exemption if we feel that that amount is not high enough? I understand that Line 363 is attempting to target a certain segment of the population, but the actual effectiveness relative to the intended target would seem to be extremely low.

            I don't understand how this deduction relates to "Because a great deal of the income tax act is made up of sections which prevent people from unduly reducing their income tax.", but I'm willing to learn.

          • Mike T.

            Sorry I was reading guide as the Act itself. yes I suppose you could get rid of some of the specific items which take up some lines on the form, and end up with shorter forms. But removing certain items would have very little overall effect on the complexity of our income tax system altogether (an entire income tax act with attendant regulations is well over 1000 pages, and simple deductions like the one you point out are among the easiest parts), so it's ultimately not helping very much. Assuming that each deduction in the guide serves a worthwhile purpose (which it may or may not), eliminating it only lessens overall funding and incentive for that good, while providing very little reduction in complexity. Trying to make up for that by spreading the same miniscule amount between all taxpayers as part of the personal exemption would have little effect.

          • madeyoulook

            Assuming that each deduction in the guide serves a worthwhile purpose

            I really shouldn't be partaking of beverage when reading Mike T.

          • Mike T.

            I hope you apply a much higher level of reading comprehension in your workaday life.

          • Phil

            It is probably true that even if we eliminated every deduction and credit on the tax form that many of us submit (so that there was one line to report total income, and then a table to calculate tax owed (so as to retain the progressive aspect)) the Income Tax Act would still be an imposing document.

            But the difference would then be that a large percentage of us wouldn't need to have any interaction at all with that Act and the Guide. Presumably the Act would still exist, but now primarily for businesses and other tax paying entities (anyone or anything other than individuals) who still need to know what expenses can be applied against gross revenue to come up with net revenue.

            And even then, why couldn't the Act be simplified for businesses? I'm reasonably confident that there are quite a few opportunities to eliminate special deductions or credits that are aimed at one business sector or the other….get rid of them all.

          • Mike T.

            Anyone with more than one T4, and anyone with any sort of income other than one job (and under almost any system, they'll have to know what kind of income it is: business, employment, capital gain, etc.) will still have to fill out a form. And there's still the army of people working out the deductions before you get your paycheque and T4, so there's still lots of effort put into taxing your income, even if you aren't filling out a form once a year. Overall, assuming all deductions are beneficial*, eliminating lots of deductions removes a great deal of fairness and doesn't get rid of nearly as much complexity as people think.

            *And if they aren't, discuss them individually instead of talking about eliminating them all at once, (this goes for that poster as well).

          • Phil

            I may have given the impression that I think simplification of the income tax system would be "easy as pie", and that wouldn't be the impression that I want to give – I won't be at all surprised if it does take quite a bit of effort.

            But I'll still stick to my (aspirational) target that 90% of tax returns could consist of a post card sized form:
            - total up all your income (no differentiation of sources)
            - apply the RRSP deduction (in a different strand of this thread you "convinced" me to leave that deduction in place)
            - enter the net number into the correct spot in the Tax Payable table, and calculate
            - compare to Amount Paid, and calculate Refund or Balance Owing

            Let's see how close we can come to that target.

          • madeyoulook

            I suspect that if anyone tries to tinker by starting with what we've got, it would be a mess.

            But if someone started by saying "If I were designing a simple, fair income tax system from scratch, what would it look like?" it might be a little less hard to design.

          • Mike T.

            Simple and fair rarely work well together, esp. with income tax.

          • Phil

            I certanily agree with you if you are referring to Alberta's tax simplification effort of a decade ago or so.

      • madeyoulook

        Comment got submitted and appeared as such, then on my return… poof! Am I the only one tagged by the Rogers censors, or is this random through-crack falling courtesy of Intense Debate?

        • madeyoulook

          And so I shall try again. Years ago, the funny-for-the-truth-therein joke was along the lines of: The new simplified tax form has only three lines. One: State your total income. Two: Send it in. Three: For residents of Québec only: add 20%.

          • Phil

            Not sure where your initial reply went….can't help out there.

            Wrt the funny, I laugh and grimace at the same time – it is funny, no doubt about that, but I also grimace because I worry that that thought essentially becomes the reality for a portion of the voters, which then helps to prevent any serious consideration of true tax reform.

            On a somewhat related note, the place that I would actually consider expanding the tax forms has to do with breaking out the various services that are being funded with those taxes…..so instead of just seeing a grand total Federal Tax amount of $10K, you would see a "bill" of $750 for DND and $2500 for transfers to provinces for health and so on.

            [My two dollar figures are WAGs]

          • madeyoulook

            [I]nstead of just seeing a grand total Federal Tax amount of $10K, you would see a "bill" of $750 for DND and $2500 for transfers to provinces for health and so on.

            The income tax guides used to pie-chart a loonie to show us just that, in a way. I can't say that I've noticed that little feature in the last few years.

          • Phil

            That seems vaguely familiar. I know that my property tax notice comes with the pie chart, and I do find the information to be of some value.

            OTOH, who in the heck reads the guide? And, the simplified tax form wouldn't need a guide to explain stuff like this:

            If, in previous years, you withdrew funds from your RRSP
            under the HBP or the LLP, you may have to make a
            repayment for 2009. The minimum repayment is shown on
            your notice of assessment or notice of reassessment for
            2008. To make a repayment, you have to contribute to your
            RRSP from January 1, 2009, to March 1, 2010, and designate
            your contribution as a repayment on line 6 or 7 of….

            Grrrrr, Keep It Simple Stupid!!

          • Mike T.

            So no deductions for investing in RRSPs? I am not sure t his is a good idea.

          • Phil

            For the sake of discussion let's say that there are 40 deductions / credits for which a typical taxpayer can qualify, the RRSP deduction being one of them.

            If you then ask me to place that list in order of Keep >>> Eliminate, the RRSP deduction is one that I (personally) would rate as a strong keep. But even there, I'm open to discussion.

            But to then layer on top of that program to encourage home buying……

          • madeyoulook

            If you really want simplicity, you expand the TFSA as the retirement vehicle for Canadians and kill off the RRSP and its deduction.

          • Mike T.

            There's very little difference. There's little overall difference in subtracting an input amount from overall income and not including output amounts in income.

          • Phil

            Agreed that the net financial effect is (or should be) close to zero, but from a paperwork point of view this would be a more efficient system, and does get me closer to my post card goal.

          • Phil

            And "another" cut in one of the tax bracket rates to make the change revenue neutral.

          • Phil

            And for further discussion, how would you rate the absolute necessity of these deductions:

            - Northern Residents,
            - tuition amount transfers from student to other tax payer,
            - political party donations,
            - employment amount, or
            - age amount?

          • madeyoulook

            Nil to all. Lower the tax rate across the board, and dump each of these little distortions.

            Maybe we could get to that postcard after all, eh? Well, ok, maybe not on this planet, in our lifetimes.

          • Phil

            I'm liking this idea more and more each day.

            Same could apply to CPP and EI amounts…..just pay tax on them but then cut the bottom rate by an ~corresponding amount…..voila, a simpler tax system is within reach!

      • tobyornotoby

        The transit tax credit was the subject of a sustained lobby (mid-90's on) by the Canadian Urban Transit Association, supported by environmental groups hoping to encourage eco-friendly behvaiour, but I don't think the credit (good for about a month's worth of commuting if you take transit all year) is deep enough to produce the shift in behaviour from car commuting to transit. CUTA might think differently, but the program ought to be evaluated to see if it actually produces the social benefit it was designed for, or whether it just rewards people who would ride the bus anyway.

        • Phil

          I wonder how many folks who use transit (before or after the credit was implemented) actually benefit from the credit. My kids who attended high school and university over the last few years have all had transit passes, but have never been able to use the credit because their incomes haven't been high enough. I would wager that the correlation between "likely to have purchased a transit pass" / "low income" would be fairly strong, so I question the actual effectiveness of the change to the tax act. especially against the added complication.

          • Mike T.

            See, this is a reasonable tax debate based on discussion of a single topic, rather than unhelpful blanket statements.

            And yes, students who spend most of their time in school will generally not have high incomes, and they're they're all getting a larger, transferrable tax credit on their largest or second largest expense anyway. Most credits somebody in school can get will be subject to that argument. Somebody with a low income who uses the bus will likely receive an extra benefit, however, because of the diminishing utility of money. it's also probably true that anyone who has a choice between commuting by car or transit and has already chosen the less environmentally friendly way will not be swayed to change because of the tax credit. In a similar vein to the creating more daycare spaces vs. giving every parent $100, it may have been a better idea to give the same amount of $ to increase transit availability, rather than transferring small amounts to users.

            Although I would point out the added complication is minimal. Add up the $ from each transit pass in a year, put in on the line, then at the end of that section you multiply the entire category by 0.165 and take that amount off your total tax owing. It's, like, 4th grade math, and it's not like your trying to figure out the capital cost allowance class of a good or anything.

          • madeyoulook

            Although I would point out the added complication is minimal.

            Which joins with each and every other minimal added complication to create one helluva mess. And a major political upheaval if anyone dares simplify. What have you got against public transit? Disabled people? Old people? People with medical expenses? People paying alimony and child support? Hard-working film producers? Etc. Etc.

          • Mike T.

            If you think its too hard, maybe the overall discussion is taking place on a level to complex for you to understand.

          • Phil

            I'll wager that myl actually does grasp the complexities of this discussion – he is just not convinced that any gains that might exist are worth the hassles.

          • madeyoulook

            Well, now I am having trouble with the discussion. Where do I leave the impression that I think "it[']s too hard," and what is the "it" that I think is too hard, anyways?

    • Dave

      Of course it was retail politics. That's why they made the announcements at a Giant Tiger store.

    • Jenn_

      And can you believe it, with all those microcredits, I don't think there's a ONE that I qualify for. I'm trying not to take it personally, I really am, but what are the odds?

      • madeyoulook

        Adopt a child and send him to summer camp. Take the bus. Start a film company. Move further North. Go back in a time machine and repaint your kitchen, last year.

        Don't say you don't have choices…

        • Olaf

          Jenn always wants the government to meet her needs, instead of asking herself "what needs will the government support and how can I better need those things?"

          Typical, selfish Liberal.

          • madeyoulook

            *guilty grin*

        • McC_

          and my favourite: become a trucker, eat lunch.

        • Jenn_

          Oh, don't be ridiculous, MYL. The only one that's even halfway doable–the going back in time thing, requires I own my home. And I rent!

          • madeyoulook

            Go back in a time machine, buy a house, then buy some paint…

            C'mon, Jenn, it's like you're not even trying!

          • Jenn_

            All right, I admit it. I was being partisan there. And hey, there's also that nifty tax credit on first time homebuyers I could qualify for last year!

          • tobyornotoby

            You could save up for it with a tax free savings account, withdraw the money and THEN go back in the time machine.

          • madeyoulook

            Hey, slow down, there. That's spending the future's wealth waaaaay ahead of time. No one would ever be so stupid as to pull a stunt like that!

  • oppo guy

    Flaherty would be a lot more convincing on this point if he hadn't been Harper's cheerleader pushing provinces to adopt the HST — as they did in Ontario and BC.

    Before you were Finance Minister, I didn't have to pay Ontario 8% on haircuts, vet bills, and home renos, but now I do. Thanks a lot, Jim. I think of you everytime.

    • TedTylerEzro

      So you approve of the drop in consumption taxes (the GST cut) in the first place then?

    • Sean

      Why should those things be exempt from consumption taxes? Doesn't the HST help to create a more level economic playing field?

      • McC_

        GST-HST (as a value-added tax) is also fully recoverable for business expenses, unlike the PST

        • TedTylerEzro

          Well, like I was telling Jenn up above, it all depends if your GST/HST that you collect for the government is greater or equal to the amount you pay out for expenses. If you pay a lot of GST but don't really collect much (because of the business you are in), a GST cut is welcomed.

          • Jenn_

            What busines are you in that you don't charge GST on it? I'm trying to think of something. Banking, maybe? I know non-profit housing, but they've become "municipalities" for GST purposes now, so they're alright.

          • TedTylerEzro

            Agriculture and Fisheries are the biggest beneficiaries. A lot of their products are either GST free or charged GST at 0%.

            But largely, anywhere that you have a lot of overhead in terms of buying equipment and supplies vs. the amount you charge for your services, you will benefit from a GST cut.

          • McC_

            "But largely, anywhere that you have a lot of overhead in terms of buying equipment and supplies vs. the amount you charge for your services, you will benefit from a GST cut." only from a cash flow perspective with regard to the period between paying, colleacting and remitting GST-HST; but any GST-HST you spend on business inputs you can claim and get reimbursed monthly, quarterly or annually depending on you, so the rate of the GST makes no difference to your bottom line, only to your cash flow.

          • TedTylerEzro

            Well the cash flow is important, but not everything you need is eligible for input tax credit.

            Specifically, I'm talking about capital property, which includes equipment that depreciates.

          • McC_

            I'll take your word for it.

  • Joe You

    I think Flaherty's argument is actually valid…for ther first 2 weeks after the cut, then the psychological effect goes away. Probably cheaper ways to give a psychological boost…

  • Emily

    People would like it if the govt gave them a million bucks too, but it wouldn't be good for the country.

    • McC_

      had a prof in undergrad (staunch Waffle-era New Democrat) who made a pretty interesting case that the feds should give every citizen $100K on their 18th birthday to do with as they see fit (pay the full price of their post-secondary education, travel the world, start a business, overdose on drugs on a beach in Thailand, whatever)… it's à propos nothing really, except your comment brought back the memory.

      • McC_

        should note pre-emptively that the prof's idea wasn't just to add this spending to the federal budget (who-ah! you think we got a deficit now?!), but that it would be implemented at the same time as scrapping tuition subsidies, and a whole host of HRSDC, business development and other youth-focused programs, and according to the prof's math would wind up being roughly cost-neutral.

        • Emily

          We kinda do that with all our lotteries….except it's random.

          Within 5 years most winners are broke again.

        • Phil

          wind up being roughly cost-neutral

          Ah ha, so a tax shift of a sort….not a green shift, but a [insert catchy name here] shift.

          I like it already! ;-)

          • Andrew (not PorC)

            I call it the hookers-'n-blow shift.

          • tobyornotoby

            Shiftless Shift for kids who don't want to work?

  • Lord Kitchener's Own

    So, Stephen Harper is Brad Goodman, Jim Flaherty is Bart Simpson, and the people of Canada are Lisa Simpson:

    Brad: You see, folks, we're all trying to please someone else. And as soon as you're not a human be-ing, you're a human do-ing. Then what comes next?

    Bart: A human go-ing! [gets up to leave]

    Mr. Goodman thinks Bart's answer was wonderful, and he calls him up to the stage. He asks Bart what made him yell out that remark, but Bart doesn't know. Brad asks him again, and Bart explains, "I do what I feel like." Brad is clearly impressed: "I couldn't have put it better myself!"

    Brad: People, this young man here is the inner child I've been talking about!

    Lisa: [incredulous] What?

    Brad: We can all learn a lot from this young man here, this, this –

    Bart: Rudiger.

    Brad: — Rudiger. And if we can all be more like little Rudiger –

    Marge: His name is Bart.

    Brad: [snaps] His name isn't important! What's important here is that this lad has fully developed ego integrity with well-defined boundaries.

    Bart: [snoring noises] [Audience laughs]

    Brad: People, I am excited. I can sense a change in the air tonight. You are all going to start living, really living.

    Audience: Yay! [chanting] Living! Living!

    Brad: Be like the boy!

    Audience: Be like boy! Be like boy!

    There you have it people. Canada's tax policy in a nutshell. Do what FEELS good.

    BE LIKE BART!

    • Thwim

      Eat my shorts.

    • McC_

      I was with the old folks in the back who liked Roy.

    • LynnTO

      Instead of art imitating life, in Canada, life imitates the Simpsons.

  • Stewart_Smith

    This could actually be very interesting if the Conservatives decide to counter the charges of them "dumbing down government decisions" with an explicit "give the people what they want" message. I don't think it is really a bad idea from their point of view, it is relatively consistent with their earlier message and allows them to be aggressive in responding to the opposition.

  • PolJunkie

    "But what economists fail to take into account, he says, is the psychological value in cutting a highly visible levy."

    Oh. My. God.

    • Andrew (not PorC)

      Yes. That part is just stupid gobbledygook. Spoken like a person who has no understanding of the matter at hand.

  • DianeG

    Give with one hand, take away with the other hand, then leave a huge debt in your wake. Ugh!

    • McC_

      "Give with one hand, take away with the other hand" that was Budget 2006, when the GST (paid by everyone who buys)was cut from 7 to 6% and the income tax rate on the lowest bracket (paid by everyone who pays income tax) was raised from 17% to 17.5%.

  • tedbetts

    Hon Mr Flaherty: The member opposite again raises the question of reducing the sales tax. I must say that with respect to tax cuts, I agree with Paul Martin. With respect to reducing the GST federally and the RST provincially, I also agree with the federal minister, and we've talked about this. All you get is a short-term hit, quite frankly. You accelerate spending. You pull it ahead by a month or two. It has no long-term positive gain for the economy.

    On this side of the House — and I say this with respect to the member opposite — we're interested in long-term, sustainable economic growth and the creation of permanent jobs in Ontario. That's what grows the economy. That's what helps people. That's what helps retailers in Ontario, not short-term, knee-jerk actions.

    Ontario Hansard – 05-November2001

    • Crit_Reasoning

      Nice find. It's also ironic that many provincial finance ministers essentially used the GST cut as an opportunity to crank up provincial sales taxes. So the consumer ends up paying roughly the same sales taxes on most items, but more of that money is going to provincial coffers instead of federal coffers.

      • TedTylerEzro

        A desirable outcome as far as I'm concerned, though I know some wouldn't think so.

      • McC_

        "many"? I think just two, NS and QC so far, but I could be mistaken…

      • Style

        Doesn't that follow quite directly from Mr. Harper's conception of federalism? The federal government should fund only federal responsiblities, cut federal taxes and let provinces raise their own funds to meet their own obligations, with the safety net of equalization.

        • TedTylerEzro

          I would like to think so (given it is a goal I agree with), but if that was the case it should have been an agreement between the provinces and the federal government to do this.

          • McC_

            you know who did that? Trudeau. in the 70s. crazy eh?

          • TedTylerEzro

            Even a broken clock is broken twice a day and all that.

            Trudeau was baffled that the government was involved in marketing grain with the CWB too. If it had been up to him, we would have been rid of that abomination in the 70's too. Unfortunately, when the party apparatchiks told him it was part of what kept Winnipeg bought and paid for by the Liberals…

            Well, that was the end of that.

          • McC_

            I didn't know that about the wheat board, neat! I think it's unfortunate that so few of us are willing to give credit where credit is due when politicians/parties we don't like implement (or even just try to implement) good policies… I think we'd have far fewer sacred cows and third rails in our politics if more of us were willing to to do that.

      • sea_n_mountains

        CR, by chance do you have a list of provinces that did so and when?

    • Jenn_

      Well that certainly supports my contention that Flaherty was nothing but a suit for Harper to move about. Although, according to the article he's certainly now embraced the policy he apparently didn't agree with. What a principled guy!

      • tedbetts

        Right up there with "Nobody, I mean nobody, not one economist, not one, not one senator, predicted the global recession."

        He fits in well with Say Anything Steve. Call it culture of deceit or that they are making it up as they go along or the Know Nothing Party, but there is a clear pattern.

        [youtube vkk_OR6Dqt8&feature=player_embedded http://www.youtube.com/watch?v=vkk_OR6Dqt8&feature=player_embedded youtube]

      • Claudia Lemire

        Are you surprised though? I don't think any move made in this Government has ever come from anyone other than Harper!
        I do cut Flaherty some slack sometimes you embrace things after the fact.

        • Jenn_

          Well, yeah, I kinda am. I mean, I know Harper has the last word and all that, but I would have thought his cabinet ministers at least had a beginning word. This makes me think they just show up for their instruction sheet.

          I know, I know, we've known the Harper bench was light for a long time, but I'm still surprised the most important cabinet minister is THIS ethereal.

    • Style

      In teh full clip, you see Mr. Hampton arguing the Tories should delay or cancel a corporate income tax cut and cut the sales tax instead. Which is now Mr. Ignatieff's policy. He won't restore the GST, instead he'll delay the corporate tax cuts. Of course, at the provincial level, the LIberal party completely disagrees with this, and is raising the sales tax to fund other tax cuts. How do people sustain the widespread belief that everyone knows the right way to tax? There's nothing magical about consumption taxes versus corporate or income taxes. To the extent the GST cut was redistributive, it was a stimulus and a progressive policy.

      • tedbetts

        Well, an economist would tell you (and provide you with some graphs to prove his or her point) that when you are tinkering with the taxes (i.e. just changing rates or brackets by a small to medium amount), there is no question that income tax reductions produce longer term economic change and that upping the consumption taxes up or down by a bit doesn't really affect much. So Flaherty circa 2001 was repeating what finance and economic experts would pretty much all agree on. At best, a cut to PST or GST would result in a new purchase which is very quickly overtaken by inflation so there is no difference to the economy or to the taxpayer in the end.

        When you get to bigger changes – eliminating a tax or huge cuts, which we have not seen in North America really – there is disagreement.

        • Style

          That seems to be a modelling result rather than an actual empirical result, and it seems to follow from an economic model that believes there's no involuntary unemployment. There's an NBER paper somewhere that looked at the empirical effect and it was trivial. You could probably tell a good economic story where raising the highest income tax rates and cutting the consumption tax is better overall.

      • Andrew (not PorC)

        There is something magical about consumption taxes vs corporate and income taxes. It's called the deadweight loss. Income taxes are less economically efficient than consumption taxes.

  • Phil_King

    Whoops, thought you were replying to me, but now I see you were responding to Louie. My bad!

  • Blue

    We have such a large percentage of of our workforce and unemployeed people whose paycheques originate from one form of gov`t or another that the only way a gov`t will stay close to being in the black is to claw back some of those wages as income tax.

    Expect higher and higher income taxes in the future. That 5000 dollars every 2 weeks is reduced by half—–it`s a circle game.

  • Loraine Lamontagne

    Nearly 20 million out of a total of 33 million Canadians live in Central Canada. I would have imagined that the revenue from a consumer tax like the GST would come largely from Quebec and Ontario. If we lower government revenue from a consumer tax while increasing spending, then the burden of financing government will increasingly be on those who pay income tax – a lot of Ontarians and Quebeckers for sure, but a heavier burden will be placed on high-wage earners in the West where average income is higher. But they do vote for Harper, so I guess they realize this and wish to foot the bill.

  • Blacktop

    The purpose of the GST was that it took federalsales tax that was once charged across the board off the foreign purchaser and hence was good for any producer who had foreign sales. It was never meant for anything else.

    • Mike T.

      Remember how all retailers were going to drop their prices by 7% because of the flow-through they experienced earlier in the chain. It's right up there with "if there's a recession we'd have had it by now."

      • Blacktop

        Yeah, Yeah, Mike. But I think the exporters did well on it. Actually, wasn't it the last one in the chain domestically who paid the GST. Those from other countries didn't pay it that was the point.

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