Friday, November 18, 2005

GST

Apparently the Tories are considering a plan to cut the GST by 2%. Very interesting...

Chretien's pollster, Michael Marzolini, has been crusading for this idea for years, and I presume he's got some polling number to back him up on it. While I don't really think it's a good idea for the government to kiss away such a large source of revenue, but it's hard to see how this wouldn't be a winning strategy politically. Everyone hates the GST, it would counter the Solberg budget, and it would remind people of Martin's flip-flop on the GST way back when (not that anyone really cares about that in my opinion...). Plus, it would be the kind of constructive policy the Tories could hold up as proof that they're not just campaigning against corruption.

On the flip side, it could make balancing the books very difficult if they do win, but I suspect that's a problem the Conservatives wouldn't mind finding themselves with, after twelve years in opposition.

12 Comments:

  • It could be a very worrisome proposal for the Libs if you ask me. It's the kind of policy that can electrify a campaign and the public because it shows (or at least could be seen to imply) fresh thinking. It's also a very and much more equitable tax cut than income taxes in the sense that works more for the working poor than do income tax cuts (which they probably aren't paying anyway). Everyone can see a reduction in taxes on their purchases with every purchase right on the bill; income tax cuts are so complicated, and only are seen once a year even if they put more money into your pocket.

    It will depend on how well it is played in the public by the two communications teams. The Libs will have to focus on the loss of revenue threatening balanced budgets and threatening the GST tax transfers to cities. Given their history, I'd guess the CPC communications team find some way to fry this golden egg.

    TB
    Cerberus

    By Blogger Cerberus, at 2:34 PM  

  • Reduction of the GST below 7% is just a bad idea. It costs too much to administer - not so much for the government, but quite a great deal for businesses who bear all of the compliance costs.

    Reducing the level of GST to 5% keeps all of the costs, reducing the net to the extent that it is almost negligible. If you want to reduce the GST, the eliminate it.

    As it is, it brings in about $ 20 billion or so a year. Reducing it by 2% would reduce that number probably to less than $ 10 billion a year because the rebates (and other costs) would stay the same.

    Mulroney first proposed a 9% tax. 7% was as low as he could go and still make it viable.

    So, the only sane policy options are 2:

    1. Eliminate the GST and raise income taxes a point or two.
    2. Keep it the same.

    By Anonymous Anonymous, at 2:37 PM  

  • Interestingly, consumption and value-added taxes like the GST are a preferred small-c conservative means for raising government funds. If some had their way, all income taxes would be eliminated and replaced by a 20% GST.

    Surprising to hear this from the CPC - sounds like it should be part of the NDP platform, since they see sales taxes as regressive.

    By Anonymous Dean, at 3:28 PM  

  • It would also give the Liberals a great way to remind people AGAIN that this is the party of Brian Mulroney. Didn't John Reynolds vote for the GST? Did Harper support it? I don't think any party will benefit from brining up the issue.

    By Blogger Jason Cherniak, at 4:38 PM  

  • It's a no lose stragtegy. The GST is a huge moneymaker (the administration costs dwarf what it brings in, even if the rate was 1.5 percent) and the surpluses are, well huge (by which I mean unconscionable). Plus, the Liberals cannot campaign against it effectively. The promise to repeal the GST was their big lie and it still resonates ... they have no credibility in this area.

    By Anonymous Peter, at 5:01 PM  

  • dean,

    That's a good point about the NDP, when I heard about the notion of cutting the GST I thought to myself, "What a great idea." I think the GST should be scrapped and the loss of revenue made up elsewhere. The GST really does have the greatest effect on those at the lower income levels.

    -Socialist Swine

    By Blogger Socialist Swine, at 8:05 PM  

  • John Reynolds wasn't a Mulroney MP, he was a SoCred cabinet minister in BC. This sounds like Brison logic to me.

    By Anonymous Mack, at 8:27 PM  

  • "Apparently the Tories are considering a plan to cut the GST by 2%."

    One of the benefits of not being affilliated with a party blogroll is that I get to speak freely and say sensible things like:

    "We need to crank the GST up to like 9%, 10% as a base rate, perhaps with an even higher rate of like 12% for luxury items, and drop income tax rates a commensurate amount."

    Excerpt From "The Anonalogue Tax Platform":
    (http://anonalogue.blogspot.com/2005/09/shift-tax-burden-to-consumption-now.html)

    "-Hike GST to 9%. Seriously. The GST is a good tax: broad based, nondistortionary, and consumption oriented. I like it. Actually, let's hike that sucker up to 10%; it's OK, we're cutting income taxes. A 3% GST hike would bring in an extra $9-10 billion a year, by my best guess; we can cut personal income taxes accordingly.

    -Force, with extreme leverage, provinces to harmonize PST with GST, if they have a sales tax at all. Administrative efficiency is a good thing.

    -A small corporate tax cut. Sorry, we don't have room in the budget for much more than a small cut.

    -Personal income tax. Flatter. Our marginal tax rate is too high. My first year out of school I made $25K and paid, with few deductions, about $900 in combined federal and provincial personal income tax. That's less than a 4% effective rate. The truth is that ... you hardly get taxed at all up to around $20K, and even up to $25K your effective tax rate is quite low. The problem with that is that it creates a two-tiered society...
    ...
    So I'd lower the effective exemption rate a bit, and flatten the sturcture a bit. Since we've shifted the tax burden to consumption with our GST hike we can now afford to cut taxes across the board.

    Yes, a flatter tax structure means poorer people may pay more taxes; I'd argue that our income tax system as it stands is flat out immoral and lowering the level at which people pay into the system is an improvement, not a flaw. And I'd move away from "Social Engineering" tax credits if possible; the concept of horizontal equity is shot to hell in this country."

    By Blogger v, at 9:07 PM  

  • In the reminding voters of the early-90s department the Tories would, I think, get the better deal here. Much better to be associated with Mulroney than that greatest of Liberal flip-flops (at least in recent memory).

    This will make calculating 15% tips more difficult--no more just adding the tax. Think of the waiters!

    By Blogger Rhetoric, at 11:05 PM  

  • Personally, speaking as an average middle class tax payer, I would like to see either a flat tax and lower GST, OR higher GST and significantly lower income tax.
    OR:
    How about 15% GST and 10% flat income tax rate.

    With a goal of paying down debt until the flat tax could be systematically reduced to Zero.

    Okay, lets hear you economy whiz kids explain to me why this wouldn't work.

    By Anonymous thots, at 11:23 AM  

  • "In 2002, the latest year for which data are available, 25 per cent of male and 39 per cent of female tax filers were non-taxable."

    Lisa Phillips, Osgoode Hall Tax Thingie,
    http://www.theglobeandmail.com/servlet/story/RTGAM.20051118.wcomment1118/BNStory/Front/

    By Blogger v, at 3:02 PM  

  • Quite effective info, thank you for this post.

    By Anonymous www.lugo-3d.com, at 2:57 AM  

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