Saturday, April 22, 2006

Harper Acknowledges GST Shortcomings?

The Harper government may be close to acknowledging that the GST cut is not the windfall to Canadians as previously argued:
The federal government is looking at ways to beef up its tax-cut package for the spring budget to bolster Conservative claims that their plan will leave Canadians better off than measures enacted by the former Liberal government...

"On the income-tax side there is a problem because if the Liberal-initiated income taxes are repealed and only the GST is cut, then what [Prime Minister] Stephen Harper has been saying about Canadians being better off is not true and that circle must be squared before budget day," a source familiar with deliberations said...

As an alternative to the Liberal tax bracket rate cut, the Tories are considering a different set of reductions, which would see them reduce the two middle-income tax bracket rates instead.

"It is on the table," the source said. "There is going to be something there [in the budget] just so the government can say every taxpayer is better off."

As discussed earlier, Canadians are already paying taxes according to the reduced rate enacted by the past government. If Harper were to rescind this tax cut, he effectively sets up a scenario where Canadians have underpaid for 2006 and would have to make up the shortfall next tax season. Coupled with the increasing consensus from experts that the GST cuts don't leave most Canadians better off, as the Conservatives have claimed, and you have Harper left with a potential public relations nightmare heading into another election. Given the fact that this government makes every decision within the confines of a future majority, the fact that they are reconsidering their tax plan is hardly surprising.

The opposition still has an opening on this issue, because Harper has been so adamant about dropping the Liberal tax plan, in favor of his GST cut. In proposing other tax relief, Harper essentially acknowledges that the best tax relief is done through lowering the rate, not on the consumption side. This argument may get lost in the hoopla over tax cuts, but if the opposition gets out in front of this issue it can be spun as a partial victory.

8 comments:

Anonymous said...

I'm worried about this too.

If Harper goes with his original plan and increases the base rate back to 16% from 15, the only way he could do it without making the majority of Canadians pay up the difference April next year is to set a special rate -- for the last six months of this year -- of 17%. (Thus, an average rate for the year of 16%.)

The last time we paid a rate of 17% was in 2000, and where the second rate -- then a punitive 25% rather than the current 22% -- kicked in at just $30 K and change rather than $36.3 K as it is now. Talk about back to the future.

When I and a lot of other progressives find ourselves actually agreeing with the Canadian Tax Federation on this issue, it only makes the point of how ill-thought the GST cut was in the first place.

Anonymous said...

Yes - except the 1% Liberal reduction to 15% is only relevant to less than 20% of taxpayers in that particular tax bracket. This gives nothing to those whose net incomes are low enough that they do not pay any taxes.

I would like to see the personal exemptions increased across the board - that is fairer.

ottlib said...

The personal exemption was increased across the board along with the cuts to the lowest tax bracket.

So if Stephen Harper follows through on his promise to roll back the Liberal tax cuts he will be rolling back the increase in the personal exemption.

Anonymous said...

These "Liberal" tax cuts - Goodale threw them in without consultation in caucus or even with the Treasury Dept. sometime in November just before the election so they could then campaign on them.

Given that most of the goodies they campaigned on were tossed in without forethought or consultation I applaud the fact that the Conservatives are doing a full audit and analysis.

Apparently the Liberals in Martin's and other Lib ministers tax payer funded goody dropping race around the country in 2005 managed to "promise" 25 billion in unfunded, unbudgeted for and poorly thought out promises to every region or interest group that could have gotten them votes.

In fact, on Jan. 23 (election day) billions of dollars in "tenders" were granted just out of the blue even though many of them had not closed for bidding and none had gone through a review process.

This was very quietly done but captured on Merxx.

Of these dubious tenders $5 billion went to defence contracts - many single sources and if the auditor would follow the trail and go back a few years and follow the money she may find a disturbing pattern here.

Harper is now having to review every defence contract - $5 billion because aomost none of them were made even under the existing procurement rules.

So - these Liberal death bed promises that were supposedly good for canadians - just more Liberal smoke & mirrors while they got billions more to their friends.

It iwll take months or even years to unravel this pilfering from the taxpayer.

And we are supposed to bow and be oh so grateful; to the Liberals for a paltry 1% for 20% of us suckers. I mistrust any program put in place by the Liberals.

Anonymous said...

Tania, I totally agree. I think we need a higher exemption as well -- and the Liberal plan also raised that, though not high enough. I think it could be a few thousand higher if it was phased in over several years. All of us, and especially families, could use the break.

My understanding of the Conservative platform as written is the same as Ottlib's -- and that was they wanted to roll the exemption back as well, to what it was before Goodale got the race started in November.

Ralph raised the exemption by $500 for 2005 (retroactive) plus another $200 for this year. Even if one presumes Harper keeps the bottom rate at 15%, a $700 rollback
would mean all working Canadians would pay at least another $105 -- at 16%, Steve's plan, $112.

50 bucks (GST cut) vs 112 (higher exemption)? I'll take the income tax cut even if it's peanuts; it's still more peanuts than a reduction in the consumption tax. In my case, roughly average for someone in the service industry, a couple hundred better off.

As for the part about the defence procurements, Stan -- I'd welcome any audit, as long as it's done by the Auditor General and not by Harper's hacks.

Sheila Fraser's done a heck of a job so far just half way into her mandate, and set a standard for all bean counters to follow. If the law allowed for it and she agreed to it, Parliament should extend her term another ten years when the current one expires in 2011.

Steve V said...

stan

"Given that most of the goodies they campaigned on were tossed in without forethought or consultation."

Like the GST cut, the childcare money and the capital gains?

Anonymous said...

the gst cut, the child care allowance and the capital gains tax plan for the future were part of the Tory election platform which was very comprehensive and developed after months of planning. Gooddale's little tax thingy in his "third" budget in 8 months was so ill thought out that the Treasury Dept. knew nothing about it and tax filing forms mailed out to taxpayers did not even include it - there was I think an additional $300,000 then spent to send out this revision.

If it was to be in an election campaign that is what they should have done to see if people wanted it - not the other way around.

And who do you think does the audits??? It is Sheila Fraser's team and the accountability acty gives her greater powers and more money AND the ability to follow the money.

Will br very interesting unless the Liberals block the bill and the Liberal senators refuse to let it pass.

They are covering their own asses big time and think nothing at all about this country or the taxpayer unless it is to use us as their personal pig trough. Watch to see who tries to block these audits or the accountability bill. Then that is who Sheila Fraser should go after.

Steve V said...

stan

"think nothing at all about this country or the taxpayer"

If the Tories plan is comprehensive and well thought out, as opposed to a simple pander to get votes, then I doubt we would hear the following:

"The Canadian Taxpayers Federation has calculated that the vast majority of individuals or families with children six years or older will pay more in taxes if the GST is dropped by one point and the income tax reductions, announced in the 2005 mini-budget, are withdrawn."