So, would you rather have an income tax cut, or pay less in the way of GST? Which tax cut would help you pay bills and increase cash flow, or improve the financial health of your family?
That’s a major question these days as Jim Flaherty ponders what to hack away at in his tax-cutting, pre-election Spring budget. Today during QP I asked him if he agreed that a personal tax cut would make the most sense, and just before that I sat down with Canadian Chamber of Commerce boss Nancy Hughes Anthony to get her opinion.
And how about yours? Cut the tax on spending? Or the tax on earning?
To view the video, and Jim Flaherty’s response in the House of Commons, click here.
30 comments ↓
We shouldn’t cut taxes, but instead create more tax fairness, through the elimination of a bunch of inefficiencies and unfairness.
First, make it so that tax injustice like that which happened to the employees of JDS Uniphase can never occur again. Compensate the victims.
Second, get rid of taxes on unrealized gains. If you havn’t yet made the money, you shouldnt be taxed on it.
Third, get rid of taxes on investments. Make it so that Canadians have more incentive to invest their money. This creates jobs and makes money in the long run, but has a quantifiable immediate cost.
Four, reform the EI and CPP programs. These cost people a lot and they don’t need to.
Five, then after allll thats done, start thinking about cutting the personal income tax such that wages employers have to pay can start to go down and we can get inflation under control without raising interest rates [which would result in a lot of people losing their homes]
As long as they are only cutting GST by 1% every few years at best, why not have additional personal tax cuts?
Keep going Garth you’ve got the HEART OF A LION!!!!
I got your back darlin!!! lol
A few facts first:
- GST is paid by nearly everyone
- The GST is a regressive tax in that it places a proportionaly larger burden on those with lower incomes (thus a GST cut would benefit lower income Canadians)
- Income taxes (above the basic personal exemption) are paid by about 16 million Canadians
- Income tax cuts provide a better stimulus to the economy than a GST cut.
- Income tax cuts to the highest tax bracket are considered the best stimulus to the economy
On the whole as a middle class Canadian I would probably benefit from an income tax cut (unless I was planning to make a large purchase this year). Low income Canadians would likely benefit more from a GST cut. Either is fine with me.
Business is concerned about a “productivity gap” that has developed over the last decade or so. Given that our governments have spent the last decade (or more) cutting taxes, wouldn’t it make more sense to reinvest in infrastructure and services and restore our ability to compete?
Just asking. If people complain about the things that have happened as we’ve cut taxes, it doesn’t seem to make sense to keep cutting.
No small cut as discussed would nor has helped me or anyone. Use it to re-invest in energy conservation or reduce debt.
Garth first I would increase the basic exemtion to take more of the working poor off the tax rolls.
That still leaves a lot of the working poor short of what they need (they don’t pay tax even now) so I would develop some sort of negative income tax (like the GST refund)that for working poor (who recieved the min wage or some such measure )- to recieve a monthly tax suplement the following year. This would encoursge people to get out and work (increase Canada’s productivity),even if the job itself might not be enough to support them, rather than staying on welfare. You would not get this suplement unless you worked almost full time in a year – it would not replace UI or welfare but help the working poor.
Then I would cut waste in government and reduce the average tax rate as those results gave in.
For example the gov cut Status of Women Funding – lots of flack here for the left but in my mind it is just a front for a bunch of special interest lobby group. A lot of reasearchers talking about things but doing nothing.
I know my wife ,a teacher and my daughter a engineer have seen no value in these organizations and they don’t need anyone to speak for them.
I agree with Kevin’s points, especially:
“We shouldn’t cut taxes, but instead create more tax fairness, through the elimination of a bunch of inefficiencies and unfairness.
First, make it so that tax injustice like that which happened to the employees of JDS Uniphase can never occur again. Compensate the victims.
Second, get rid of taxes on unrealized gains. If you havn’t yet made the money, you shouldnt be taxed on it.”
Garth, would you take up this issue with the finance minister for the few high tech workers who are suffering from this unfair tax on unrealized gain, a non-existent benefit? Thanks.
The govt should at least reconsider the 4 yrs grace period given to the Income trusts to convert back to corporation.
Here are a couple of interesting articles.
http://dianefrancisblog.blogspot.com/
Garth, will MPs have to vote again to pass the income trust bill? (Just curious, not sure how parliament works)
There will eventually be more stuff to vote on, but it has the force of law now. There is no hope at the moment it will be thwarted. — Garth
If I had to choose between consumption tax vs income tax, I would choose income tax cut. It is a no brainer. We must encourage saving and discourage consumption and waste. Income tax cut leave more resources in the hand of hard working canadians who in general are better manager of their hard earned dollars.
As a middle class taxpayer, personally I’d be happy with the personal exemption increasing as Justwondering suggested to take more people off the tax rolls completely, or paying off the debt. I don’t think our economy needs the spending stimulous that the GST cut would provide right now. However, if the signs of a weakening economy down south (which should impact us in a year or two) prove true, at that time lowering the GST would be a good move to give the economy a boost.
I don’t necessarily need a cut but if one comes, I definitely prefer a income tax cut.
I agree with Colin,
“Business is concerned about a “productivity gap†that has developed over the last decade or so. Given that our governments have spent the last decade (or more) cutting taxes, wouldn’t it make more sense to reinvest in infrastructure and services and restore our ability to compete?”
It takes money to make money. He need to invest in our future. If we fail to do this, we will simply lose out in the Global economy.
A move towards Flat Tax, if you please!
A few people here seem to believe a gst cut will benefit poor people. I find this interesting as all the low income people i know can’t afford to purchase much so the gst cut means nothing to them whereas someone who can afford more expensive purchase will benefit from this cut. We are actually paying more taxes now as a result of the changes made to the income tax this year. This government clearly doesn’t understand that not everyone earns 80,000 a year. The people i know recieving the so called credit for child care are using it for utilities or groceries and I don’t think Mr Flaherty has any concept of the needs of this group of citizens nor does he really care , we already saw what he is capable 0f here in Ontario.
I agree with many of the ideas my fellow posters have put forward – here’s a few more:
Definitely income taxes should be cut before consumption taxes. There needs to be less incentive for Canadians to consume, and more incentive for productive activities (i.e. work). This is also a sound policy to promote a better environment, and reward middle-class Canadians who earn a paycheque.
Taxes on savings should be eliminated. For example, the GST on investment fund management fees. Based on about $650 billion in assets in funds (per IFIC), that’s an estimated $600 million a year that the government collects, the majority of which is coming directly out of Canadians’ retirement savings. GIC’s, term deposits, etc. don’t have any GST on the ‘fee’ or ‘spread’, so why tax investment funds? It makes further sense to remove this tax, because the additional wealth generated in RRSP’s will provide additional taxable income as funds are withdrawn from the plans.
I disagree though that capital gains should be tax-exempt. Investors already get the benefit of lower tax rates than on regular earned income. Allowing continuing deferral will just create wealth for those in the deferral business (brokers, fund dealers, accountants…)
Additional taxes should be placed on activities that cause harm to society and the environment – i.e. energy, extraction of resources, packaging, etc. This should be offset by additional tax decreases on income, credits for taking action to reduce these problems, and by aggressively reducing debt, thereby creating more income that is long-term sustainable. The Green party platform has some excellent ideas here – it appears very fiscally responsible in addition to promoting greater sustainability.
To Squirrel:
According to the National Anti-Povery Association a GST cut of 1% would benefit low income familes an average of $143/year. A reduction to ALL income tax rates (not just the lowest tax bracket) would benefit low income families an average of $33/year. The following link will take you to their document: http://www.napo-onap.ca/en/issues/tax_cuts.php
The last “Tax Cut” combined with the GST reduction cost me about $120 this year. That was the repeal of the Liberal Income tax Cut.
When you make what my family makes, the GST is squat, as the tiny number of items i buy that I pay GST on (razor blades?, deoderant, shampoo….) make that reduction worthless.
If they’re going to cut taxes, then make it a personal income tax cut. Otherwise, please don’t bother. I don’t mind paying taxes. I’ll pay more if needed, but please don’t tell me you’re cutting my taxes when you aren’t.
Me:
One income family, disabled spouse, (very small) homeowner looking for Garth to keep pushing for income splitting…
First $15,000.00 should not be taxed. And, should be inflation indexed in the coming years.
Any savings should not be taxed. Paid once, why you must pay again, again….
Pension income, including CPP, should not be taxed at all.
You can have the GST. Consumption tax is fine with me. At least, I have control over my spending.
The problem wit tax cuts is they don’t benefit those who don’t pay tax.
Alberta for example have significantly raised the basic exemption and charges a flat tax of 10%.
Nobody seems inteested in the negative income tax for the working poor?
If the choice is only between a GST cut or a cut in income tax, I would only point out that those at the lowest end who already pay no income tax will not benefit from further cuts to the marginal rate. They will benefit, even if a meagre amount, if the GST is reduced.
For me, I benefit either way. When I look at how much of our disposable income we actually spend in a year, I think a 1% cut in the GST is a substantial savings.
But my real preference: I would sooner pay down government debt, and (in my utopian view) finance worthwhile programs like health and infrastructure. Especially infrastructure…
Gatrth:
I’m all for
1) Income splitting for ALL Canadians (it should not just be for seniors as now is proposed)
2) Reduce income taxes, not cut the GST
3) Increase the personal exemption limits, which are currently way too low, to help low and middle income earners
4) Rescind the Conservative Gov’t's bad decision to tax ‘most’ Income Trusts and find a better way to help the economy grow and help investors (wishful thinking from this lying Government!!)
I should also say:
5) NO deficit budgets… ever. If we can’t make tax cuts, maybe reform is necesary, but no deficits.
6) Continually pay down the debt at a reasonable rate.
Cheers.
The religous right wing fanatics, like the hutterites hold on they live in communes like left wing communists. Oh I see there just right wing extremists if they agree with 90% of the world or put up a Christmas Tree.
See the whole gay thing is not smart any more, hey its in the Charter stupid. Its back to keep it in th closet nobody wants to hear about it, or have Garth name calling people who say grace. Nobody wants Dick and Jane out of the books. Just kidding I love Garth Liberal position on this and he can speak for hours on it and show you how smart he ios, of course you have to shower twice after listening to him on it.
Nobody seems inteested in the negative income tax for the working poor?
The equivalent of subsidizing Wal-Mart, McDonalds, Taco Bell & co for underpaying their employees and overpaying their executives.
Personally, I would perfer income tax cuts over a reduction in the GST. But here is another option – pay down the national debt at a faster rate. Fifteen years in the future, think of the things the country could afford to do without the debt. This should be the first priority.
If I had my choice it would be income splitting – even if all rates stay the same.
Nobody seems inteested in the negative income tax for the working poor?
The equivalent of subsidizing Wal-Mart, McDonalds, Taco Bell & co for underpaying their employees and overpaying their executives.
Yes, that would apear to be a problem – but there are many other small companies out there paying the min wage as well. (BTW – GST refund already supports Wal-Mart in your interpretation)
My current question still is. What do all these proposed tax reductions do for someone making too little to pay tax.
Increase the min wage may be an option? (But Wal-mart costs go up and prices go up) those same very poor who by at Wal-Mart because it has low prices still can’t make ends meet.
If not negative tax what method do you propose to help the working poor.
I’m not sure about the analysis of a GST cut helping low-income families: the GST credit that comes every quarter seems to cover what goes out to that tax (since rent and groceries are exempt, I’d have to spend something like $250-300 per month on taxable items; OTOH, I’m better off than most because I get so many clothes at xmas that I never spend any money there through the year, and I’m a low-income single rather than a family
. Adding an exemption to utilities (eg: phone) or upping the credit might help low-income families more than an overall cut, while still retaining the consumption tax on those who can spend more.
Personally, I don’t think the government should be cutting at all at this point: there’s still some debt to be paid down, and even then we should consider building a modest reserve for when times get tough again. (If I’m reading http://www40.statcan.ca/l01/cst01/govt03a.htm this table right, then it looks like we’ve got about 500 billion dollars of debt, and will take something like 95 years to pay it off at the current rate). Plus there are plenty of projects that need funding…
[but since you asked an either/or question, I'd say income taxes]
If not negative tax what method do you propose to help the working poor.
Companies that pay minimum wage thrive when they have a large pool of uneducated workers (as they do in the US). Affordable education (trades and professional depending on person’s interests) is the only way to help the working poor get better paying jobs.