[Canada] Canadian Politics Redux

[crazy canuck]

The Libs have only been in office a month, and already their fiscal policies are looking a trifle disappointing. The middle-class tax cut will not be made up for by tax increases on the wealthy, meaning that instead of a budget deficit used to fund infrastructure spending, it looks like a budget deficit to fund unwise election promised tax cuts - usually something one would expect of a conservative party.

If they make up the difference by increasing the GST, that will be even more disappointing. There is no form of taxation more regressive.

I agree with the first point.  But iirc most economists agree that the GST, with the appropriate exemptions for lower income earners, food etc., is an efficient and fair tax.  I recall a round table discussion the CBC had with economists of all stripes from Unifor to the Chamber of Commerce all agreeing that they would recommend increasing the GST rather than all the other tax policies being proposed by the parties and all agreed that it would never happen because it was politically unsaleable.

[Malthus]

The Libs have only been in office a month, and already their fiscal policies are looking a trifle disappointing. The middle-class tax cut will not be made up for by tax increases on the wealthy, meaning that instead of a budget deficit used to fund infrastructure spending, it looks like a budget deficit to fund unwise election promised tax cuts - usually something one would expect of a conservative party.

If they make up the difference by increasing the GST, that will be even more disappointing. There is no form of taxation more regressive.

I agree with the first point.  But iirc most economists agree that the GST, with the appropriate exemptions for lower income earners, food etc., is an efficient and fair tax.  I recall a round table discussion the CBC had with economists of all stripes from Unifor to the Chamber of Commerce all agreeing that they would recommend increasing the GST rather than all the other tax policies being proposed by the parties and all agreed that it would never happen because it was politically unsaleable.

I have always been of the opinion that a decently graduated income tax is superior in progressive status to a sales tax however many loopholes are offered, but I'm willing to admit I'm not (thank god) an expert on tax policy. 

Here's an explanation from someone who claims to be (though they do not agree with cutting the GST):

http://economics.about.com/od/incometaxestaxcuts/a/regressive_tax.htm

Now we've seen the definition of regressivity, we can see why sales taxes are more regressive than income taxes. There's typically three main reasons:

1. Wealthier people spend a small portion of their income on goods and services than poorer people. Wealth is not the same thing as income, but the two are closely related.

2. Income taxes typically have a minimum income level at which you do not have to pay taxes. In Canada, this exemption is for people who make around $8,000 or less. Everyone, however, is forced to pay sales taxes, no matter their income.

3. Most countries do not have a flat tax income rate. Instead the income tax rates are graduated - the higher your income, the higher the tax rate on that income. Sales taxes, however, stay the same no matter your income level.

Policy makers and economists realize that the, on average, citizens are not in favour of regressive rate taxation.

Thus they've taken steps to make their sales taxes less regressive. In Canada the GST is exempt on items like food, which poorer people pay a disproprtionately larger portion of their income on. As well, the government issues GST rebate cheques to lower income households. To their credit, the FairTax lobby proposes giving every citizen a 'prebate' cheque in order to make their proposed sales tax less regressive.

The overall effect is that sales taxes such as the GST is more regressive than other taxes, such as income taxes. Thus a cut in the GST would help low- and medium-income earners more than a similar sized income tax cut. While I am not in favour of a cut in the GST, it would make the Canadian tax system more progressive.

http://economics.about.com/od/incometaxestaxcuts/a/regressive_tax.htm

The point is that Canada uses various techniques to make its sales tax 'less regressive' than it otherwise would be - but it is still, inherently, regressive compared with the alternatives.

[viper37]

If they make up the difference by increasing the GST, that will be even more disappointing. There is no form of taxation more regressive.

partly true.  It can be compensated by various tax credits given back to low income families.

[Barrister]

Ah, the government is toying with the idea of increasing the GST.  I'm surprised they doing this so quickly.

And that, my friends, is what they call a "trial balloon".

We'll see what kind of response it gets.

[viper37]

The Libs have only been in office a month, and already their fiscal policies are looking a trifle disappointing. The middle-class tax cut will not be made up for by tax increases on the wealthy, meaning that instead of a budget deficit used to fund infrastructure spending, it looks like a budget deficit to fund unwise election promised tax cuts - usually something one would expect of a conservative party.

If they make up the difference by increasing the GST, that will be even more disappointing. There is no form of taxation more regressive.

I agree with the first point.  But iirc most economists agree that the GST, with the appropriate exemptions for lower income earners, food etc., is an efficient and fair tax.  I recall a round table discussion the CBC had with economists of all stripes from Unifor to the Chamber of Commerce all agreeing that they would recommend increasing the GST rather than all the other tax policies being proposed by the parties and all agreed that it would never happen because it was politically unsaleable.

True, but then you need to lower significantly the income tax to compensate such a measure, otherwise, you reduce disposable income and hurt the economy.

[viper37]

Ah, the government is toying with the idea of increasing the GST.  I'm surprised they doing this so quickly.

And that, my friends, is what they call a "trial balloon".

We'll see what kind of response it gets.

yes I know, but, it's not something you usually throw before your first budget.  First, make a budget, make a deficit.  Then send trial balloons on how to resolve the deficit before the next budget.

[Malthus]

The overall impression is that they know already that their numbers won't add up (and probably did before they got elected).

[Barrister]

Ah, the government is toying with the idea of increasing the GST.  I'm surprised they doing this so quickly.

And that, my friends, is what they call a "trial balloon".

We'll see what kind of response it gets.

yes I know, but, it's not something you usually throw before your first budget.  First, make a budget, make a deficit.  Then send trial balloons on how to resolve the deficit before the next budget.

Nope.

You make all your hard decisions (such as raising the GST) in your first year.  That way you have "political capital" to spend (everyone'll give them more benefit of a doubt than they will later on), plus there is more time for any negative emotions to fade.

The Liberal numbers never did add up, so now they have to figure out what to do about it.  They can just run larger deficits, but that just makes it harder to erase by 2019.  They've already played the "cupboard is bare" card, which works but only gets you so far. They can cut back on some of their promises, which they'll probably do, but you don't want to do that too much.

And they may well introduce some new taxes as well.

[crazy canuck]

Malthus,

I agree that a progressive tax system is, in theory, the most equitable way to raise tax revenue. But it is also too easily avoided by higher income earners.  Languish discussed this problem at length in a general tax policy debate in some thread or other a few weeks ago.  That is, if I understand the argument correctly, why most economists in Canada say that a properly structured GST is the best way, as a practical matter, to raise revenue.

@ BB, yep, for sure its a trial balloon.  And I agree that it is a sign of just how badly they had misjudged both the revenue side and the cost of their promises that they are going to turn to this kind of political poison. 

[Barrister]

Not an enormous fan of skill-testing trivia questions for politicians, but for this one...

In a honours take for Macleans magazine Trudeau was asked a series of 10 questions in 60 seconds.  He did pretty well IMO for some pretty easy softball questions (though he ducked "BC vs Nova Scotia, and "Toyota Prius vs Mercedes SL").

But another question was "What is your favourite Baltic Nation", which he declared "That's not a thing".



Come on man - we're not asking you to pick out Kyrgyzystan on a map.  The Baltics are NATO partners of Canada.  Even if you can't/won't name a favourite, at least be aware of their existence!

And, predictably, both the Conservatives, and the Baltics themselves, respond.

http://www.macleans.ca/news/canada/the-baltics-to-trudeau-yes-were-a-thing/

https://twitter.com/CPC_HQ/status/676804145223966721

[crazy canuck]

I suppose the most positive thing that can be said is Justin will once again be reminded of his limitations and the need to rely heavily on his advisors.

[Valmy]

The obvious answer is Lithuania. Geez everybody knows that.

[Grallon]

The media circus Justin allows himself to be constantly surrounded by really makes me begin to regret Harper. 



G.

[Duque de Bragança]

The obvious answer is Lithuania. Geez everybody knows that.

For Darius Kasparaitis of course. A true hockey fan i.e a true Canadian knows that.

[Barrister]

The obvious answer is Lithuania. Geez everybody knows that.

For Darius Kasparaitis of course. A true hockey fan i.e a true Canadian knows that.

No love for Latvia's Arturs Irbe?