Monday, December 31, 2007

New Year, Old Politics: Letter To The Editor

At midnight, on January 1, 2008, just as the ball in Times Square will drop, so will our GST. It will drop from 6% to 5%, just as Stephen Harper had promised two years ago. Some may herald in this cut as they will the New Year, however this cut in taxes is not only an ill-conceived attempt at electioneering but short-sighted economic interfering.

First, of all the taxes, the GST is a good tax. In our system the GST offers for everybody an incentive to save rather then to spend, which leads to greater investment and a better economy. With GST rebates those who are in poverty receive that money back, so as GST applies to everyone, those who are less advantaged aren’t disproportionately hurt by the tax; compared to Income Taxes which actually offer a disincentive to work, in turn damaging the economy.

Now a government cuts taxes to boost the economy; of all the taxes, cutting the GST has the smallest benefit. Cutting the GST only allows Canadians to keep more of their own money. When Income Taxes are cut, not only do Canadians get to keep more of their more money, but they are motivated to work more because they get more money back for every hour they work and Canadian productivity goes up. Thus a cut in the Income Taxes would have been far superior to cutting the GST.

Every economist agrees cutting Income Taxes is a better way of bolstering our economy. Our Federal Finance Minister, Jim Flaherty in 2001, as Ontario Finance Minister, argued consumption taxes (like our GST) were in fact good taxes. Not to mention Stephen Harper has a degree in Economics; but this makes one ask, “Why did the government reduce the GST when they could have cut Income Taxes?” Simple, because some Canadians hate the GST and the Conservatives want votes; so instead of thinking of our economy, the Conservatives thought of themselves.

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