Friday, November 02, 2007

Cut It Out With the Tax Cuts Already

I'm a Liberal. I support my party. But why in the name of all that's holy is Stephane Dion calling for more income tax cuts?

The concept of fair taxation is pretty simple and is accepted by democracies around the world. People should pay according to their means. Rich people should pay a higher tax rate than poor people. Income tax achieves this by having progressively higher marginal tax rates.

Sales tax, a consumption tax, is the opposite of progressive taxation: it is regressive. While everyone pays the same sales tax rate, poorer people tend to spend a higher percentage of their income on taxable goods than richer people, meaning that poor people pay more tax relative to their income.

That was the reason I opposed the GST nearly 20 years ago when Brian Mulroney dumped it on us. At the time, his spin doctors muddied the water by saying that the GST was replacing the manufacturer's sale tax and so would be revenue neutral, but that turned out to be a big lie. The GST has been a gigantic regressive tax.

We need to reduce the GST to make taxation more fair. It's not very sexy, but reducing the GST is sound public policy.

Unfortunately, I doubt that Stephen Harper is going to take the next step in tax reform and add another tax bracket at the upper end of income (along with a higher top tax rate). He's probably not going to reverse the downloading of expenses to provincial and municipal governments. He's probably not going to reduce the percentage of government revenue that comes from sales tax and property tax, and increase the percentage that comes from income tax. Nor will he review the capital gains tax that hugely reduces taxes for the rich. That's the sort of policy that we Liberals should be talking about, rather than blindly proposing the opposite of whatever Stephen Harper proposes.

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2 comments:

annie said...

I think he may be talking about the working poor, up to the middle class for lowering taxes. The people who do not pay income tax, still get a GST rebate every three months, which could be raised for the very poor.

Abdul-Rahim said...

Exactly!!! He's just pandering and acting stupid with the cuts. It's stupidity.