Sunday, April 09, 2006

GST Cut May Hurt Conservative Fortunes Next Election

Consumers appear to be quite excited about the proposed GST cut. It looks as though Canadians have another unexpected bonus waiting for them this tax season:
Canadians filing their tax returns this month are in for a pleasant surprise of the found-cash variety.

Average taxpayers will discover more than $300 coming their way in mostly long-forgotten election goodies served up to voters by the previous Liberal government...

the Canada Revenue Agency implemented the changes to the tax system anyway, and by another stroke of good fortune, the breaks were made retroactive to the beginning of last year.

That means most ordinary working folk whose taxes are stripped directly from their weekly wages were probably overpaying the treasury for all of 2005, and are now entitled to a hefty rebate.

It is already well documented how the GST cut will not benefit average Canadians in the same way as the Liberal tax plan. However, the Conservatives win on appearances, because the GST cut is so hated and high profile. Where this argument may fall apart is this time next year, when the tax changes show concrete results. We are all paying taxes right now based on the Liberal plan of the lower rate on the first 35 000, as well as the higher exemption. If Harper nixes the Liberal plan, he effectively sets up a scenario where people have underpaid on their taxes and will need to pay the balance next April. The Liberals have the perfect opportunity, because the gap is even more pronounced when you compare this year's rebate to next year's shortfall. How do you like the GST cut now?

Nothing is more disturbing than paying taxes all year, only to find you owe more when you do your return. Harper's short term "victory" with the GST cut, may be overshadowed as the practical comes into play. Interesting too that the chickens come home to roost around the same time many predict the next election talk to heat up. Harper's transparent plan to curry favor, may backfire as soon as Canadians get the bill next year. If Harper is smart he will run the GST cut and Liberal plan concurrently this year, to avoid the underpaying tax scenario on next year's return.

2 comments:

BlastFurnace said...

We got the income tax cut because the Ways and Means motion to implement it was passed by the Liberals, NDP and Bloc. The Conservatives opposed it.

If they turn around and suddenly realize they have to keep that cut to keep themselves alive, it will be the height of arrogance. Let's keep our fingers crossed they'll jump the shark on this one.

Steve V said...

blastfurnace

Given that every stance is based on appeasing potential voters, I won't be surprised if Conservatives look for ways to get out of this future problem.