Tuesday, January 09, 2007

Fraser Institute Criticizes Harper's Tax Cuts

The right-leaning Fraser Institute released a publication today, essentially criticizing GST cuts:
Canadian governments are too reliant on personal income and business taxes and need to rebalance the tax system to make it more efficient through additional use of consumption taxes such as the GST, according to a new study released today by The Fraser Institute, an independent research organization...

“Canada has a great opportunity to improve our economic performance by simply rebalancing our tax system to rely less on capital-based taxes and more on consumption-based taxes,” Clemens said.

The authors also point out that among 30 industrialized countries, Canada has the fourth highest reliance on income and profit taxes, accounting for 46.5 per cent of CanadaÂ’s total government revenues. By comparison, other OECD (Organization for Economic Co-operation and Development) countries obtain an average of 34.4 per cent of their total revenues from income and profit taxes. These taxes are considered to be more costly to society in terms of their incentive effects and the cost of compliance.

On the other hand, Canada ranks 24th out of 30 OECD countries for its use of taxes on the consumption of goods and services (for example, the GST). Canada relies on consumption taxes for 25.9 per cent of its total revenues compared to an average of 32.3 per cent for other OECD countries. These types of taxes impose much smaller costs on society.

Harper has effectively created the illusion that the Conservatives are the taxcutters. Even though personal income taxes actually rose in the last budget, Harper used the GST cut to maximum advantage. The Fraser Institute's findings gives the Liberal approach to taxcuts credibility, whisimultaneouslysly exposing Harper preference for glitz over real relief. It will be interesting to see if this report finds its way into the discussion the next time Flaherty and Harper spout off about "helping average Canadians". If we are too believe this paper, our tax system is entirely out of balance, and the Conservatives are onexasperatinging the inherent problems. Another example, wherein callous attempts to maximize vote potential results in bad policy.

4 comments:

Olaf said...

I trust that you'll treat every Fraser Institute report as an authoritative source. But seriously, the GST cut is bad economics and everyone knows it. I don't even understand why the hell it turned out to be so appealing with the Canadian electorate.

knb said...

Olaf, IMO, it is because it appeals to the lowest common denominator. Not in terms of intelligence, but lack of exposure.

Ewww, ahhh, the GST is dropping. If someone can show me how this has benefitted anyone, except those buying high ticket items, I'd love to hear it.

Olaf, the populace buys BS. That is sad to me. I do not care where your allegience is, to see people taking in the nonsense, is sad.

Dana said...

One must never forget that the word "conservative" is an anagram of "voters cave in".

Steve V said...

"I trust that you'll treat every Fraser Institute report as an authoritative source."

Probably not, but it is relevant that a right-wing think tank criticizes cutting consumption taxes, sort of like when Sun media says something positive about Liberals.