Monday, January 05, 2009

Tax Cuts

Much debate, on this side of the border, over whether a tax cut package in the budget is something the opposition can support. Is it a pure stimulus, or is part of the stimulus tax relief? Using the Obama model, it looks like domestic tax cuts have received a boost:
President-elect Barack Obama will meet with congressional leaders in Washington on Monday to discuss his economic stimulus package, a plan that reports say will include $300 billion in tax cuts.

The tax cuts for individuals and businesses would account for about 40 per cent of the stimulus package, which is expected to be between $675 billion and $775 billion, according to a number of published reports.

The reported tax cuts, bigger than expected, could be a way to garner support from Republicans who have been critical of the amount of spending in the package.

That's a pretty hefty percentage of the stimulus, devoted to tax cuts. I suppose the devil will be in the details, but it should provide our government with a timely talking point, should they take heat on the nature of a stimulus. I would also argue, Obama's move lessens the probability of making a compelling argument to defeat the budget, based on the tax package.


CuzBen said...

Good point Steve, the S-word has been overused to the point that it is losing all meaning.

Not only do I think that bringing down the gov because of a high proportion of tax cuts in the "stimulus" package would be a huge mistake, I really think that cuts play an important part of stimulating an economy. We don't just want to stimulate spending, but also job growth. Tax cuts that are smart, targeted and with an eye on efficiency will make us a lower-cost jurisdiction overall and allow us to better compete with the US and other countries. Most important tax cut: new investment. Entrepreneurs are our best hope. Obama his dream team knows whats up and I bet his cuts aren't just to appease the Republicans.

Anonymous said...

There are SMART tax cuts aimed at creating jobs (like Obama's - see
for more details than the CBC article on what he's planning) and dumb tax cuts like GST cuts that do NOTHING to help create jobs at a time when our unemployment will be edging up towards 8%. A GST cut would be IMMEDIATELY OBLITERATED by retailers raising their prices by 1% (as most have done with the previous cuts). Dumb tax cuts should NOT be supported.

We voted AGAINST a tax credit/cut filled focus group style budget under Dion in 2007, if Harper puts out a similar budget in a few weeks we should vote it down as well. If Harper's tax cuts are smart then support them, if dumb then we bring our argument to the people that they are awful economic managers.

Why should we adopt a LOWER standard for supporting the govt NOW than in 2007 especially after Harper's antics of late?

Anonymous said...

I'll try that link again: here

Anonymous said...

I might also add that if it's a budget filled with dumb tax cuts like GST and other 2007 style focused tax credits then Liberals gain NOTHING by supporting it because we won't get ANY credit for a budget that would look very much like one we voted against two years ago (and we decided that without first knowing if the Bloc would support it and the Bloc almost voted against it too as Chantal Hebert noted afterward).

Harper would portray a GST cut as what he was planning all along and if it looks like a past Con budget we voted against, it would hard for us to convincingly argue different. So Steve what we gain by supporting that? I'd rather an election frankly.

pogge said...

Interesting chart here at Firedoglake (originally prepared by a Republican) on the return on investment for various types of stimulus spending. Notice that corporate tax cuts are way down on the list.

Scott Tribe said...

Also interesting that the Nobel prize-winner for economics this year, Paul Krugman, says that if it really is that high - 300 billion or 40% of the stimulus package - then it's too high

Steve V said...


Yesterday, you were citing Obama as the template?

All I'm saying, the government can simply argue they are following a similar path to the Americans, the optics of which undermine any vote against.

One thing that is hard to gauge, in terms of tax cuts, is the effect on consumer confidence, which is an indirect input. And, I hate to say it, but the idea of a one year GST holiday has some merit, in that it rewards consumption, at a crucial time. Just saying, politics aside, might actually be the first time that type of cut has value, and I would use the economists who previously trashed GST cuts who are now reconsidering.

Anonymous said...

Steve a 1 year GST holiday costs $30 billion for ONE YEAR ALONE ($6 billion for each %). That would leave NOTHING for anything else, I would be appalled if that happened. $30 billion stimulus is the max anyone is talking about, to give 100% to a GST cut is insanity.

And I think the past two years have borne out that the 2% GST cut only lead to about 0.5% in real price reductions since EVERY retailer raised their prices to compensate. Therefore another cut is USELESS. Take a look at this video here to see a good look at this.

Simpson also has a good article on why on another GST cut would be stupid (found here).

Therefore I think a GST cut would be a MASSIVE MISSED OPPORTUNITY and deserves to be voted down. Forfeiting $6 billion or more to something that is FAR LESS LIKELY to have an impact than other measures would be something definitely regretted later.

A GST cut should be VOTED DOWN period.

Anonymous said...

Obama is goign to let a lot of the existing tax cuts sunset by 2010. I think the totality of the Obama plan will be in the budget numbers.

Steve V said...


Not sure if the figures are true now, GST revenue is down considerably. I understand the practical points, but in terms of psychology, which is half the battle now, it's something to consider. I'm not saying I'm sold, but I admit looking at it differently from the previous reductions.

BTW, nobody is voting down nothin.

Anonymous said...

"BTW, nobody is voting down nothin."

If this is in fact the prevailing attitude that's basically a green light to load up the budget with poison pills and/or make it into something Liberals would have NEVER supported in the past.

If Stephen Harper really believes the Liberals will support his budget no matter then really what stops him from putting out a budget that is in all ways looks like a CONSERVATIVE and not a Liberal budget?

What do Liberals gain by supporting such a budget? Won't it just entirely validate Harper's way of governance and boost HIS (and OUR) and popularity?

After all Ignatieff said he would ONLY support a budget that is "good economic policy" and in the "national interest". Couldn't the Cons just run "positive" ads after the budget vote saying "even the Liberal leader beleives we are governing in the national interest with good economic policies".

If that pushes Harper into the 40s in the polls what stops Harper from calling an election in April (BEFORE our convention) over some crime bills (putting 14 year olds in prison) or some nonsense?

It seems no one is thinking long term anymore, sigh...

Anonymous said...

Sorry there was a typo: "Won't it just entirely validate Harper's way of governance and boost HIS (and OUR) and popularity?"

Should be "Won't it just entirely validate Harper's way of governance and boost HIS (and NOT OUR) and popularity?"

W.D. said...

Actually tax cuts and increased benefits are the best way to stimulate the economy. Anybody on social assistance has fallen behind the REAL inflation rate by about 40% over the last decade because of neglect due to a hot economy. If the government increased all benefits, old age, unemployment and welfare by 100 dollars a month, 100% of that money would go back into the economy the minute it hit the hands of the recipient.

If the government increased the basic personal exemption on income taxes so the average Canadian got 500 dollars a year back more than half would make it out into the economy while the rest would go to pay off debt (a good thing) or go into savings. Any cut to consumption taxes or business taxes would have almost no effect as they would go into business profits only.

Now compare those numbers to handing the crooks nd idiots in the banking and auto sectors a trillion dollars in the U.S and 80 billion in Canada with no strings attached and no way of measuring how much money is actually making it out into the economy. Then consider that any money spent on infrastructure loses over 50% to government buerocracy and business profits before a single penny makes it into our economy and ask yourself what is the best stimulas to spend OUR tax dollars on?

John Wilpers, Global Blog Coordinator said...

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Jesse said...

Ooo, an EXCITING new international news website. Congratulations, unless it's a scam.

But, back to "work", I think the real irony here is that the GST cut before was stupid, inefficient, and wasteful, and puts us way short on stimulus money now. But by recognizing that it makes sense "now but not when you did it", I think we've already completely lost a narrative the public will absorb on consumption taxes being good.

Steve V said...

"PPS Could I trouble you to suggest a few talented conservative bloggers?"

Can't think of any right now ;)

Thanks for the invite.