Wednesday, November 07, 2007


If there is one report, or economist, which has come out and praised Flaherty's tax package, I've yet to find it. This time, the think tank that prepared the government's own figures is criticizing the economic statement:
Global Insight's chief economist Dale Orr:

"What the Finance Minister Flaherty didn't tell us is that the lowest marginal rate was 15% in 2005, and in 2006 until the Conservative government raised it to 15.5% in budget 2006, to help finance the first GST reduction," Orr said, adding that the rollback of the earlier Tory tax hike accounted for almost 80% of the total personal income tax relief .

"Thus, this personal income tax 'relief' is relief only because the Conservative government took it away in their budget 2006, to have it restored again in the November, 2007 economic statement."

"This is a welcome bit of tax relief, but it is obvious that if it was any smaller it would be undetectable," the paper noted, adding that even at 10.9 per cent the tax burden is as high as it has been at any time over the past 15 years.

Yesterday, I proposed that Dion address the GST issue head on, challenging the government. Knb made the point that Dion could walk into the House of Commons with a stack of papers, each one a separate criticism of the government's approach. It would appear today that we can add another sheet, to what is fast becoming a book of unanimity.


Anonymous said...

Another good post Steve.

All of these economists have come out against the GST cut and for income tax cuts. No secret there.

I wonder what the response would have been had the Tories gone for much deeper income tax cuts and not done the GST - sure the Libs would have heckled them for not fulfilling their election promise (it's politics, have to have a negative comment when in opposition), but I wonder what the public response would have been.

I am solidly middle class, and I benefit from both income and GST tax cuts. I actually have benefited from the other Torie "targeted" tax cuts, not just the overall reduction in rates. So overall I am happy with the tax reductions over the last 2 years.

The problem that the economists statements, such as before the cuts when they all said income is better than GST, is that no one has been asked about the total cuts of both. If Liberals tried using these statements to make that point, the Tories would list off all of their cuts, allowing them emphasize the various cuts:

- 2% off of GST
- 1% reduction in income tax
- raising the excemptions
- child tax credit
- trades tax credit
- kids in sports tax credit


I think for the Libs to be successful, they would have to propose raising the GST and lowering income taxes, and give specific examples. if they want to raise the GST to raise more money for social programs, the Tories will attack them for raising taxes, even if the result is good social programs.

If Dion pledged to lower the lowest income tax rate another 1 or 2%, lower the middle tax rate by 1 or 2%, and raise the GST by 1 or 2%, I might have a hard time voting against him.

But unless there are concrete income tax cuts to go along with a raise in GST, my wife and I, and a lot of other people, would not like total taxes to go back up.

Steve V said...

"If Dion pledged to lower the lowest income tax rate another 1 or 2%, lower the middle tax rate by 1 or 2%, and raise the GST by 1 or 2%, I might have a hard time voting against him."

That's the key right there. You're right, if the argument is higher taxes to fund a social agenda, then the Tories own the issue. However, I haven't seen anything policy wise to support the notion that this is Liberal policy, in fact all we have heard is Dion arguing for more corporate taxcuts, prior to Flaherty's statement. What is needed now, the accompanying clarity on the balance between a GST hike and personal reductions. If the Liberals want to deflect criticisms, then they have to embrace the other half of what the economists are arguing. I suspect we will see taxcuts fleshed out, because it would seem the big spending angle is simply creation at this point.

MarkCh said...

The risk for the Liberals is that the Conservatives would then make those tax cuts as well, funded out of still growing surpluses. Then where would the Liberals be?

Steve V said...

"The risk for the Liberals is that the Conservatives would then make those tax cuts as well, funded out of still growing surpluses."

That isn't possible in the near term, Flaherty has already admitted as much. This is it.

Tomm said...


Bury this.

This is not a good post for the LPC and this is not a good topic for the LPC.

The GST is a "tax on a tax". That is to say it is a income, net tax, being taxed. That is a red button for voters, and it doesn't take a genius to make this case clearly, using small words.

The GST was opposed as a bad tax, by the Liberal's, because it disproportionately affects poor people and those that otherwise, aren't being taxed. It's a way to tax even the poorest members of our society. Once again, this argument can be made by people like Peter Van Loan using small words.

Dion walking into the House of Commons with "egghead" papers explaining why raising the GST to pay for other tax cuts, just sounds ludicrous to the guy in the street.

Its a loser argument.

That being said, I am not a Liberal supporter so go ahead and try it.


burlivespipe said...

However, if Dion was to come out and propose a measure of gst relief, coupled with more income tax cuts, I believe there would be instant ignition.
Remove the gst totally from some selective items that are universally required, like women's hygene products, and used cars. Just those two items may provide a bigger cut than all the ones brought forward by the CONs.
Then reduce the income tax by another .5 percent.
Okay, I'm not sure if the used car angle can be successful, at least not in Oshawa and Ontario's car belt. But there are some creative ideas out there that would stick Harper's poorly-planned bone in the grave.

MarkCh said...

"Remove the gst totally from some selective items" If there was any move that could cause all the economists to go back and side with the Conservatives, it would be that. The best thing about the GST is that it is relatively simple to collect and has a broad base. A bunch of exemptions would be a bad idea.

Anonymous said...

You're nice guys here, I enjoy reading your thoughts ...
Here's the problem, the average voter doesn't disect promises like you do. The average guy hears "GST is going up" and that's enough to stop listening.

Steve V said...

"Its a loser argument."

But, you are leaving part of the reality out of the equation. The Conservatives are framing Dion, with the new ads and the talking points, that he wants to raise taxes, specifically the GST. That leaves two options, you either respond or you remain silent.