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Harper wants a reduction in the GST (and why reducing the GST is not a good idea)
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| rabbitjoker |
Steve Harper is proposing to immediately reduce the GST by 1% (to 6%) and by another 1% as soon as possible (to 5%).
As a total fiscal conservative: Harper's proposal is not what Canada needs.
Consumption tax is a fiscally conservative concept. Low income tax is a fiscally conservative concept. Prudent budgeting is a fiscally conservative concept. Savings and paying down debt is a fiscally conservative concept.
Reducing the GST supports none of the above foundations of fiscal conservatism.
1) GST is a consumption tax - and is paid by all at point of consumption. The amount you pay is based on the amount of products or services you consume. Everybody pays the same amount regardless of income, status, patronage, etc.
2) Lowering GST will not increase personal savings or reduce personal debt. Canadian's currently do not save. Reduction of income tax increases after tax "take-home dollars" and has been proven to increase savings rates and reduce debt rates.
3) Lowering GST will increase inflation. Inflation risks are very real. Canada's biggest challenge from an economic perspective moving forward is inflation - the Bank of Canada can only increase the interest rate so much (until our dollar goes so high that we further loose our competitive advantage for exports). Lowering the GST will encourage increased consumer spending (and increased inflation).
Harper's move does not make sense to fiscal conservatives (nor economists). For the average family a 1% reduction in GST will save $400 / year.
Goodale's income tax reductions will offer $500 / year savings. Goodale's approach (in this respect) appears to be more fiscally conservative than Harper's. |
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| Moral Hazard |
^^^^ nice analysis.
The truth of the matter is that most Canadians will put no thought into this. People see that they are going to get a tax reduction and they rejoice. Reducing the GST 1% is simply a very cost effective move to buy votes. It gives the electorate the impression that life will be better because they will be taxed less while not actually giving up much by way of revenue to the Government.
$400 savings a year on every $40,000 spent..... enough to buy your vote? On the otherhand..... would $100 extra by way of income tax deduction buy your vote? People should really look past the immediate and look for the long term policies as they ultimately have greater magnitude. |
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| rabbitjoker |
Lets not forget - the minute the GST is decreased, consumer pricing is going to rise the EXACT same amount.
What is Harper thinking? Is the guy trying to force me to vote Liberal??? |
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| CategoryZd |
I'm feeling this argument. I also agree that many canadians will just see a GST reduction and think "OOoo, savings!"
To a family of four living off 40k/year, $400 could buy some better christmas presents. It's no surprise Harper's pitching this during a christmas time election. :p |
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| Time2Burn |
Way to read between the lines RJ!
The best thing about the GST is the refund cheque I get every 4 months. |
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| simms327 |
either way, we only save roughly $400 a year and it costs the government billions.
cant they put that money into somthing that will benefit us all...
e.g. health care, schools, etc...
but i guess that wouldnt win the election... the lure of a 1% reduction... crazy people. |
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| Jayx1 |
| quote: | Originally posted by rabbitjoker
Steve Harper is proposing to immediately reduce the GST by 1% (to 6%) and by another 1% as soon as possible (to 5%).
As a total fiscal conservative: Harper's proposal is not what Canada needs.
Consumption tax is a fiscally conservative concept. Low income tax is a fiscally conservative concept. Prudent budgeting is a fiscally conservative concept. Savings and paying down debt is a fiscally conservative concept.
Reducing the GST supports none of the above foundations of fiscal conservatism.
1) GST is a consumption tax - and is paid by all at point of consumption. The amount you pay is based on the amount of products or services you consume. Everybody pays the same amount regardless of income, status, patronage, etc.
2) Lowering GST will not increase personal savings or reduce personal debt. Canadian's currently do not save. Reduction of income tax increases after tax "take-home dollars" and has been proven to increase savings rates and reduce debt rates.
3) Lowering GST will increase inflation. Inflation risks are very real. Canada's biggest challenge from an economic perspective moving forward is inflation - the Bank of Canada can only increase the interest rate so much (until our dollar goes so high that we further loose our competitive advantage for exports). Lowering the GST will encourage increased consumer spending (and increased inflation).
Harper's move does not make sense to fiscal conservatives (nor economists). For the average family a 1% reduction in GST will save $400 / year.
Goodale's income tax reductions will offer $500 / year savings. Goodale's approach (in this respect) appears to be more fiscally conservative than Harper's. |
Yes i agree... giving back tax money to canadians so they will be able to use it for their own needs is NEVER a good idea :rolleyes: . What about all this sudden liberal spending in the last month? You dont think thats going to raise inflation substantially? Usually its in bad times that governments spend heavily in order to try and stimulate the economy.
You will never be able to convince me that having more money in my account as opposed to the government's so they can spend it on waste is a bad thing. |
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| Jayx1 |
| quote: | Originally posted by rabbitjoker
Lets not forget - the minute the GST is decreased, consumer pricing is going to rise the EXACT same amount.
What is Harper thinking? Is the guy trying to force me to vote Liberal??? |
No this wont happen because prices are always displayed BEFORE TAXES in Canada.
If the tax were hidden like in most countries this might be a valid arguement. |
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| rabbitjoker |
| quote: | Originally posted by Jayx1
You will never be able to convince me that having more money in my account as opposed to the government's so they can spend it on waste is a bad thing. |
Do you understand the difference between reducing INCOME TAX and reducing CONSUMPTION TAX?
Yes, both offer you more "money in your account" - but reduced income tax guarantees you more - because the savings are not based on your consumption - you get the money regardless of how much you spend. |
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| Jayx1 |
| quote: | Originally posted by simms327
either way, we only save roughly $400 a year and it costs the government billions.
cant they put that money into somthing that will benefit us all...
e.g. health care, schools, etc...
but i guess that wouldnt win the election... the lure of a 1% reduction... crazy people. |
Health care doesnt need more money. It needs to be fixed.
Only in overtaxed canada are we brainwashed to think overtaxation is a GOOD thing.
Where's the outrage from 1991 when the GST was implemented? Have we really gone that soft? |
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| Jayx1 |
| quote: | Originally posted by rabbitjoker
Do you understand the difference between reducing INCOME TAX and reducing CONSUMPTION tax?
Yes, both offer you more "money in your account" - but reduced income tax guarantees you more - because the savings are not based on your consumption - you get the money regardless of how much you spend. |
Yes I do, and thats why this tax reduction is great. Because everyone benefits equally based on what they spend. That means if you spend 100,000 you save 2% just the same as if you spend $400. Consider it a reverse flat tax.
Our taxes are the main reason im buying my Ipod in the US. On the surface the price difference is only about $40 but after you factor in taxes the price difference is $100. Wouldnt you rather that be spent in canada? |
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| Jayx1 |
| quote: | Originally posted by simms327
either way, we only save roughly $400 a year and it costs the government billions.
cant they put that money into somthing that will benefit us all...
e.g. health care, schools, etc...
but i guess that wouldnt win the election... the lure of a 1% reduction... crazy people. |
PS the savings on 40 G would be $800 not $400
its 2% not 1%
PS: im willing to bet if the Liberals proposed this it would be a "brilliant" idea. |
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