Tuesday November 6, 2007
Think before you criticize GST cut
By BILL TIELEMAN
Even a stopped clock is right twice a day.
The federal Conservative government is cutting the goods and services tax by another one per cent.
That means Prime Minister Stephen Harper is actually doing the right thing, something groups usually opposed to Conservative policies actually support, like the Canadian Centre for Policy Alternatives and the National Anti-Poverty Organization.
And it means Harper is rejecting the advice of economic conservatives, like the right-wing Fraser Institute, the Bank of Montreal, the Vancouver Board of Trade, and the C.D. Howe Institute.
But wait! The Canadian Auto Workers also opposes the GST cut. So do the federal New Democratic Party and Liberal Party.
And the CCPA and NAPO have changed their minds since first calling for a GST cut a few years back - now they oppose it!
What's a sensible person to think?
Well, if you are determined to cut taxes, whacking the hated GST is the right thing to do.
The GST is regressive, while income tax is progressive.
To illustrate. Say one person makes $20,000 while another makes $300,000. The first buys a car for $20,000 and at five per cent GST pays $1,000 tax.
The richer fellow buys a $60,000 car and pays $3,000 GST.
The $1,000 GST the lower income person has paid equals five per cent of his income while the richer one has paid $3,000 - but just one per cent of his income in GST.
It's obvious the GST hurts one a lot more than the other.
That's not to say the Conservatives are doing their best to help the poor - far from it. Increasing the GST tax credit, building social housing or creating child-care spaces would all be more effective - but less politically appealing to the Tories.
But opponents to the GST cut should think carefully before criticizing it.
The CCPA, for example, said in a 1999 paper: "No one disputes that it is among the most regressive of all taxes, one that puts a disproportionate financial burden on those least able to pay."
But last year, the CCPA issued another paper claiming: "This is a tax cut which disproportionately favours high-income families. For every dollar of this tax cut received by low-income families, over three dollars goes to families that are not low-income." Whoops - which is it?
And federal Liberal Leader Stephane Dion says if elected he would consider reinstating the two per cent GST cut. Ouch.
Meanwhile Liberal finance critic John McCallum voiced support for other parts of the Conservative fiscal update: "We certainly like the significant corporate tax cuts." Ouch again.
So enjoy the GST tax cut - go buy something and create some jobs - but don't let the Conservatives off the hook when people are still begging in the streets.