Friday, December 4, 2009

Cons pondering GST hike???

Just one other thing for today ... the National Post, the semi-official organ of the Conservative Party, suggested Ottawa's finances are in such a big mess that the unthinkable is actually being considered -- the 5% GST may go back up "temporarily" (meaning permanently) to 7%.

The 2% cut has cost the feds about $13 billion per year. Not only was it short-sighted, as a value-added tax taxes consumption rather than income (and since we all consume on a regular basis it means a steady stream of cash for the government) it also was ill-timed -- since the GST was basically paying for Old Age Security and related supplements with plenty of cash to spare, the Cons were shooting themselves in the foot since the first cohort of the "baby boom" starts collecting in 2011 -- just thirteen months from now.
 
The argument would be, the boomers will have plenty of disposable income so the money will be made up somehow. How, exactly? Not all boomers worked, so they didn't pay into the CPP or RRQ; OAS and supplements will be all they have. More importantly, the strain on long term facilities will become almost unbearable in the next few years. Since seniors don't pay as much in income taxes (because of increased exemptions) someone has to pick up the remainder. And we can't keep borrowing the money -- certainly not from enemies like Mainland China, like the US has had to do.
 
A government shouldn't do things that are popular, they should do things that are for the common good no matter how unpopular. Mulroney and Wilson were excoriated for introducing the GST in the first place but it was smart policy. Increase consumption taxes and lower income taxes -- not the other way around. If people have more in their wallet at the end of the week, they will spend it and that will raise the revenues overall. Eventually you go back into surplus and overall debt can be paid down.

I do not believe, simply can't believe, that Team Harper would give all provinces authority to have a harmonized sales tax (as they did this week) or plowing those which opt in with "transition money" unless they're planning behind the scenes an about face about the federal sales tax and the level at which it is charged. If they approve even a half point hike, I'm not going to be smug in saying "I told you so."

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6 comments:

penlan said...

If they do put the GST back to where it was does that mean the HST will be even higher than the 13% here in ON? It will then be 15%? If so then we will be paying through the nose for things we didn't have to before. Less so-called "disposable" income. I have just a small amt. of disposable income monthly. About $10. Disability income doesn't go far at all.

BlastFurnace said...

Sadly, Penlan, it's people in situations like yours that's the worrying part about it all. While the GST or HST or however it's formulated is a net benefit for middle and higher income earners, it's those at the low end that are hardest hit. When the GST was cut, so was the GST rebates proportionate to the cut.

From what I've read, there's nothing in the proposed plans that the rebate would go back up to where it used to be -- and that's what really makes it insulting.

I happen to think it's time to roll together all the "entitlements" such as the tax rebate, child tax credit and working income supplement then top that up with some more money and create a real "negative income tax" so that everyone has a guaranteed floor of income. This would be over and above welfare, disability, etc.

It can't be done overnight -- unless you get rid of corporate welfare immediately -- but phased in properly it could put a real dent in our shameful poverty situation.

penlan said...

It's utterly disgusting! To be frank, the only Party that really seems to be aware of the poverty here is the NDP. I don't see the Libs coming close to seeing the reality of most Canadians & of course not Harper & cabal.
The Greens aren't in the picture at this time.

I'm thoroughly disappointed in Ignatieff & feel that he & the Libs have let all of us down - big time. They've made zero headway on anything & are supporting many things that most liberals would not support - like doing away with the long gun registry, eg. Doubt I will renew my membership, which is due now.

Unfortunately I see Harper getting his majority in the next election - whenever it's held. People are so damn blind!

BlastFurnace said...

Oh to have PR ... especially MMR like they have in Germany. At this point I would gladly split my vote between the Libs and NDs. I actually respect Mr. Layton for taking a principled stand on this issue -- even though even his hands would likely be tied since the "contracts" the feds have signed with Ontario and BC re harmonization doesn't run out until, I believe 2014.

Even I have to admit Mr. Ignatieff has been very lacklustre and unless he is planning an explosive out of the gate surprise like Chrétien did in 1993 the next election could be a foregone conclusion. And with media concentration getting even more intense, Canadians aren't being told the truth which ensures Harper has trustworthy allies to tell his and his cronies' lies.

Torontonian said...

If this does go ahead it will be a fatal blow for the Conservatives.
They'll never live down the "spend and tax Tory" moniker that will emerge.

Chrystal Ocean said...

Good post, with which I essentially agree: consumption taxes good, income taxes bad. I also agree with using a negative income tax to ensure a basic level of income for all.

"When the GST was cut, so was the GST rebates proportionate to the cut."

Not so, at least not from my perspective. My household income is in the lowest decile of income categories. I saw no change, but for the annual COLA increases, to the GST rebate I'd been getting previous to the two percent cuts.