Showing posts with label GST. Show all posts
Showing posts with label GST. Show all posts

Wednesday, January 02, 2008

Less Than It Seems

As I have pointed out here on many occasions the reduction in a consumption tax like the GST does little to put money in Joe and Jane Canuck's pockets. It is a populist illusion to cover for the real tax cuts the Harpocrites gave to big business.

NDP Leader Jack Layton said the GST announcement and other Conservative tax cuts will do little to increase wealth in Canada. In an end-of-year interview, Layton noted that the tax cuts could widen the gap between rich and poor, while the average family could see higher property taxes, post-secondary education fees and other bills.

"Those with the highest salaries - the millionaires, the big banks, the (profitable) corporations... The ones that don't need the help - are going to get the most help; the oil and gas companies in the tar sands, continuing to get subsidies as well as a big boost from the corporate tax cuts," Layton said.

Patti Croft, chief economist with the investment firm Phillips, Hager and North, said anyone making big-ticket purchases will benefit from the consumption tax reduction. But, she said: "In general most economists would prefer a cut in income taxes. It's a more efficient way to reduce the tax burden. By cutting the GST, hopefully it causes Canadians to spend more."

Ottawa realtor Duane Leon, however, predicted that even though the cut could shave thousands of dollars off the price of a newly built home, there would be little impact on the real estate market. Many builders have already announced that price increases in the thousands of dollars for new construction that will take effect early in the new year, he said, adding this will offset any benefits to buyers from the GST reduction.


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Monday, December 31, 2007

Harper Recycles


Stephen Harper, taking a page from Ralph Klein, is recycling old promises and announcements. Guess that's what he considers being Green.

PM kicks off final GST cut at electronics store

Mr. Harper wound up 2007 by holding a news conference at a Mississauga store on Monday to trumpet tax cuts his government has made and which take effect at midnight.

As the year turns, the GST will drop to 5 per cent, something that Harper's government announced months ago.

Mr. Harper said Canadians should not expect further tax cuts in 2008, adding that his government will be cautious on tax relief or new spending.

Even this is not as big a tax break as the corporations are getting thanks to Harpers generosity with our tax money. And what you save in GST you pay back in payroll taxes.

Starting Jan. 1, Canada's corporate tax rate will be trimmed to 19.5 per cent from the current 22.12 per cent. This rate is slated to come down each subsequent year until it is reduced to 15 per cent on Jan. 1, 2012.

As well, the tax rate on small businesses with incomes under $400,000 drops to 11 per cent from the scheduled 11.5 per cent rate.

Of course, what the government giveth, it often takes away and Ottawa has also brought in a slight increase in so-called payroll taxes.

The taxpayers federation estimates that employees will pay an additional $50.43 in 2008 on employment insurance and the Canada Pension Plan, while employers will pay $46.02 more per worker.

And it is the payroll taxes, EI specifically that creates the record Government Surpluses whether that government is Liberal or Conservative.

And note that workers still pay more than employers. Time to abolish taxes on the working class!

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Tuesday, November 13, 2007

Flaherty's Tax Deception


The reason the Conservatives have a surplus is because income taxes remain high. The recent Flaherty roll back was only to the level that had existed under the Liberals.

Tax Fairness? Hardly. The rich continue to get tax breaks, the working poor face claw backs and the middle class pays more in taxes.

And other than the window dressing of rolling back the Conservative created GST (not eliminating it) not much tax relief came out of all the smoke and mirrors pre-election mini-budget.

Instead all that Flaherty did was dress up for Halloween as the Wizard of Oz.



The federal government's personal income tax cuts were relatively modest, and for the most part merely a rollback of the tax increases in his first budget, according to an analysis by a think-tank that was involved in preparing projections for Finance Minister Jim Flaherty's recent economic statement.

And those measures will only temporarily ease the personal income tax burden, and not by much, and won't keep that burden from rising in the future, says the analysis Wednesday Global Insight's chief economist Dale Orr, which warns that burden will rise in the years to come.

"Finance Minister Flaherty is fond of telling us that Canadians pay too much tax," it said, noting that last week's economic statement promised about $60-billion in tax relief over the next five years.

However, almost 60% of that is the goods and service tax reduction, a cut that Global Insight say will do little to boost the overall performance of the economy.

"Only 18% is in personal income tax reductions," the report said. "From almost any perspective, the personal reductions in the economic statement were very small, smaller than they could have been, and smaller than they should have been."

The economic statement, which was widely perceived as a pre-election mini-budget, reduced the lowest personal income tax rate to 15% from 15.5%, retroactive to January 1, 2007. It also increased the amount people could earn before being taxed, providing $10.9-billion in personal income tax relief over the 2006- 2013 period, with about about half of it this year and next.

"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."

And the amount of "relief" is tiny relative to its impact on the personal income tax burden, which is measured as the proportion of personal income paid in personal income tax, and it's temporary, the analysis argues.

The rollback of the earlier tax hike reduces that burden slightly to 9.8% this year from 10.1%, but the tax burden will rise back to 10.1% next year as the projected increase in after-inflation earnings pushes more income into higher tax brackets, it said.

While tax brackets rise with inflation, any real or above-inflation increase in incomes, means more of that income is taxed at higher rates, Mr. Orr explained in an interview, adding that were it not for the re-indexing of the income tax system, which occurred under the former Liberal government, the tax burden would rise even faster.

"Roughly speaking, if personal income increases by five per cent, federal personal income tax collections will increase by about six per cent of $7-billion a year if the increase in personal incomes is evenly spread across the income distribution," it said. "Personal income tax collections ... are the proverbial 'cash cow'."

In fact, in recent years the faster growth in incomes at the upper-income level has resulted in personal income tax collections rising by closer to eight per cent for every five per cent increase in personal incomes, it said.

The analysis, for example, calculated that for every $100 increase in income an individual's income the government collects an extra $29 from an upper income tax-filer but just $15 from a low-income one.

The analysis was prepared for Global Insight clients which include governments of virtually all stripes and corporations, Mr. Orr said.

Canada's rich pay less in taxes than poor, report finds

OTTAWA — The era of tax cuts ushered in by federal and provincial governments in recent years have made Canada’s tax system so regressive that the country’s richest now pay the lowest rates of all income groups, says a report to be released Thursday.

The report by the Canadian Centre for Policy Alternatives, an advocacy research group that has pressed in the past for more social spending and bigger taxes on corporations and higher-income Canadians, looked at what percentage of income Canadians pay in taxes to all levels of government.

The study shows that Canada’s progressive tax system has become less so between 1990 and 2005, and for the richest Canadian families — those with annual earnings of $266,000 a year and more — the era of tax cuts since the turn of the century has been like manna from government.

Those very rich Canadians paid 30.5 % of their income in federal, provincial and municipal taxes in 2005, as opposed to the 30.7 % for those with incomes under $13,523, the lowest 10 % of family earnings.

That’s a big difference from 1990, when the top 1 % of earners paid 34.2 % of their incomes in taxes, as opposed to 25.5 % for families in the bottom 10 %.

“The tax system as gotten less progressive,” said the group’s senior economist Marc Lee.

“There’s something in the overall tax system now that most people would find offensive. The idea that someone who is in the upper middle class is paying a higher tax rate than someone much wealthier is not fair.”

In last week’s mini-budget, Finance Minister Jim Flaherty cut the GST as well as personal, corporate and other taxes by $60 billion over five years, declaring that “Canadians pay too much tax.”

In recent years, several provincial government have also cut taxes, but in many cities, property taxes and users fees have been rising as local governments try to cope with rising costs and service demands.

The highest taxed Canadian families are those earning between $120,000 and $151,000, who pay 36.9 % of their income in taxes. This group is followed closely both those earning $57,460 and $72,299 — whose tax bill represents 36.5 % of their total income.

Lee said his report is different from other such analyses in that he included all sources of income, including salaries, inheritances, employer provided benefits and capital gains. As well, the report calculates all taxes, including property and corporate taxes and user fees charged by governments.

He said he chose the 1990 to 2005 timeline because the last time a similar methodology was used to analyze the Canadian tax system was in 1988, and because the 15 years covers a time of government deficit cutting and tax hikes, followed by several years of tax cuts.

The main finding is that on average, tax rates dropped by 2 % between 1990 and 2005 as both federal and provincial governments undid the tax increases of the 1990s with deeper and broader reductions.

But the relief wasn’t spread equally. Those in the top 1% of earners actually saw their tax bill drop by about 4%, whereas those at the very bottom saw the take rise by 5%.

Lee said although the lowest income earners generally pay no or very little income tax, they do pay a disproportionately high amount in relation to their income in sales taxes, property taxes and other government revenue generators, such as gaming and liquor sales.

Tax cuts by provinces was the main impetus behind the flattening of the system, says Lee, although federal cuts, such as the elimination of the 5% high income surcharge after 2001 also reduced progressivity.

Provincial taxes are less progressive than federal levies because of their greater reliance on sales tax and fees for such things as driver’s licences. As well, provinces generally have flatter provincial income tax rates.

“Provincial income tax cuts are the major culprit behind Canada’s eroding tax fairness, an important consideration given allegations by the provinces of a fiscal imbalance in Canadian federalism,” the report finds.

Upper-income earners benefited from a 2001 federal decision to eliminate the 5 per cent "high-income surtax" and from preferential treatment of capital gains from the sale of stock market shares and real estate.

The affluent were also better able to take advantage of increased allowable tax deductions for RRSPs, Lee said.

At the other end of the scale, low-income earners saw their tax rates accelerate as a result of increases in payroll, consumption and property taxes, as well as user fees.

The analysis concludes that there is scope for raising income taxes at the top of the income ladder to make the system fairer.

"Such changes would help to ensure those who can afford to contribute more for public goods and services valued by all Canadians can do so," the study says.


Tax cuts won't buy a cup of coffee
Analyst says savings for low-income earners are, at most, 39¢ a day

Unveiling tax goodies on mini-budget night, a beaming Finance Minister Jim Flaherty declared to a national audience that "these tax cuts will move some 385,000 people off the income tax rolls altogether."

Sound good?

It should. This kind of thing has been a staple of federal budgets for many a year.

But analysts scoff at this supposed manifestation of a government's goodwill toward Canadians at the bottom of the financial scale.

In fact, there's widespread agreement the tax changes introduced by Flaherty do little to improve the lot of low-income earners.

"Don't get sucked in by that," says TD Bank chief economist Don Drummond when asked about Flaherty's claim 385,000 people won't pay federal tax as a result of the Oct. 30 mini-budget. "Most of those people were paying $5 or $10."

He said he completely agrees with the idea that someone earning under about $14,000 should not be taxable. "But just bear in mind the amount of taxes they are paying. It's not a very meaningful statistic."

The main lever used in Flaherty's mini-budget to ease the tax burden on low-income Canadians was raising the basic personal amount that can be earned without paying federal taxes to $9,600 – an increase of $671.

The people supposedly removed from the tax rolls, then, are those whose taxable earnings would have been slightly higher than the old threshold of $8,929.

"There are people who would be just barely above the amount of the non-refundable credit, so, in effect, you put them in a zero tax position," says Hugh Mackenzie, a research associate with the Ottawa-based Canadian Centre for Policy Alternatives. "They're not eliminated from the tax rolls. The position that they find themselves in is that when they go through the tax calculation, they find at the end of it they don't owe anything.

"It's not as if these people are exempted forever from paying tax," Mackenzie added. "As inflation goes on and economic circumstances change, you could have a very similar income and find yourself taxable again."

In his mini-budget, Flaherty also said he is helping taxpayers by dropping the lowest personal income tax rate to 15 per cent from 15.5 per cent. This helps all taxpayers but is proportionately more helpful to those with low incomes.

But Flaherty's budget measures still aren't great news.

Cutting the lowest tax rate will return about $1.3 billion a year to taxpayers, notes Drummond. "When you've got 20 million paying taxes, $1.3 billion doesn't go very far."

However, he says, the Harper government decided to spend the money it had for tax cuts on reducing the GST another percentage point to 5 per cent.

With a GST cut, "there's no incentive to work, save and invest. In fact, if it gives any incentive, the incentive is only to spend more and consumption is not one thing the Canadian economy is short of by any means," Drummond said.

As a result, Flaherty's income tax moves do little for Canadians with the smallest earnings packets, economic analysts say.

First of all, it's universally noted the reduction in the lowest income tax rate to 15 per cent only reverses a tax increase brought in by Flaherty in his 2006 budget. Taxpayers are getting a benefit they would have received anyway had he not raised income taxes last year.

It's a similar situation with the increase in the basic personal amount to $9,600. Flaherty is only moving forward increases in that tax break put in place by the Liberals in 2005.

Taken together, the Oct. 30 measures will provide only very modest help for low-income earners.

The CCPA's Mackenzie estimates the mini-budget changes will result in a maximum income tax reduction for individuals of $242 in 2007, $187 in 2008 and $144 in 2009.

For a single parent, the maximum reduction is $298 in 2007, $184 in 2008 and $94 in 2009, he said.

And those savings will be less for anyone with an income below about $38,000 a year, Mackenzie said. So, as a result of the way taxes are calculated, Flaherty's income tax changes will amount to a gain of at most 39 cents a day for a single individual and 25 cents a day for a single parent, he estimates.

It marginally helps people with very small incomes, says Rob Rainer, executive director of the National Anti-Poverty Organization.

"But we're not going to see any major, substantive visual evidence on the streets, so to speak, of people really having their financial fortunes reversed by this," Rainer said.

Analysts and anti-poverty advocates agree that Canadians must go way beyond tax cuts if they are going to use government fiscal measures to effectively reduce poverty.

Reducing taxes for those at the low end of the income ladder only helps if governments refrain from cancelling out any benefits by clawing back income supports and social assistance as taxpayers' incomes begin to rise above the subsistence level, economists stress.

These clawbacks, designed to keep support programs from becoming too expensive, act as a disincentive for low-income workers to extend their hours or upgrade skills because the reduction in social benefits, combined with rising tax rates, leave them with less money. As a result, what economists call their marginal effective tax rate can reach the same level or higher than top income earners.

"You really have to get the effective rates on low-income people down," says Dale Orr, an economist with Global Insight. "Some of these people are subject to very high effective marginal rates because they lose tax credits and subsidies and things. So we really have to do something better for them."

The federal Conservatives have taken a step in this direction, introducing the Working Income Tax Benefit, a $550-million-a-year program designed to help eliminate some disincentives for low-income earners. However, critics say it needs to be expanded to be of maximum value to working families.


Federal government shows no interest in making Canada better
Lana Payne
The Telegram

Before kids even go to school, we expect them to connect the dots.
My daughter has been doing it for years and she’s only 6. When she’s finished connecting the dots, she is left with a clear picture that she then colours a multitude of shades and hues.
You soon learn, though, that children are very good at connecting other kinds of dots. At Thanksgiving, like most kids in the city, she was asked to bring items to school for the food bank. We talked to her about food banks and explained that not everyone had enough money to buy food, pay bills and buy clothes for their kids. And that food banks help, but they are not the answer.
This must have stayed on her mind, as a few days later she asked, out of the blue, if we had food banks because “rich people didn’t share enough.”
Canada’s not-so-new prime minister and his blustery finance minister are counting on us having forgotten to connect the dots.
They certainly don’t want us questioning their tax-cut agenda and the damage it is causing and will continue to have on the country’s social fabric.
They most certainly do not want Canadians contemplating this failed and flawed public policy.
Because if Canadians start connecting the dots, they may discover that despite tens and tens and tens of billions of dollars in tax cuts, they are still not feeling that financially secure.
Despite a 30-year unemployment low, despite more than a decade of government surpluses and despite unprecedented economic growth, Canadians are a worried lot — at least according to polling by the Canadian Centre of Policy Alternatives.
It may have something to do with all the debt families are carrying and a lack of household savings. Or it may be because real wages, excluding inflation, have not increased since the recession year of 1981-82.

Not shared
It’s no wonder Canadians are feeling a little shaky. After all, the country is generating more wealth than ever before, they see politicians giving away billions, but it isn’t filtering down to them.
And despite this failed and unimaginative economic policy of tax cutting, the federal Conservatives persist with the finance minister announcing at the end of October another $60 billion in tax cuts — almost 25 per cent going to corporations.
This is what Canadians do know and what Stephen Harper ought to fear.
They know how expensive it is to send their big kids to university or college because taxes haven’t been used to reduce the cost of post-secondary education.
They know that only the lucky and the fortunate can access affordable child care and early learning programs for their smaller kids. They know that tax cuts won’t repair mould-infested schools. They know tax cuts won’t build bridges or pave roads. Nor will they build hospitals, buy cancer-treatment equipment or pay home-care workers a decent wage. Tax cuts do nothing for homeless people, except keep them homeless.
And tax cuts for corporations do even less, except feather a few already cushy nests.
Canadians know that the last thing hugely profitable corporations need is more of their hard-earned cash. Yet the Harper Conservatives have done just that, handing over another $14.8 billion in corporate tax cuts, including to obscenely rich oil and gas multinationals.
It’s no wonder a study last week by the Centre for Policy Alternatives discovered that Canada’s tax system is becoming less and less progressive. According to the report, by economist Marc Lee, the richest one per cent of families pay a lower percentage of their income to governments than the poorest.
Lee’s conclusion was that Canada’s tax system, after years of cuts, now fails a basic test of fairness.
And this was before the Conservatives’ latest round of tax cuts, which had many economists warning that Harper had slammed the door on any new major programs.
What a waste. This money could have made a real difference in the everyday lives of Canadians. An average $200-a-year individual tax cut won’t buy a coffee a day. But collectively, it could have done a lot of good.
That’s, of course, if you are interested in making that difference in the first place.

Government doesn’t care
What is becoming increasingly clear is that Canada’s slightly used Conservative government has no interest in that. They are much too busy managing the public relations of a war, shutting out the media and playing politics.
And while they play politics — fencing with each other over who is the sharpest politician in the lot — another child’s sense of wonder is dimmed by poverty because government chose tax cuts over action.
And that is the whole problem. We have a federal government that doesn’t believe in government, and so most days are spent dismantling and diminishing government as a force of change.

The message to Canadians is: don’t look to Ottawa to be part of the solution.


Unfair burden on poor

EDITORIAL
TheStar.com


Whether taxes are high or low, they ought to be fair, with those with the greatest ability to pay contributing a larger percentage of their income than those with less ability to pay. Such a progressive tax structure has long been a core Canadian value – at least in principle.

But the reality of our current tax system tells a far different story.

In 2005, the richest Canadians actually paid a smaller share of their income in taxes than those who earned the least. In a country that prides itself on fairness, all levels of government took a combined 30.7 per cent of income in taxes and fees from those with incomes under roughly $13,500, but only 30.5 per cent from the top 1 per cent of Canadians, those with incomes of more than $265,800 a year.

In the broad middle between the poorest and the richest, the tax system was mildly progressive, which means that the very richest Canadians paid a lower overall tax rate than any other group.

These findings come from a new study by the Canadian Centre for Policy Alternatives, which looked at changing taxes from 1990 to 2005, a period when the rich were getting richer and the poor poorer. Astonishingly, it found tax cuts had exacerbated that trend.

During this period of big tax cuts, the overall tax rate for most Canadians fell 2 percentage points. For the wealthiest, the drop was 4 percentage points. But while others were getting tax breaks, the poorest Canadians saw their tax rate rise more than 5 percentage points.

By their very nature, some taxes are regressive, hitting the poor harder than the middle class and the rich. Property taxes are one such tax and while they took a diminishing share of everyone else's income over the period, for the very poor they took a rising share, increasing to 5.9 per cent in 2005 from 5.1 per cent in 1990.

Sales taxes, which are also regressive, had the same effect. Rising more slowly than income for most Canadians, they increased significantly relative to income for the two lowest-income groups.

But if that wasn't bad enough, cuts in progressive federal and provincial personal income taxes favoured those with higher incomes, particularly the rich, at the expense of the poor. To create greater fairness, Marc Lee, the study's author, suggests hiking taxes on the rich.

But taxing the rich would do nothing for the poor. It is far more important to tackle poverty head on, and raising incomes of the 10 per cent of Canadians who live on less than $13,500 a year.


See:

Flaherty's Smoke and Mirrors

Tax Cuts For All

Tax Cuts For The Rich Burden You and Me

Tax Fairness For The Rich



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Monday, November 05, 2007

Liberals Gain Third Party Status

The Liberals are not effective as Her Majesty's Official Opposition due to their failed fund raising .

The latest party financial returns published by Elections Canada show the Liberals raised $793,835 from June through to October, less even than the party's third-quarter donations last year.

The legendary "natural governing party" almost fell behind the NDP, which raised just $38,000 less than the Liberals during the same nine-month period.

The figures were released by Elections Canada only this week, but the Liberals were aware of their financial state well before Gov. Gen. Michaelle Jean opened the new session of Parliament with a speech from the throne in mid-October.

Add to that any funds they do raise they have to use to pay off their Leadership convention debt. They have no election war chest. They are now just another third party in the House.

And as those of us on the left know politics is all about economics. And economically the Liberals cannot afford an election. Which determines their political praxis. It really doesn't matter whether they want an election or not, they can't afford it.

So they will shut up and sit on their bums fearful of challenging the Stephen Harper Party. And they will continue to claim it's all because the people of Canada don't want an election. When in fact it is because they are politically and financially bankrupt.

While the Tories awash in cash launch another attack ad campaign, we are in the midst of a protracted election campaign whether the Liberals want it or not.
Tories launch fifth negative ad campaign targeting Stephane Dion


Which Garth Turner notes on his blog. H/T to Take Off,eh for the Turner link.

When I spoke with a top dog in the OLO (Office of the Leader of the Opposition) Friday night, he said they were debating what to do about the new attack ad.

The Liberals cannot respond because they lack the moola. Also it doesn't help when your leader sticks his foot in his mouth and mumbles about increasing the GST.

Stephane Dion's
suggestion that he might one day increase the goods and services tax had some of his Liberal troops shaking their heads yesterday.

One Liberal MP actually buried his head in his hands when told of his leader's public musings.

Another simply cursed.

Yep trust the Liberals to blow it. They are not on autopilot they are on auto destruct. And they will end up a third party come the next election.


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SEE:

Harper the Mad Dog

Liberals Favorite Tax Cut

Poll Spin

A Reply To Northern Liberal

Jack Layton PM?

LiberalTory Surplus Story

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Tuesday, October 30, 2007

Pizza Parliament

This gives new meaning to the term pizza parliament.

GST cut would buy about one pizza a month for most buyers: economist
Is that the Pizza Pizza $5 buck special?


SEE:

Liberals Favorite Tax Cut

How To Spend The Surplus

LiberalTory Surplus Story

Canadian Values

Tax Cut Fetish


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Liberals Favorite Tax Cut

The Liberals will support the Harpocrites mini-budget because it contains one of their favorite tax cuts.

"We certainly like the significant corporate tax cuts," Liberal Finance Critic John McCallum told CTV's Mike Duffy Live.



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SEE:

How To Spend The Surplus

House Divided



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How To Spend The Surplus

Gee after all these tax cuts announced by Diamond Jim the Minister of Finance the Government still has an embarrassment of riches. And how do they intend to spend it?

The government will still have $10-billion in surplus cash to apply to the national debt.

Instead of wasting it on the national debt they should use it to fulfill their promise of increasing actual daycare spaces. This is not just a broken promise, but as predicted by the opposition, one that has fallen flat on it's face.

Few companies keen to provide daycare

The Tories thought tax credits would spur employers and community groups to open 125,000 spaces over five years. Cross-country consultations have poured cold water on the election promise

An analysis of the possibility of getting Alberta employers to create child-care spots says: "Discussions with employers, businesses in Alberta, were mainly reflective of what we heard across Canada in terms of child care not being their line of business, shared concern that it would be too costly and complex for small business to consider."

As for the idea of tax credits, those performing the analysis said: "shareholders are skeptical that a tax credit will create an adequate incentive for employers to create new child care spaces and are concerned it unfairly favours large enterprises." Nor would tax credits work for non-profit organizations, they say.

Many stakeholders said long-term funding to sustain the spaces was needed as well as the start-up financing that the government had offered. And there was a general consensus that the money should flow to the provinces and territories for distribution rather than from Ottawa to child-care providers directly in the form of tax credits.

By the time the 2007-08 budget was released last March, Ms. Finley's successor, Monte Solberg, decided that, like the Liberals, he would give $250-million annually directly to the provinces - something Ms. Finley had vowed never to do. He also offered a 25-per-cent investment tax credit to businesses that create child-care spaces in their facilities, but, as the consultations predicted, there would appear to have been little uptake on that incentive.

Mr. Solberg, who repeatedly declined to be interviewed for this article, conceded to The Canadian Press last month that the creation of 125,000 spaces might not be doable and said "we have to be realistic" when asked whether the election promise could be kept.

He cited plans for about 10,000 spaces to be created across the country - far short of the number required to meet the election goal.


SEE

The ABC's of Privatizing Daycare


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Tuesday, October 02, 2007

LiberalTory Surplus Story

So the Throne Speech will be a Budget Speech. The new-con men; Harper's Neo-Con Government are preparing for a confidence vote. The only way they can bring themselves down.


Fresh from closing the books on last year's massive $13.8 billion surplus - about four billion more than it had recently predicted - the department said Friday that already in the first four months of this year it was operating on a $7.8 billion surplus, about one billion more than last year's monster haul for the same period.

Despite announced spending increases in the March federal budget, fiscal analysts have been watching with mild surprise as the surplus built up in government coffers month by month since April.

The new surplus was accumulating even though program spending rose by $3.7 billion during the first third of the year on higher transfer payments and increased expenses for such things as the war in Afghanistan.

But budgetary revenues also rose significantly by $4.9 billion, spurred on by higher tax receipts from corporations and individuals.

And July saw another $1.4 billion added as money continued to flow into Ottawa faster than the government can spend it.

"Wow," reacted John Williamson of the Canadian Taxpayers Federation. "This is feeling little like the atmosphere we had prior to the Liberals rolling out their five-year tax cut plan that began in 2000.

The calls for broad-based tax relief, particularly from the corporate sector, grew louder yesterday as the federal government disclosed its surplus for the first four months of the current budget year, at $7.8-billion, is on pace to become the largest federal windfall in the country's history.

The total is nearly three times what it projected for 2007-08 and more than halfway to the $14.2-billion windfall recorded for 2006-07, which the government unveiled this week.

Assuming spending and the rate of tax revenue growth remain as they are, the surplus is headed toward $23-billion -- which would make it the highest on record, surpassing the $19.9-billion set in 2000-01.

"All the stars are aligning for the federal government to unleash some stimulus -- if not in next year's budget, then before," said Douglas Porter, deputy chief economist at BMO Capital Markets.

"The confluence of events we have here is that there is pressure on the economy from the currency and the credit crunch; we have surplus numbers well above last year's lofty levels; and we have an election possibly looming."

He said the scenario was reminiscent of the fall of 2000, when the former Liberal government unveiled a $100-billion tax-cut package in an early mini-budget. Weeks later, an election was called, and the Liberals secured a third consecutive majority government.

For the four-month period ended July 31, the $7.8-billion surplus represents an increase of 15%, or just over $1-billion, compared with the same time last year. Corporate tax revenue climbed 25%, while revenue from personal taxes gained 3.5%, to $37.7-billion. On the whole, revenue for Ottawa increased 6.5%, to $80.5-billion.


The stars are aligning for Harper with a few clouds gathering. A budget speech means the government can fall, bets are increasing for a fall/winter election. Place your wagers now.

Harper pledges $725-million in tax cut

Harper's team gears up for election

Liberals ready for election, adviser says

And Harper uses his executive authority to pay down the countries debt, Alberta style, despite previously calling for parliamentary oversight. But then he was leader of the opposition and had to say that. Yeah right. $14 billion gets ya less than a billion in tax cuts. Peanuts.

The national debt now stands at $467 billion.

And speaking of peanuts,this surplus, shows that $1 billion in program cuts made last year, and those now pending in the Department of Environment, were not needed. They were purely for partisan political purposes.


With all the ceremony of an election stump speech, Prime Minister Stephen Harper announced Thursday that a $13.8-billion surplus - one which exceeded the federal government's own projections - has gone towards paying down the debt.

The move is an interesting role reversal for Harper, considering how loudly the Conservatives used to crow from the opposition benches when the previous Liberal government delivered massive surplus after massive surplus.

But when asked about the difference, Harper replied like a man headed to the polls: Liberals tax to spend, while Conservatives tax to put the fiscal house in order.

Despite that stance, echoed by Finance Minister Jim Flaherty as he fielded questions following Harper's quick exit, critics weren't impressed.

NDP Leader Jack Layton this week questioned the wisdom of using the surplus to pay down the national debt, suggesting that the government's failure to adequately fund social programs and infrastructure while swimming in dough makes it less likely his party would prop up the minority government.

Liberal finance critic John McCallum said the party's position on surpluses would be made clear when it releases its election platform, but noted that in the past Liberals have favoured a splitting the "surprise" windfalls between tax cuts, new spending and debt repayment.

"The lessons I draw from this is that there was certainly no need to raise the income tax rate and no need to cut the most vulnerable people, like women's groups, literacy programs and museums," he added. In the first Flaherty budget, the Conservatives reversed former Prime Minister Paul Martin's half-point reduction in the lowest income tax bracket in order to pay for a cut to the GST tax.

Paying down the debt Alberta style, meant that while Ralph Klein could symbolically burn the provincial mortgage, declaring Alberta debt free, the province was a mess.

Ralph Klein says provincial debt is dead.

On July 13, 2004, Premier Ralph Klein announced that Alberta was the only debt-free province in Canada. It had owed $23 billion when he took office in 1992

In order to pay down the debt it deferred much needed infrastructure funding, had unfunded pension liabilities, contracted out services and cut staff. Now in order to play catch up by funding infrastructure and services, and paying off pension liabilities, the costs are skyrocketing in an overheated economy. Causing the current treasurer to cry gloom and doom, hinting at future debt and deficits.

Paying down the debt is an illusion, it sounds good but it is unsound economics.

Like cuts to the GST rather than its elimination.

At least one neo-con press pundit, from Calgary of course, has claimed that Harpers good fortune economically has less to do with the belt tightening cuts made by then Finance Minister Paul Martin, than to the long term wisdom of Brian Mulroney.

No seriously, the man who left Canada in a debt and deficit crisis should be thanked for introducing NAFTA which she says is now paying off. Sure in sales of Canadian iconic industries to foreign capital and our link to the declining credit market.

Actually paying down the debt was Federal Liberal policy, and the debt reduction act was adopted under PM Paul Martin, one which was modeled on Ralph's. The Harpocrites are merely following through, well actually pushing through debt reduction as a priority. It is after all a policy of theirs since they were the Reform Party,created in those halcyon days of the debt and deficit bugaboo.

Meanwhile the rising dollar has offset the immediate impact that the credit market meltdown has had. And the surplus gives the illusion all is well in the marketplace.

One fly in the ointment is that the Canadian economy has yet to feel the full brunt of a credit crisis, which first surfaced in August and could result in fewer revenues for the government. But few expect that a mild economic downturn will do more than slow down the flow of cash from taxpayers.

But the inevitable storm clouds are gathering, despite the voluntary efforts of another Tory right winger; Purdy Crawford point man for Canada's big banks and credit unions.And despite viewing the melt down with rosy glasses for the past two months, David Dodge, finally had to bite the bullet Friday.


The Bank of Canada injected almost $1-billion into money markets yesterday, a stark reminder that all is not right in Canada's credit market.

Just two days after Bank of Canada Governor David Dodge declared that "the overnight market is now well on its way back to normal operations in Canada," the bank found itself having to defend its key interest rate with one of its largest cash injections to date.

The central bank also increased the amount that it leaves in its settlement system to allow for easy money transfers between banks. It has set aside $300-million, instead of the $150-million target of the past few weeks, and the $25-million during normal market conditions.



Something is definitely amiss in Canada's money markets.

The Bank of Canada, for the third business day in a row, injected about $1-billion into the overnight market to defend its key interest rate.

A bank spokesman said the liquidity provision was simply a technical move, a normal quarter-end demand for more cash.

But for the Bank of Canada's monetary policy to work properly, it's not enough to just defend the overnight rate. That rate needs to act as a benchmark for the short-term borrowing rates that corporations, home buyers and consumers pay.

That bail out was announced the same day that the second budget surplus was declared. And since paying down the debt results not in any real economic savings for Canadians simply a better credit rating, it is ironic that it could be wiped out in a credit market melt down.

But the Canadian economy is facing difficulties other than the strong loonie and the risk of a protracted U.S. slowdown, Mr. Hall said.

New elements in play have led the Bank of Canada to adopt a neutral approach to interest rates, Mr. Hall said. Those factors include the implicit tightening as a result of the widening of credit spreads and a reduction of liquidity as banks reverse a process in which they could push loans off their books by securitization. "It will take time for these effects to be felt," Mr. Hall said.

The freeze-up in the Canadian asset-backed commercial paper markets along with the rise in the Canadian dollar will make this Friday's release of the Bank of Canada's quarterly business outlook survey an important report, said David Wolf, economist and strategist for Merrill Lynch Canada Inc.

Government can only effectively pay down the debt when they have the secure asset base to do it. That is your infrastructure is paid for.

Instead of paying down the debt, the government needs to expand investment in its assets, not selling them off. Infrastructure needs investment which the Harpocrites deny since it runs counter to their neo-con monetarist policy.

Debt reduction only works if you have no liabilities, such as infrastructure. And to show exactly how hidebound the government is, they would rather have parliament literally fall down around their ears than abandon their neo-con ideology.

“Paying down the debt” means “reducing the public’s supply of T-bonds.” In other words, it means “reducing the public’s net financial wealth”

When the public’s T-bond supply gets too low, it puts a damper on the money creation process. And, as we saw in article 1 of this series, when new money is not created at a sufficient pace (or worse, when the money supply contracts), it results in economic stagnation or contraction. To me, that goes a long way to explaining our dubious history of paying down the debt.

As we reviewed in article 1, inflation is caused by too much money deflation is caused by too little money. But T-bonds are not money, they are merely “proto-money.” Because of that, and because it takes money to create inflation, it follows that increasing the public’s T-bond supply does not cause inflation. Let me say that another way: Deficits do not cause inflation, because deficit spending is the process of increasing the T-bond supply, not the money supply. Monetary policy causes inflation or deflation; fiscal policy does not.



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Saturday, September 15, 2007

GST Cut Falls Flat



Here is a new definition of Flat Tax.
A tax cut that lands flat, as in flat on its face.


Last year's GST cut did not stimulate increased consumer spending or the economy and, unlike some other tax cuts, will not pay for itself in the long run, a new analysis has concluded.

"Do tax cuts pay for themselves? Well, certainly the GST reduction didn't," Global Insight said in an analysis Tuesday of the costs and impact of the one-point cut in the sales tax rate by the minority Conservative government to 6% from seven last July.

"The relationship between GST revenues and consumer expenditures reveals no significant evidence of stimulated consumer spending," concluded the analysis, based on Finance Department fiscal reports that run through June 2007 -- the first 12 months since the Harper government carried through on its election promise and cut the GST.

"A cut in almost any other kind of federal government tax would have been more effective in stimulating economic growth and would have resulted in it getting more of the lost revenue back," Dale Orr, the think tank's chief economist, and author of the report, said in an interview.

Among the tax cuts that would be the most effective in stimulating economic activity and boosting future revenues would an income-tax cut, which as well as leaving people with more money to spend, would encourage them to work longer and harder to earn more, Mr. Orr said.

However, he noted that the Conservative government instead raised personal income taxes in its first budget.

"That was done specifically to finance the GST cut," Mr. Orr said.

Insured workers pay GST which was intended to address the national debt, yet we have not received any evidence that all those funds are doing that. Insured workers then pay GST for servicing the national debt, pay income taxes to fund programs and serve the national debt and then workers and employers pay down the national debt yet again through their EI premiums - not voluntary contributions!

VAT (value added tax) and GST (goods and service tax) are two of the fastest growing taxes globally, a new report launched today by PricewaterhouseCoopers demonstrates. The report, Shifting the balance –the evolution of indirect taxes, offers an insight into the growth of indirect taxes and focuses on a number of key themes such as the shift from direct to indirect taxes, barriers to business and the need for reform, litigation, and the use of technology in indirect tax compliance.


It suggests that this could reflect a global trend by governments to focus on the certainty of revenues from VAT/GST and a desire to shift compliance costs from tax authorities to businesses. The report describes how, in light of the evolution of indirect taxation, there is a further challenge not to be forgotten. VAT systems can be regressive in nature and also potentially inflationary. It recommends that governments considering the introduction of such systems to enhance global tax competitiveness, need to bear in mind measures that will ensure a level of welfare for the lower paid individual taxpayers, including the potential for applying reduced tax rates or even zero tax rates for basic goods and services or those supporting other social aims, such as relieving the burden on the elderly or disabled.



SEE

Tax Cuts For The Rich Burden You and Me

Tax Fairness For The Rich



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Tuesday, March 20, 2007

Canadian Values

Remember this from the Conservatives platform during the election?

Well here is an example of another broken promise by the Harper government.

They forgot the GST cut in the budget.
Country must wait for GST cut

The Conservatives have finally admitted that a cut in the GST is not 'real tax relief' after all.

"Budget 2007 will strengthen the federation by restoring much-needed fiscal balance," said Minister Flaherty. "And Canadians come out ahead through real tax relief that benefits working families."

I guess 5% is not a Canadian value after all.

Since Flaherty said his budget was all about Canadian values.

" Canada is a powerful idea. We are a modern nation that stands up for Canadian values in this world.

There are values and beliefs that unite us. Make us proud. That embody what it means to be Canadian.

To achieve a better Canada, we must invest based on those values and beliefs.

First of all, we help the vulnerable—and aspire to help one another.

Secondly, we take pride in the spectacular beauty of our country, and aspire to preserve it.

Third, we cherish the universality of our health care system, and aspire to strengthen it.

Fourth, we are a caring people, and aspire to support people who need our help.

This budget makes our values and beliefs stronger."

SEE:



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