I’m reminded of those ****** annoying hands in my pocket commercials right now because it was payday today, for the third time in this New Year.
Usually it's a happy day (I like to treat myself to a McDonald's breakfast buritto breakfast on paydays, yum) , but my joy was tempered when I remembered something from the campaign that had been drown-out amidst the din of beer and popcorn, promises of elected Senators and promises that you need to be elected to sit in a Stephen Harper cabinet: the Conservatives are going to raise our taxes!
But they’re going to cut the dreaded GST, you say, by a whole one per cent! And another one per cent if we behave and give them that majority they want! Quite true. But buried in the fine print was how they were going to pay for it: by canceling tax cuts made by the Liberal government. Or, to describe it more accurately, by raising personal income taxes.
I’ll allow Rick Bell, of all things a Calgary Sun columnist, to explain it:
In November of last year, before the election, the Liberals brought in a one percent reduction to the lowest tax rate. For the first $36,378 of our taxable income, the rate goes down from 16% to 15%. The Grits made the move retroactive to Jan. 1, 2005. By the year 2010, the next two tax rates on incomes higher up the food chain also go down a point.
In addition, the basic amount you can make before forking over anything to the feds is raised by $500 a year.
Harper has said he will allow the new rates for 2005 but will scrap them this year. Nixing the reduction means the 2005 rate of 15% will be-come the 2006 rate of 16% and the personal exemption before you pay taxes will go down $400.
That, dear friends, is a tax increase.
You bet it is Rick. This fiscal stuff can be dry though, which is why the media and politicians like to use examples to help people relate (Billy-Bob and Suzy-May have three children…). I don’t have a crack research staff at my disposal, so I’ll use myself as an example.
Since the beginning of the year, the Liberal tax cut has saved me $16.79 every paycheck (every two weeks). This being the third pay period, that’s an extra $50.37 in my pocket. And no, Scott Reid, I’m actually saving it. Over the course of the year that would be an extra $430 or so in my pocket. To me, that’s real money. Except the Harper Conservatives want to raise my taxes, and take that money away.
Now I’m not a tax lawyer or a mathematician, so correct me if I’m wrong, but here’s how I read this. The Liberals made the tax cut retroactive to 2005, but those with taxes deducted from their pay had it deducted at the higher rate. Therefore, nice refund this April for the overpayment. Score!
However, now that we're in 2006 our taxes are being deducted at the lower, Liberal rate. But Harper has said, while he’s letting the 2005 reduction stand (ain’t he a peach?) for 2006 it’s back to the higher rate. Therefore, when he pulls the trigger on that tax hike my paycheque will go down by $16.79.
Let’s say, being optimistic, he gets this passed April 15. At that point, my Liberal tax cut savings will be $117.53. That's nearly $120 cash in my pocket, if I haven't blown it on Cabarnet and Camembert yet. But I shouldn’t have been paying that lower rate for the past three-and-a-half months. So, if I read this right, Harper will be clawing back that $117.53 on my 2006 tax return, in addition to cutting my pay by $16.79 every two weeks from April 15th on.
Still, we'll have a one per cent lower GST though. Here’s a fun little challenge:
- Save your receipts for two weeks, and add up how much you pay in GST.
- Calculate how much you’d have saved with a one per cent lower GST.
- Compare it to how much the tax deducted from your pay every two weeks has decreased. Which number is bigger?
And I’m on to you Michael Fortier! If you go out and buy a plasma screen TV this week to watch Question Period on be sure you divide the cost out over 12 months. No skewing the statistics, we’re looking for an average here. I’m willing to bet the average Canadian will be saving more on their income tax than they would with the GST cut.
Not to mention the fact a million and one economists will tell you income tax reductions are far more fair and desirable than consumption tax reductions. But don't just take my word for it.
"If you want tax cuts that are going to promote work, going to promote saving, help us invest more and raise living standards in the future, the GST is not the tax you would go after."
-- CD Howe Institute
And Jim Davies, an economics professor at the University of Western Ontario, puts it even more succintly. Here's how he described the Conservative plan.
"Stupid, stupid, stupid, stupid."
-- Jim Davies, UWO
I could see three stupids, but when he pulls out the fourth you know he's serious. Why, even the Canadian Taxpayers Federation (well known Liberal stooges, I know) thinks raising the income tax is a bad idea (shocking, I know). The CTF wants the lower income taxes AND the GST cut! Go big or go home, I guess. Sayeth the CTF:
The Conservatives say they plan to increase the lowest income tax rate from 15 per cent to 16 per cent. Such a change will incur the wrath of taxpayers and peg Mr. Harper as a tax hiker.
I’m not sure how we could afford to do both, although it would fit in with the conservative making government small enough to drag it into the bathroom and drown it in the bathtub mantra.
I do know one thing though, and that’s I don’t want to give Stephen Harper $430.
Stephen, keep your hands out of my pocket!
