As we begin to move out of the holiday season and draw closer to the return of Parliament and the unveiling of the budget that will decide the face of this Conservative government, we'll begin to see more speculation, and planned leaks and trial-balloons, about what may be contained therein.
Just today I noted four different media stories, including one with comments from finance minister Jim Flaherty himself, pushing tax cuts, including further corporate tax cuts, as the appropriate stimulus for the next budget.
A piece in the Globe floats a “corporate tax holiday” for a year. Just let all corporations take a year off paying taxes. How much will this cost us? They can't say, but assure us it's not that much. Less than $40 billion to be sure.
Over in the National Post, they claim the pressure for corporate tax cuts is rising. OK. To support this they quote one source, the president of the Canadian Taxpayers Federation. A guy with his finger on the pulse, to be sure. Despite already substantial corporate tax cuts on the books, he wants more, and now.
A CP wire piece laments the lack of personal tax cuts from past budgets coming into effect this week. With increases in payroll taxes, most Canadians will be a tad worse off, tax wise. Unless they have the money to put into tax-free savings accounts, that is.
And finally, in another CP piece, Flaherty hints tax cuts may be on the way in the upcoming budget, as a way of boosting consumer confidence:
``There are a couple of ways to stimulate the economy. One is spending on the infrastructure side and other ways, and tax reductions _ leaving more money in people's pockets _ is also stimulus to the economy,'' Flaherty told reporters at a news conference.
``We've been reviewing other (tax) options,'' he added.
With the Conservatives having strangled government revenues over the past few years as part of their dogmatic quest to reduce the size and capacity of the federal government, the fact is it lacks the resources for more than minor tweaking of the tax system without massive deficits that would be economically unacceptable and too difficult to climb out of when the economy rebounds.
And besides, I'm not convinced that tax cuts, either corporate or personal, will do much of anything to provide stimulus or meet Flaherty's stated goal of improving consumer confidence.
Times are tough. Canadians are concerned about their jobs, and are cutting back discretionary spending and saving more in case they get into trouble. This, of course, has a trickle-down effect throughout the economy. Although, my delaying buying that beautiful 40” LCD HD TV I've been coveting probably effects the Japanese economy more than ours. or maybe the South Korean economy, I'm undecided on brand.
Nevertheless, it's a problem. But is putting, say, an extra $100 in my pocket through tax cuts going to make me more likely to pull the trigger and buy that TV? No. I'll likely save the $100, because a) it's not that much money, and b) my underlying concerns remain. And as for corporate tax cuts, the fact is substantial cuts that will give us extremely competitive rates are already on the books.
The way to increase consumer confidence is to increase our confidence we'll still have jobs in six months. Little tax cuts won't do that. Instead of sending everyone $100, pooling that money and putting it to work building infrastructure is a far more sensible policy. First of all, it creates jobs to build things like roads and bridges and subways. Good-paying jobs that will put money back into the economy, and return tax revenue. It will also create lasting infrastructure that will increase our economic competitiveness, for sound infrastructure is one of the cornerstones of a strong economy.
Minor tax cuts would be an expensive flash in the pan that would simply be the Conservatives pandering to their base, and trying to put the opposition parties into a difficult position by making them either support bad policy or vote against tax cuts. This is the same kind of political maneuvering at the expense of good public policy that got Harper in trouble with his economic statement. While this would be much more of a finesse-play than cutting public party funding was, it would still prove Harper has learned little except how to be a better snake. Some minor tax tweaks would be fine, but in my view the bulk of the stimulus in the next budget must be directed to infrastructure spending.
Going into a large deficit to cut taxes doesn't make sense, unless you plan to raise taxes to get back out. And who is really going to propose that? They'll just say we won't have to raise taxes, don't worry about it, enjoy your lollipop, it'll be fine. But it won't. If we're agreed on the need for a deficit budget, let's not be stupid about it.
This is an opportunity to invest in our future. Let's not waste it for trickle-down ideology. Recommend this Post on Progressive Bloggers