The GST Rollback - Consumption vs Income TaxesI've got a degree in Economics up on my wall so I supose that makes me "an economist" and according to the Liberal Party my opinion is decisive on how taxes should be cut. Thus I supose the time is right for me to now return from the blogging wilderness to chime in with my much vaunted opinion on the matter. (Quickly thereafter returning to being swamped by law school) I'll personally defer to the Milton Friedman who said "I'm in favour of cutting any tax, any time, for any reason whatsoever."
Although, that's probably Milt taking his own position to the extreme. Their is something to be said for the efficiency of consumption taxes as opposed to income taxes. I think its terribly misleading to say they're the preference of all economists. Ironically they're the preference of all free-market economists whom Liberals routinely ignore. You see most left leaning economists labeling it a "regressive" tax that "disportionately" affects the "less priveleged". Its a flat rather than progressive tax. This is why in the past both the Liberals and the NDP have proposed scrapping it. And really any reduction of a flat tax will have the greatest proportional effect at the bottom, and the larged dollar figure directed towards the top. This is always going to be the case as people don't have the same amount of money to begin with, no matter how many NDP supporters secretly pine away for an egalitarian society.
The Liberal talking point about the GST reduction affection those who spend more recieving more money in return is true. But then again this is true with any across the board tax reduction. Tax cuts return money that people already had, as opposed to increasing their prexisting store of wealth.
However, a two percent reduction in the taxes applied to your consumption will affect those who
consume a higher proportion of their income as opposed to "saving it". The rate at which people save increases with their income. Hence the less income you have, the more this tax will impact you. Furthermore, everyone consumes - not everyone pays income tax. If you want to make an argument that not everyone consumes, I supose your pitching your tax plan to a hermit. I find it dubius that they're a constituency whose vote you can really get out to begin with.
I'd be rather skeptical anytime the Liberals suddenly embrace the same economists that they
spurn on any other public policy issue. Although its ironic that perhaps the debate has been framed with the Tories taking up the leftist/social justic tax cut and the Liberals with the libertarian cut. Although arguably the entire debate falls right of center as the true lefties wouldn't cut any taxes at all.
Whether cutting the GST or Income Tax is preferably really depends on what your trying to achieve. If your attempting to increase investment, savings, and productivity - it would be more effective to lower income taxes. On the other hand if your goal is simply to remove excess tax, and return it in the most just manner knocking back the GST is as if not more effective in doing that.
From a purely moral perspective there really is a certain disingenius tone to having the Liberals lead by a silver spoon shipping magnet claiming that a Conservative tax cut is going to result what Scott Reid suggested were "the Conservatives upper class constituency who were going to spend it on luxury automobiles" or something to that effect. Perhaps that's how Paul 'Plutocrat" Martin would spend his GST reduction, on the other hand I think I and most other Canadians are likely to see the price of gas, their phone bill, their internet bill, and their cable bill drop a few bucks every month with the GST reduced as opposed to rushing out and buying a Porsche because of the 2% saving.
Its too bad that when a chance for a real debate emerges, you often find that it just as swiftly decends to ridiculous metaphors and hyperbole. That said the prospect of a Conservative victory warms the cockles of my soul, and I smile a little more at the thought of Paul Martin and Scott Reid no longer annoying me with their presence on national television. Hope springs eternal.