Tax cut pledges are rolling out like a bad movie.
- CUPE’s 2006 election campaign page
- How CUPE members can protect public services, a HOW-TO guide for the election campaign
- Federal NDP website
Conservative leader Stephen Harper says he’ll reduce the goods and services tax (GST), a move that benefits the rich far more than the rest of us. Meanwhile, Prime Minister Paul Martin continues to pretend his tax cuts will benefit middle-income earners.
Both Harper and Martin are trying to buy your vote. Not only do their promises fail to respond to the real priorities of Canadians, but they are also deceptive. Much more of the benefits will go to those with higher incomes.
In poll after poll, Canadians have said their priorities are improving health care and other public services, such as education. But neither the Conservative and Liberal tax cut promises respond to these priorities, and neither Harper nor Martin should be trusted to keep their promises.
The Conservatives (the party that created the GST) say they will cut it immediately by 1 per cent, costing $4.5 billion a year. But implicit in Harper’s promise is that he would also cut the GST credit.
The GST credit provides over $3 billion a year to 8 million middle- and low-income Canadians. Cutting the GST credit would be regressive.
The GST was expected to raise $31.5 billion in 2005/6, according to the February 2005 Budget. But this amount excludes the $3 billion that is provided through the GST credit this year. The total gross amount that will be collected by the GST this year is closer to $35 billion.
So cutting the GST by 1 per cent would cost $5 billion rather than the $4.5 billion that Harper said it would cost. Either Harper doesn’t understand public finances, or else he is deceiving Canadians by also not revealing that he would cut the GST credit.
Analysis done by the National Anti-Poverty Organization shows that cutting the GST by 1 per cent would only provide low-income families with an average annual tax break of $143. Less than 10 per cent of the total benefits would go to low-income families. With the cut in the GST credit, Harper’s promise would be even worse for lower- and middle-income Canadians.
Martin’s tax cut plans are no better. The income tax cuts promised in the November Economic and Fiscal Update quickly disappear after 2006 for middle- and low-income earners, but they skyrocket for higher income earners. When fully phased in, the cuts will give an individual with an income of $40,000 a tax break of only $270, while someone with an income of $150,000 will get a tax cut of over $2,000. A two-earner family with an income of $60,000 would get a tax cut of only $247, while a similar family with an income of $150,000 would receive over $1,000.
Deceptive. Regressive. And expensive. Either promise would mean less money to invest in the public services that would benefit all Canadians, no matter what their income level.
Tax measures should be targeted so that they reach those who really need them and so they don’t break the bank and starve other programs. Examples of these include increasing the GST credit and increasing the Canada Child Tax Benefit.
Some have argued that Canada needs income tax cuts to spur investment and productivity. But the Liberal government provided over $100 billion in corporate and high income tax cuts over the past five years. Corporate profits have skyrocketed to record levels and the rich just keep getting richer. But investment rates have dropped and productivity has stagnated.
More of the same won’t help. Since the private sector isn’t holding up its end of the bargain, the economy needs more direct public investment in infrastructure, education and health care. These investments will do more to increase productivity and improve the economy than more tax cuts for the rich.
Some people find the idea of a tax cut attractive because they have had almost no real wage increases in the past five years, while the costs of tuition, public transit and other services have increased. Instead of a tax cut of less than $1/day, what is needed are real wage increases, starting with a $10 minimum wage, and higher quality and more accessible public services.
Deep tax cuts are not what most Canadians are looking for. Canadians instead want the government to protect the environment, rebuild our infrastructure, reduce poverty, and provide high quality and accessible education and health care.