THANKS to federal Finance Minister Jim Flaherty, your wallets will be thicker and your pockets will be heavier than they have been.
The astronomical surpluses Ottawa has been raking in led the Conservative government to make deep cuts to personal income, corporate and sales taxes this week. But even though Canadians will keep more of their paycheques starting in January, the fact remains that the Conservative government missed a golden, perhaps even a once-in-a-generation opportunity, to help Canadians save a larger share of what they earn.
Instead of chipping away bit by bit at every levy -- including the Goods and Services Tax , which practically every economist will tell you is the worst tax you can possibly cut -- the federal government should have offered huge, double-digit reductions in personal and corporate income taxes while jacking up certain consumption taxes, such as the excise tax on gasoline.
This idea of a "tax shift," which has been championed by the federal Green Party for some time, would force people to modify those bad habits said to be slowly killing our planet by offering them an incentive (reduced income taxes) and a deterrent (higher fuel prices) not to do things that release more carbon into our atmosphere.
Before you dismiss it as the pie-in-the-sky ramblings of kooky environmentalists, keep in mind that its supporters include such respected figures as Don Drummond, chief economist of the Toronto-Dominion Bank, and Sir Nicholas Stern, former chief economist of the World Bank and author of a report for the British government on the global economic consequences of climate change.
This year, Canada will collect $113.5 billion in personal income taxes, $30.3 billion from the GST and another $41.5 billion in corporate taxes. Leaving the GST aside, let's say the government cut personal and corporate income taxes across the board by 20 per cent. A single person earning $35,000 would save $1,085 at tax time, while a company with $1 million in earnings would save $44,200.
These huge tax savings would surely be more noticeable than the one to two per cent decreases that have been offered to individuals and companies during the past decade.
A broad-based 20 per cent tax cut would cost the Canadian government $31 billion -- a huge loss of revenue, to be sure, but an amount that could be made up in other ways. Let's say that the government opted to triple the 10 cent per litre excise tax on gasoline to 30 cents. This would put an additional $8 billion into government coffers. Let's propose that the federal government levy a carbon tax on all natural gas, as well as electricity produced by non-renewable fuel such as coal, that utility companies would pass onto their customers. Let's also propose that the government impose a carbon tax on companies large and small based on the amount of greenhouse gases they emit.
Suddenly, Canadians are faced with a clear set of choices. If people reduce their ecological footprint by driving a smaller car, taking the bus, switching to energy-efficient appliances, etc., they get to keep more of their own money. But if they want to drive an SUV and keep the thermostat locked at 25 degrees Celsius in their 2,500-sq.-ft. house during the dead of winter, they can expect to pay a greater price for their bad environmental behaviour.
It is now, at a time when the federal government can never hope to spend every tax dollar it receives, that such a shift in tax policy should be undertaken. If a recession strikes, it will be extremely difficult for any federal government to justify taking such a bold step without worrying that its ability to provide basic services to Canadians will be compromised.
Having blown the bank on tax cuts and $10 billion worth of debt repayment, the Conservatives are unlikely to pursue such a policy now. But for the Liberals, Bloc Quebecois or New Democrats, such a policy would allow them to put their money where their mouths are on the environment.
They can tinker around with the edges of the tax system, or they can do something truly revolutionary. When these parties -- especially the Liberals, who allowed the Tory mini-budget to pass by abstaining from a confidence vote in the House of Commons -- summon the will to force an election, it will be interesting to see if they have the courage to bring forward such a bold proposal.
ctbrown7@yahoo.ca
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