Taxes and tax cuts

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April is tax-paying month and many low- and middle-income Canadians labouring over their tax-forms will be fuming and swearing at the governments they are compelled to endow with their hard-earned money. Filers who derive their much higher incomes from stocks and investments, on the other hand, are not upset at all. They may even be smiling, since the tax amount they have to pay--if any--is proportionately a lot less. The income tax system is riddled with loopholes that effectively let them pay as much or as little as they choose.
In the runup to Rodney MacDonald's first budget, business lobby groups are pushing for more tax cuts. The Canadian Federation of Independent Businesses (CFIB) has embarked on a campaign to improve the province’s "business climate" through tax reduction. The campaign’s message was echoed by three articles in the April 8 business section of The Chronicle Herald. In the articles, the CFIB, the Nova Scotia Chambers of Commerce, and business columnist Roger Taylor promote tax cuts as a means of supporting small businesses.
Imagine a tax cut that you only get when you buy stuff. The more you spend, the more you get from the tax cut. Skill testing question: who would benefit more from this tax cut, the poor or the rich? Well, the rich buy more stuff than the poor. So affluent people will get more cash from this tax cut then low income people will. You now understand what is wrong with the Conservatives' plan to cut the GST.
OTTAWA—A new analysis finds that high-income families will receive a disproportionate share of the benefits from the Conservatives’ tax-cut promises. According to Standing Up For Which Families? Who Benefits From the Conservative Tax Cut Promises, by Sheila Block and Ellen Russell, the 5.4% of families earning over $150,000 a year will receive 27.9% of the benefits from the Conservatives’ tax cuts modelled in the report—an average of over $2,010.
You can imagine my surprise last Thursday. "You're on the Conservative website," my friend Ellen cheerfully told me from Ottawa."Why? What are they attacking me for?" I asked."They're not attacking you. They're citing you," she gleefully announced.Sure enough, there I was. In a release titled "No credible third party accepts Liberal claim that GST cuts benefit the rich," the Conservative election campaign cited me (and a few other policy luminaries) as somehow validating Stephen Harper's claim that cutting the GST would help low-income Canadians.
Will retirees have to eat cat food if the government messes with income trusts? The financial industry would have you think so. A well-choreographed barrage of protest is depicting income trusts as essential to the retirement security of Canadians. But will seniors really be hurt if Ottawa intrudes on the sanctity of income trusts?Since they serve no real economic purpose, income trusts are a peculiar beast. They exist only because of a legal loophole that enables businesses to avoid paying corporate income tax. Here is how it works:
The Liberals were long criticized for padding their budget forecasts, to disguise the true extent of Ottawa's surpluses. But, with an election then in the offing, Finance Minister Ralph Goodale's Nov. 14 fiscal update was the most honest in years, acknowledging some $50-billion in cumulative surpluses over the next five budget cycles. That's the good news.