Tax cuts are good.
But, predictably, not everyone is happy with the ones just announced by the Tories. Naturally the socialists see no good in them at all - it’s all lost revenue and breaks for the rich and their evil corporations. Stéphane (the idiot) Dion muses about reversing the GST cuts. Though some economists do think that GST cuts are a mistake. Other, more sensible ones, like William Watson are more upbeat, concluding: "Keep it coming, Mr. Flaherty."
Not being an economist I don’t really follow the anti-GST-cut arguments. And even though he’s for the cut William Watson says: "cutting the GST may tilt people unproductively toward consumption". That’s one of the things I don’t get. If people tilt towards consumption don’t the producers have to ramp up production accordingly. Won’t increased production mean more jobs in the manufacturing, distribution and retailing sectors. Won’t increased production mean more profits to be re-invested in production or elsewhere. So, just how is more consumption "unproductive"?
Whatever. Mr. Watson’s column also hits on one of my pet peeves - the Canadian propensity for self-congratulation: "...the Economic Statement: Page 1: "Canada is the greatest country in the world." They said this in the Throne Speech too." It’s meaningless 
jingoism that reminds me of the new BC license plate motto: "The Best Place on Earth", which is embarrassingly meaningless jingoism. It ought to play really well on trips outside the province. As Watson observes everybody thinks they live in the best place, for one reason or another, otherwise they’d move.
"So, just how is more consumption 'unproductive'?"
ReplyDeleteI am not an expert by any stretch of the imagination, but I will take a stab at this one. In crease consumption will, as you note increase demand for products, but it will not increase the amount that people save. That has to be taken into account too. People don't save enough for their retirement.
And a consumption tax is viewed as better -- at least somewhat. An Income tax makes people less likely to work hard, so productivity takes a hit. Of course, you cannot simply replace all income taxes with consumption taxes and not expect the underground economy to flourish.
By the way, after amalgamation, my city changed its name to Greater Sudbury. I and most others still call it Sudbury though.
hmm I thought the lettering on the new plates was a dark blue, which I only noticed since it was a pain in the ass to see with the darker background.....only complaining cause reading plates is part of my job. thank god Im in Alberta with our properly contrasted plates.
ReplyDeleteJohn, I can see your point on “productivity” as a measure of output per worker rather than “production” as an absolute. Though Watson did say “unproductive[ly]” I suppose “productivity” was what he had in mind.
ReplyDeleteThere are probably lots of good statistics to prove that an income tax cut encourages savings more than a GST cut. However when I buy my new gas-guzzling SUV next spring the 2% GST cut will result in about $1200 less being withdrawn from my investments. That is, it will remain invested not spent on more stuff — until I buy my new house when the $15,000 GST savings (offsetting the $15,000 BC land transfer tax grab) will remain invested. Similarly ........
Anyway, I’m in favour of all measures that keep my money out of government hands. What we really need is for the nanny-state to begin shrinking instead of growing. Then tax cuts can really begin in earnest.
“Greater Sudbury” - hmm, that does sound just a little ostentatious - something like renaming my old stomping grounds “Greater North Bay”.
Manuel, I kind of like the colour scheme on our new plates. But a sensible motto (like Alberta’s) seems to be too much to ask for.