Friday, March 18, 2011

Pushing sales taxes

Yesterday, the Fin Post published the authors' (Dahlby's and Ferede's) summary of their recent CD Howe Report which concludes that:
"... we should be taxing consumption spending rather than income."
Today, William Watson praises their report suggesting:

"... a special forces team ... kidnap the country’s finance ministers, lock them up in a mountain hideaway and not let them out again until they proved by written or oral examination that they understood the message ..."
And highlights Ontario and other Laffer-ing-stock provinces (the majority):
Besides Ontario, the other guilty parties — “bonehead provinces” would be an equally apt term — were Saskatchewan, Nova Scotia and P.E.I. If they had reduced corporate tax rates, they would have made more corporate tax revenue.

It gets better — or worse, depending how you look at it. Even in those provinces that weren’t on the wrong side of the Laffer curve, the cost of raising an extra dollar of tax revenue using corporate taxes was ridiculously high. In Alberta, it was $40.83.
Then there's the feds:
If you’re not already depressed enough, consider this: The federal government subsidizes all this inefficiency by compensating the provinces for the loss in tax capacity that their own fool taxes bring about. Even when the marginal economic cost of a tax is sky-high, provinces may not actually suffer very much, at least revenue-wise, as a result. Equalization bails them out.
Anyway, the bottom line - corporate taxes are worst, personal taxes next worse and consumption taxes the least harmful. All very interesting and enlightening. And I might be in favour of higher sales taxes if personal and corporate taxes were reduced accordingly. Well, that and if the governments were chopped in size and spending and equalization killed. But what are the odds of any of that happening?


Xanthippa said...

I still maintain the only reasonable taxes are voluntary ones: it is the only way to keep the government accountable and...

... when someone can legally use force to get your money, they are not your servant, they are your master (at best).

As to whether people would pay what they believe is their moral obligation: when is the last time you did not tip at a restaurant, even though you received good service?

JR said...

I wonder - have voluntary taxes ever been tried, anywhere - successfully or otherwise? It seems a lot more complicated than restaurant tipping where you give an immediate reward to someone who personally supplied a service. With government, services are supplied (or not) by mostly faceless, nameless bureaucrats and workers.

Also, ideology and politics would get in the way. For instance, how many lefties would voluntarily cough up money to pay for defence capabilities and military ops?