Federal Economic Statement

[299 bloor call control.]

I just spent awhile typing this up on a facebook entry, so I don't want to type it again, so here's a copy and paste...

Utter and Complete Disgust at the Conservatives

This man angers me beyond belief, although, judging by his face, he actually looks like Gabbo, a talking puppet, so to speak, for Stephen Harper. Either way, I'm just flabbergasted by the "New Government"'s so-called tax relief measures announced yesterday.

The resemblance is striking, no?

Firstly, they are trying to look like the good guys by cutting the income tax rate for the lowest income makers -- trying. Luckily, the press has mentioned it (as a side note), but this won't stop the Conservatives for taking full credit. Though, if you remember back to their first budget, this is actually rolling back the tax INCREASE to that same bracket to the level that the LIBERALS had cut it to. Was this the plan all along? Use the poorest people in our society as political pawns?

I'll give them a little bit of credit though, increasing the personal exemption level is indeed a good thing, as is decreasing corporate taxes. But Liberal or Conservative, this is what was needed and what would have happened anyway.

Where my flabbergastness comes in is with the GST cut. Again, we're pandering to the stupidity of the electorate who will see this as a "good thing" and that the government is keeping its promises. Anybody who has taken a first year economics course will easily tell you that this is the stupidest tax cut the government should make right now, especially when the economy is generally doing very well (manufacturing aside, of course), and stimulating the retail sector any further is pointless (see all the stories about record retail profits and sales across the country). Even the country's top economists have universally agreed that a GST cut is the least productive tax move the government can make. The GST, as much as we hate it, is a great tool that we have in the country, more comes in when the economy is good and people are willing to spend. It also is a consumption tax, to keep us from being too lavish about things, and a 1% cut only will impact those who buy the biggest of all things... not a low-income household trying to buy toys or books for their children, where the savings is only pennies, pennies which we often disregard in our pocket change.

The anger, however, enters when I listened to 680News this morning. Flaherty quickly brushed off any possible assistance to Toronto in terms of the One Cent campaign of allocating 1% of the GST to us, and all other cities across Canada. He went one step further, he said not to expect any assistance of this type in this update, nor in the next federal budget. He brought up the current "$37-billion" infrastructure program that his government put in last budget and if Toronto wants money, that's where it should get it. I'm sorry, this will solve NOTHING in terms of municipal budget issues. It's all fine and dandy that we're getting money to build stuff, but where's the money to actually RUN it? The big financial crunch in our cities, as evidenced by the recent Toronto tax initiatives, is in our operating budgets, and the One Cent campaign was largely to solve this crunch. Your puny $37-billion over a thousand years for the whole frickin' country won't do ANYTHING, Mr. Flaherty.

This complete ignorance of the issue and complete political posturing can be summarized by one quote from Mr. Flatulence:

"Our job in government is to cut taxes, it's clear in Toronto, their job is to increase taxes"

How petty, how ignorant, and good luck getting more votes in the GTA next election. This is no longer just a 416 issue. The Conservative love-nest of the 905 is beginning to share Toronto's views of the need for more sustained, economy-scaled revenues for municipal coffers. Virtually every city in Canada is behind David Miller on his One Cent campaign. I really wonder when they'll actually pay attention.

 

[billonlogan]

RIP: One Cent NOW!

POLITICS: FEDERAL ECONOMIC STATEMENT

Flaherty's promise to cut GST delivers blow to Miller's one-cent campaign
JEFF GRAY
www.globeandmail.com

October 31, 2007

With his pledge to once again cut the GST in his economic statement yesterday, federal Finance Minister Jim Flaherty has delivered an apparent death blow to Mayor David Miller's campaign for a slice of the tax to be pumped into cities.

Mr. Miller's "One cent now!" campaign, launched last year and endorsed by mayors of cities across the country (as well as, more recently, Premier Dalton McGuinty) has been aimed at winning a portion of GST revenues for municipalities.

"Cutting the GST shows the government has the fiscal room to dedicate one cent of the sales tax to municipal infrastructure," Mr. Miller said in a statement yesterday. "If there's room to cut, there's most certainly room to share."

He would have preferred to see that one percentage point cut in the GST - worth about $5.5-billion - handed instead to cities to maintain infrastructure and invest in public transit.

The mayor's office estimated that the idea would have meant an extra $400-million a year for Toronto, which still faces a projected budget shortfall next year. Without a slice of the GST, he warned, building the city's proposed light-rail lines and fighting climate change will be "increasingly difficult."

The "One cent now!" campaign never looked likely to convince Mr. Flaherty, who has a reputation as a fiscal conservative. He has repeatedly panned the idea and clearly signalled his interest in delivering tax cuts to individuals, not tax revenue to mayors.

Mr. Miller and the Federation of Canadian Municipalities, however, argue that the federal government is wrong to sit on a ballooning $14-billion surplus, even as cities across the country, where most of that wealth is created, are left with roads and bridges in disrepair and a need for new public transit projects to fight traffic congestion and greenhouse-gas emissions.

Mr. Miller's campaign originally targeted Mr. McGuinty's provincial sales tax as well, but it dropped that idea as the campaign became national in scope. It remained an open question yesterday whether more pressure would now fall on Queen's Park to hand some of the proceeds of sales taxes to Mr. Miller and the province's cities.

The campaign has not only received a cool reception from Mr. Flaherty. Mr. Miller's critics on city council point out that it was never put to a vote, yet it has used $150,000 in city funds. Also, the Royal Canadian Mint has protested against the use of the image of the penny without its permission, a move the mint says should cost the city $47,680.

One tiny sweetener in Mr. Flaherty's GST cut for Mr. Miller is this: Since the GST is applied on the purchases of new houses and condominiums (but not resale homes), the one-percentage-point cut will lessen the blow of the mayor's recently passed and controversial land-transfer tax, which is assessed as a sliding scale up to 2 per cent.

Plus, Mr. Flaherty said the GST rebate for new homes, available for those worth less than $450,000, will be maintained at the current rate.

'Mr. Miller's campaign originally targeted Mr. McGuinty's provincial sales tax as well'

Miller let McGuinty off the hook on this one. The 'One Cent Now!' was a long shot at best. I found Miller far too quiet during the provincial election even though Council voted to defer the new taxes to make this an issue. Another wasted opportunity and scarce taxpayers money.

 

[299 bloor call control.]

From The Montreal Gazette:

Good politics sometimes makes bad policy
GST cut will go over well with Canadians, but lower income tax is better idea
L. IAN MACDONALD
The Gazette
Wednesday, October 31, 2007

There is a saying that good policy makes bad politics. Well, sometimes good politics makes bad policy.

Consider yesterday's cut to the GST, fulfilling a Tory campaign promise to reduce it from seven per cent to six per cent and finally to five per cent.

The cost to the treasury, $5 billion, is easily affordable to a government that's awash in cash, and looking at a $15-billion surplus, with plenty of money left over for tax cuts in the 2008 budget.

But there was no need to rush implementation of the second stage, since the Conservatives promised to complete the GST cut within five years, not two.

The second GST cut was itself part of a fall economic statement that was moved up at least three weeks from the normal date at the end of November. And since Jim Flaherty couldn't get all-party consent to make the statement in the House, he made it elsewhere after markets closed yesterday.

Not that it would have moved markets. And not that it was exactly a well-kept secret. The Conservatives have learned from Paul Martin's Liberal reign at finance that when good news is leaked it becomes a two-day story.

Why the rush? Well, in getting out good news yesterday, Flaherty pre-empted the first anniversary of his trick-or-treat announcement a year ago on Halloween, when he broke a Conservative promise to protect the favoured tax treatment of income trusts. Good news trumps bad news.

Then, the Conservatives are giving the opposition one more opportunity to defeat the minority government, and to bring it down over a tax cut that will put money in the pockets of every Canadian consumer.

The GST cut comes on Jan. 1 just after the Christmas shopping season. Ho-ho-ho.

Who can be against that?

Well, the Liberals and the NDP, to name two opposition parties. And the Bloc, which would vote with them to force a December election.

The NDP wants new investments, read, new program spending, not tax cuts.

The Liberals are opposed to a cut in the GST. Stéphane Dion said so just the other day. He favours personal income-tax cuts and corporate tax cuts. They're coming, too, in the budget next February, but that's another story.

How's that? The Liberals are the party that ferociously opposed the GST when the Mulroney government brought it in back in 1990. Remember their noisemakers in the Senate? The Liberals are the party whose former leader, Jean Chrétien, once pledged to "axe the tax" and then used it to help balance the budget in 1997.

And now Dion opposes the GST cut because most economists think it's a bad idea. They're not wrong about that, and neither is he.

For one thing, an economy that doesn't need any more stimulation is about to get some. For another, personal and corporate tax cuts lead to more investments rather than more spending. Economists know this. Stephen Harper, who has a master's degree in economics, also knows it. But in the faculty of arts, economics is down the hall from political science, and this play is pure politics.

At the end of the day, Dion might oppose the GST cut, but he's unlikely to vote against it. Everyone knows he wants to avoid an election. The only question is at what cost to his own dignity. He has already backed down in the game of chicken on the Throne Speech. Now it's about to happen again on a tax cut, a treasury item that's clearly a question of confidence.

And if Flaherty is trying on a Santa Claus suit, Dion will be cast as the Grinch Who Stole Christmas.

The very virtue of the GST - its transparency as a replacement tax and visibility as a consumer tax - is what has always annoyed Canadians. But as a visible tax, you can also see it shrinking.

For every $200 DVD player, Canadians will now save another $2. For every $1,000 fridge, they will now save another $10. For every $30,000 car, they will save another $300. For every $300,000 home, they will now save another $3,000. As Yogi Berra famously said, you get cash, and it's as good as money.

So, truth-or-dare time for the Liberals again. In voting against the GST cut and yesterday's reductions in corporate and personal taxes, they would trigger an unwanted election. In abstaining again, they would trigger a chicken sound bite. Cluck, cluck, cluck.

As for the real tax cuts, more to come in the budget.

 

[299 bloor call control.]

Here's The Star's interpretation of Flaherty... heh:

 

[Blixtein]

For now at least, Dion seems to be a non-factor on the Canadian political scene. QUOTE]

Understatement of the year. The guy has held the job for almost a year now but has achieved absolutely nothing. If anything, he's strengthened Harper to the point where the Liberals are becoming vastly irrelevant.

 

[adma]

Funny, I usually think of him more in terms of Costello than Gabbo

...and with triplet sons named Who, What, and I Don't Know to boot

 

[afransen]

For now at least, Dion seems to be a non-factor on the Canadian political scene. QUOTE]

Understatement of the year. The guy has held the job for almost a year now but has achieved absolutely nothing. If anything, he's strengthened Harper to the point where the Liberals are becoming vastly irrelevant.

Well, isn't it an indictment of Harper that even given an opponent like Dion, he still only has a 6% point lead?

 

[Hydrogen]

And now that Harper has let go his money shot, he does not have anything left to buy votes with. If the tax cut does not resonate well with voters, what does he have left?

 

[afransen]

I think Harper will keep people's attention with low cost issues. Andrew Coyne picked up on a brief mention in the Throne Speech of his intention to use the federal gov't's power over internal trade to crush the non-tariff barriers between provinces at the moment, probably starting with things like professional credential recognition, and securities regulators, possibly moving up to the bigger fish (probably stopping short of challenging the hydro monopolies).

 

[Blixtein]

If Dion is only six points behind Harper why is he so scared of an election?

 

[AlvinofDiaspar]

Hydrogen:

And now that Harper has let go his money shot, he does not have anything left to buy votes with. If the tax cut does not resonate well with voters, what does he have left?

His charming, personable self?

Blix:

Given the 6 point difference, an election that is the direct result of the Liberals not supporting the Throne Speech will probably not be viewed in a very positive light by the electorate, who at this moment does not appear to want an election.

AoD

 

[gibsonm]

Wasted Opportunities

Funny, none of this tax-cut business will be remembered decades from now. Who will look back on this era three decades from now at the great federal vision of tax-cuts? We'll be looking at the same few old subway lines and slow inter-city trains from the 20th century and saying, Yeah, the country was rich but no real infrastructure was added or updated. The treasury was spent and there's nothing to show for it. Really, a country isn't built on tax cuts. So what, we've had them and we'll get more of them. What's it all for?

There are many things that individuals and private business can't or won't finance that are good for the country. It takes vast amounts of public money to create the environmentally sustainable, efficient infrastructure that will support the more productive economy and high quality of life we all want. How can any thinking politician believe that we can fundamentally improve the economy without massive investment in rapid transit? Sitting in guzzlers on congested highways in ugly sprawling development is no way to live and won't advance our society.

 

[Hydrogen]

His charming, personable self?

lol!


Whatever happened to that bitter, ideological Steve of the Reform Party days?



He's so...

bland.

 

[adma]

Pull his hair, and you'll find a Lego Man stud up there

 

[JasonParis]

The provincial Liberals have just won a solid second majority. I wish McGuinty would just bite the bullet and raise the PST 1% the same day the GST is reduced by 1%. He could do this by telling the people of a "crisis in our infrastructure and cities" and by directing that 1% straight to Ontario municipalities (and not General Revenue). Also, the fact that an increase in the PST will be "revenue neutral" for consumers should make it more pallatable. Maybe make a few more PST exemptions (food for example?) as well.

Anyway, Ian Urquhart's thoughts...

Mini-budget a wasted opportunity
Nov 02, 2007
Ian Urquhart

The mini-budget delivered this week by federal Finance Minister Jim Flaherty represents a major lost opportunity to provide much-needed assistance to Ontario's beleaguered manufacturers and municipalities.

Contained in the mini-budget was another cut of one percentage point in the GST. The move will save the average consumer a few hundred bucks, but it will do virtually nothing for the well-being of the country or the economy.

There was an alternative proposal, suggested in recent months by various economists: Use the GST cut as an incentive to get the provinces to "harmonize" their sales taxes with the GST.

That is, instead of cutting the GST and leaving it at that, Ottawa could have transferred the point (worth approximately $5.5 billion a year) to the provinces, but only on the condition that they agreed to harmonize.

Four provinces – Quebec, Nova Scotia, New Brunswick and Newfoundland – have already harmonized.

But the rest, including Ontario, are reluctant to do so for political reasons, as the GST is applied to various items not subject to provincial sales taxes.

These include new houses, heating fuel, children's clothing, books and feminine hygiene products.

Harmonization would mean extending the provincial sales tax to these items – and the predictable political backlash is enough to make any premier blanch. Premier Dalton McGuinty considered it in his first term, for example, but backed off when Ottawa (then under Liberal rule) wouldn't agree to exempt some of these items.

However, a $5.5 billion transfer of tax room to the provinces – of which Ontario's share would be about $2.2 billion – would likely offset any provincial misgivings about harmonization.

With that money, the Ontario government could provide significant assistance to cash-strapped municipalities and still have some left over to mollify those consumers who suddenly found themselves paying higher taxes on previously exempt goods.

Meanwhile, Ontario's struggling manufacturers would benefit enormously from harmonization as the provincial sales tax would be removed from their purchases of machinery, equipment and other inputs (which are not subject to the GST).

But Flaherty and the federal government evidently decided there would not be enough political credit for them under this scenario and opted instead to make a unilateral cut in the GST.

To be sure, Flaherty said in the mini-budget that Ottawa is still "willing to work" with the provinces to achieve harmonization. But with no incentive in the form of a transfer of tax room, it is unlikely to happen.

There have been suggestions elsewhere that nothing is stopping McGuinty and his government from occupying the tax room created by the GST cut by independently raising the provincial taxes in next spring's Ontario budget.

But McGuinty, still feeling burned by the public reaction to his imposition of a health tax in 2004, is highly unlikely to follow that advice – especially given that he promised (again) in the fall election campaign not to raise taxes.

If a provincial sales tax hike were part of a package that included a GST cut and could be sold as revenue neutral, that's one thing. But on a provincial sales tax hike on its own, without the protective packaging of a corresponding GST cut, he would be vulnerable to attack from right and left.

So an opportunity has been lost, and Ontario's manufacturers and municipalities are the worse for it.

-------------------------------------------------------
Ian Urquhart's provincial affairs column appears Monday, Wednesday and Friday. Email: iurquha@thestar.ca