I am all for reducing the tax burden. Who wouldn’t be? But let’s put the Conservative government’s claims for their cuts into perspective.
The GST cut benefits those who earn and spend the most: it will save you 20 cents on a Timex, and $100 on a Rolex. For all the hype that came with it during the election campaign and ever since, two pennies on a cup of coffee will not be liberating anyone into an early retirement. Every serious economist in the country agrees that it is poor public policy and a misuse of about $4.5 billion in federal fiscal flexibility every year. To improve disposable income for “hard working” Canadians and help build greater productivity, the first target for tax reduction should be income taxes, not the GST consumption tax.
Here, again, let’s separate the spin of the Conservative government and not be fooled by clever politics over policy. It was the Liberal government that lowered the lowest income tax bracket to 15 from 16 per cent and raised by $500 the amount every Canadian can earn tax free in 2005. Those who filled out their tax forms this year noticed both of these Liberal changes immediately. The Conservative budget actually raises the lowest income tax rate up to 15.5 per cent and lowers the basic personal exemption amount by $400, beginning July 1st.
Let’s be clear: taxes for the lowest income Canadians are going up, not down. The basic personal exemption will decrease $200 in 2006, translating into approximated 150,000 people being put back on the tax rolls this year. This means a tax hike of about $31 per taxpayer for 2006, increasing to $62 in 2007.
Almost half of Canadian families earn less than $40,000, yet they will receive only 20 per cent of the benefit of the Conservative tax cuts, an average of just over $163. On the other hand, the 5 per cent of families earning over $150,000 a year will receiver nearly 30 per cent of the benefits – adding up to an average of over $2,010 in savings each year.
The $1,000 Canada Employment Tax Credit does not represent $1,000 in the pockets of taxpayers. Tax credits are multiplied by the lowest bracket rate, which means this measure will net $155 per year to all taxpayers. This credit is almost completely canceled out by the income tax hike. Again, this tax measure sounds good until you look at the real savings.
The Universal Child Care Benefit provides the clearest example of how this government’s plan is not “family friendly” at all. $100 a month hardly provides a universal solution. Just what is “universal” about it? How do parents with children over the age of six (who still need care when parents are working) benefit? And, what about the families that need help the most? A new national study reported in the Toronto Star yesterday, reports that Canada’s neediest children in Canadian families have the toughest time getting regulated daycare. Throwing $100 to families for each child under the age of six to spend as they please clearly does nothing to address the most needy of our country, and again, represents a short-sighted and politically-motivated approach. The study goes on to reports that inadequate and uneven levels of child-care service will continue if the federal-provincial child care funding agreements are cancelled, as planned. It is difficult to see how $100 a month can even be proposed as a means to support child care choices, when $100 will not cover child care expenses for a week for one child, let alone for a year.
In summary, this government’s legislative initiatives do not put money back into the pockets of all Niagara West-Glanbrook residents, “hard working” Canadians. In fact, it is hard to imagine a set of tax measures more slanted to wealthy taxpayers. There is wide consensus that the Conservatives’ tax plan will largely benefit higher income families over those who need the most help – low- and middle-income Canadians.