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February 17, 2006 Both major parties, the Liberals and Conservatives talked tax relief during the election campaign. The Liberal tax plan focused on reducing personal income taxes while the Conservatives pledged to cut the GST. Both plans are beneficial to taxpaying Canadians. In November 2005, then-finance minister Ralph Goodale introduced what was nothing short of a mini-budget. He increased the basic personal exemption (BPE) by $500 (from $8,148 to $8,648), and lowered the bottom personal income tax bracket from 16 per cent to 15 per cent. Both measures kicked in retroactively to January 1st, 2005. Together, they will save all taxpayers earning $35,595 or more $323 a year, starting in 2005. (The BPE change results in a $75 savings and the lower tax rate translates into a $248 savings). The Conservatives, meanwhile, promised to reduce the GST from its current 7 percent, to 6 percent immediately, and to 5 percent over five years. This measure will right away put $4.5-billion back in the pockets of all Canadians. Of 23-million tax filers in Canada, only 15.5-million actually pay income taxes, so a reduction in the GST will help those who make less than the basic personal exemption. Additionally, the Conservatives announced various targeted tax breaks benefiting trades-people, families, small business owners, seniors, etc. All things considered, both plans give money back to Canadians and any reduction in the high tax burden faced by taxpayers is long overdue. Yet, to finance their tax cut package (highlighted by the GST reduction) the Conservatives have said they'll raise the bottom income tax rate back up to 16 percent from 15 percent. They'll also cancel the $500 increase in the BPE. This increase would kick in for 2006 and not affect the income tax cut granted for 2005. Nonetheless, should Mr. Harper go this route, he will correctly be labeled a tax-hiker, and rightfully incur the wrath of taxpayers. While cutting the GST is a politically popular move, it does not need to come at the expense of increasing personal income taxes. There is ample room in the federal coffers to afford both measures. For the last several years, Ottawa has been swimming in excess money.
Today's massive surpluses are the result of one thing: A structural over-taxation levied on Canadians by the federal government. Since Ottawa's books were first balanced in 1997/98, the average annual surplus has been $7.8-billion. According to independent forecasts contained in the economic update, Ottawa's cumulative surpluses - including the annual $3-billion contingency reserve - will total $72.5-billion over the next six years. Conclusion: As government coffers have overflowed, Canadians have suffered from high taxes and income stagnation. Studies have shown that over the past twenty-five years after-tax household incomes have increased only 3.8 per cent while federal government revenues have ballooned 372 per cent. To take away the lifeline thrown to taxpayers only a few short months ago, would be a disastrous first step for the new government and a poke in the eye to middle-income Canadians. Adam Taylor is research director for the Canadian Taxpayers Federation in Ottawa. John Williamson is away for the month of February and will return to this column in March. |
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Don't condemn Harper for playing by the old rules. By Link Byfield Week one for the new government and all hell breaks loose. Many people are angry -- even seething -- about Harper's cabinet picks, especially Vancouver turncoat David Emerson and new Montreal senator Michael Fortier. I share their concerns. But what can be done? According to our Constitution, Emerson serves the people of Vancouver Kingsway as their representative in Parliament. How he does it -- including which party he's in -- is between him and them. It's no one else's business. Some people are demanding there be a law barring MPs from joining another party. Why? Parties and leaders are already too strong. This would just make individual MPs even weaker, and voters with them. Some are saying there should always be a mandatory by-election. Why? When 66 Alliance MPs and 12 Progressive Conservatives joined a new party in 2004, should there have been 78 by-elections? The only sensible solution is a law that gives voters a realistic right of recall when their MP leaves the party they elected him to serve, or gives other reasons of clear cause -- stealing rings, etc. But let's not forget, they may not care. They may even approve, as they plainly did in Belinda Stronach's riding of Newmarket-Aurora. Likewise, let's not spend too much time fuming about Harper appointing a new Conservative senator, Michael Fortier. Yes, it should concern us that Harper chose expediency over principle even before he took his oath of office. But it should concern us far more that the Conservatives are talking about making Senate elections an entirely federal affair, consisting of federal party candidates running in national elections. This would create a Senate in many ways even worse than the one we've got. The Constitution says that senators represent provinces. Not national parties, national leaders and national governments. Provinces. True, the Senate is a federal House. But provinces make up the federation. For this reason, it's crucial that Senate candidates be elected in provincial elections using provincial parties and election rules -- as they are in Alberta. Of course, the last thing a strong-minded leader like Harper may want (any more than Chretien, Trudeau, Mulroney or Martin would have wanted) is an elected Upper House over which he has no control. He can intimidate his own MPs into supporting bad policy. He signs their nomination papers. But he couldn't intimidate provincially-elected senators. They wouldn't answer to him. Instead he would have to actually persuade provincially-elected senators that his legislation does not harm provincial interests and is good for the country. "You'd have gridlock!" protest the defenders of the present elected dictatorship. "Nothing would get through." But they never explain how independent senates haven't prevented the U.S. and Switzerland from succeeding better than we have. In neither does the goverment have political control. Stephen Harper didn't invent the rules he's required to play by for now. I suggest we cut him some slack, and focus instead on how he intends to change those rules when he gets his chance. With such a weak minority, his promised democratic reforms may have to wait until he gets a majority, if he can, in another year or two. This would actually be good. Few Canadians have given democratic reform the careful thought it requires. During the last long decade of democratic paralysis under the Liberals, there was no point. - Link Byfield Link Byfield is chairman of the Edmonton-based Citizens Centre for Freedom and Democracy, and an Alberta senator-elect.
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