Battle of the Tax Plans!

In the opening stretch of the federal election campaign, it looks like tax cuts, or the lack thereof, are being set up as one of the big issues.

In the blue corner, we have Stephen "No Charisma thanks, I'm an Economist" Harper, weighing in at about 99 MPs, maybe less a few right now. He's offering to cut the GST from 7 to 5 per cent across the board. This would, of course, be good for the poor. At least a little bit. Consumption taxes hurt people with less money far more than they hurt upper income earners. When I was making less than $30,000 a year, I still had to fill up the gas tank of my car, paying that seven per cent on every litre. The guy next to me at the pumps, filling his $100,000 pick up with dual rear wheels and a hemi, had to pay the same, of course. But it hurts less when it comes out of a $150,000 annual salary.

In the red corner we have Paul "Foreign Registered Companies" Martin, offering cuts in income tax, particularly in the form of a hike in the basic exemption rate. Most of the Liberal tax cuts over the past six or seven years have been targetted at (for lack of a better term) the middle-middle classes and the upper middle classes. This one is aimed at the lower middle classes - also known as the people who haven't seen much good come from the Liberal government as it cut the hell out of housing and social programs over the past decade.

In the orange corner (oh, how they longed to get Red as their colour!) we have Jack "I Have a Nifty Moustache" Layton and his plan, which is: no tax cuts. This is probably the hardest to sell, but he's proposing to dump that money back into health care and the above-mentioned slashed social and housing programs.

So which one is actually the best plan for Canada, keeping in mind that I'd really rather see the entire economy overhauled for the benefit of the poor.

Harper's plan seems pretty good at first, because the GST is a regressive tax. But poor Canadians who file income tax, the working poor, already get GST rebate cheques four times a year. So there's already some built in tax relief for the lowest levels of society there, leaving out the homeless. The Liberals are yelling about how their plan is better because you get the money back whether you spend money or not, which isnt' exactly the point. Anyone who works has to spend money on basic goods, many of which are taxed under the GST.

The Liberal plan is slightly better. Of course, they've added in a package of corporate tax cuts as well, which the NDP forced them to drop during the last session and switch to spending the money on social programs.

If I were an economist, I could probably work out which plan would leave the "average Canadian" with more money in his/her pocket at the end of the year. But I favour the Liberal over the Conservative plan slightly because it isn't designed to directly encourage spending. There's a psychological element at work here. If things are ever so slightly cheaper (and two per cent isn't much of a savings) you hardly notice, and live your life much as before. If you get a nice hefty rebate on your taxes next year, and you pay less in the next year, you can consider what to do with the lump of money you suddenly have. Save or spend, whichever you like. And Canadians really need to save more money. Hopefully some would choose that.

However, I ultimately go with Jack Layton's plan, in the short term. Barely. Tax relief for the poorest working Canadians is something the NDP should seriously consider for the future. But for now, there's a hell of a lot that needs to be done on the social front. My home town, of barely more than 115,000 people, has seen the number of homeless jump from about 17 to 54 in the last three years. And that's just the official numbers. That's directly linked to cuts in social services, housing and welfare. For years, the provincial and federal governments have skewed the economy to benefit the biggest mass of voters, the middle aged home owners of the middle and upper-middle classes. They've done very well. The economy is roaring along. Unemployment is very low.

Imagine what they could do for the poorest, if they tried?