Sunday, June 01, 2014

Imprudent Economic Management

The Parliamentary Budget Office reported this week that "Canadians are paying Ottawa about $30 billion less this year — or a little less than $1,000 per person — due to tax changes introduced in the past decade. Dennis Howlett writes:

But here’s the thing: The annual loss of revenue due to tax cuts is actually closer to $43 billion if corporate tax cuts are counted, which the PBO report did not include. Any way you cut it, that’s a lot of money. So who benefited from these tax cuts?

More than that, the gap between the wealthy and everyone else is growing:

The top 20 per cent of income earners saved $10.9 billion, or 36 per cent of the total, while the bottom 20 per cent got $1.9 billion, or only six per cent. On a pocketbook level, the lowest 20 per cent of income earners have gained less than $500 in tax reductions, while the top 20 per cent have seen their taxes go down by almost $2,000 a year.

As for those tax cuts boosting the economy, there is little evidence of that:

What have we gotten in exchange for those tax cuts apart from a few more dollars in our pockets? The Conservative government claims that tax cuts spur consumer spending, investment and job creation. There’s very little evidence to back up this claim. While middle and lower-income Canadians may spend their extra money, the rich tend to bank most of their savings — and they got the lion’s share. Tax cuts are one of the least effective ways to stimulate the economy.

As Mark Carney said before he left for Britain, what the cuts have created is a pile of dead money. Consider what that money could have done:

What could $40 billion buy? A national child care program. A pharmacare plan. Cutting university tuition to 2009 levels. An affordable housing strategy.

When seen in context, that $43 billion a year doesn’t seem like such a bargain after all.

Contrary to Conservative spin, that's nor prudent economic management.


Lorne said...

Breaks my heart, Owen, that the barbarians have convinced so many about the benefit of tax cuts that it is considered almost subversive to question them. It is especially sad when one contemplates what could be done for everyone with that lost revenue.

Owen Gray said...

What's truly frustrating, Lorne, is that people are still buying the notion that tax cuts create jobs -- which is patently untrue.

But Tim Hudak is not letting his mind be clouded by facts.