His Waterloo

The chattering classes are praising Stephen Harper's political smarts. He has set the agenda for the next election, they say, and he has delivered  a budget that the opposition parties can't fight. But Scott Clark and Peter DeVries disagree. Harper's budget, they write, is too clever by half:

The pundits are letting their cynicism blind them to two important facts — that this budget is based on fantasy math, and that not all tax cuts are equal. We covered off the first point in our last piece. Mr. Oliver is basing his ‘balanced’ budget on asset sales and extremely optimistic economic and revenue forecasts; his government is also indulging itself in many spending promises that aren’t due to take effect for years. The media has swallowed the government’s budget message largely without criticism, but let’s be clear: Much of what Mr. Oliver is promising may never happen, no matter who wins the election.

But, more importantly, if the election is to be about tax cuts, there are much better ways to cut taxes and create economic growth. If the opposition parties supported restoring the GST to its previous level, all kinds of things are possible:

Starting with the GST, the opposition parties could then eliminate income-splitting for high-income households — a costly sop to the rich that does nothing for the average taxpayer or for economic growth — and save another $2 billion for broad-based tax relief. Eliminating the increase in the Tax-Free Savings Account limit would bring in another $1 billion; overturning the many petty, unfair and unnecessary “special” tax breaks introduced by the Conservatives would net another $1.5 billion.

Add it all up and you’re looking at about $18.5 billion in revenues that can be deployed for broad-based tax relief — not just tax gifts for demographics the government is hoping will help it to another term in office. This would be tax relief for everyone — not just the rich. It would, in fact, be the biggest income tax cut for middle-income families in Canadian history. The campaign speeches write themselves.

Of course, the Harperites would call such a plan a tax hike. However:

Here they’d have the facts against them — and they’d be fighting against a political message that’s appealing and easy to deliver. The overall tax burden wouldn’t rise by one thin dime. Neither would the debt or deficit. The plan simply would change the tax mix: much lower income tax revenues, higher GST revenues — a mere $2 for every $100 spent. Broad-based tax relief for all, instead of costly gifts for the already-comfortable.

In short, the opposition could argue that they are better economists than Harper. The budget could be his Waterloo.