Tax consumption

I have already received two emails this morning aghast at my notion of increasing the HST by 4 points.   Think about this for a minute.  I am not calling for a 4 point increase in the HST and that’s it.  I am calling for an equal level of decrease in personal income tax.   The average person, for example, gets a $3,000 cut in personal income tax and a $3,000 increase in HST paid.  Of course, there would need to be safeguards for lower income folks.

I just think that taxing consumption makes more sense than taxing income, profits, savings, etc.   Sure the retail industry would grumble but with all due respect retail is the lowest value add of just about any industry.   We need to limit taxation on production (by production I mean manufacturing but also services – all activities that are producing something of value that is sold here and abroad) and tax consumption (on products and services mostly produced elsewhere – the value is being generated elsewhere).

I realize that my idea was not practical and no government would ever implement it but I have long felt that you can’t get to any fundamental change in New Brunswick’s economic performance through incrementalism.  Slight changes here and there aren’t going to give us a breakthrough.

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11 Responses to Tax consumption

  1. mikel says:

    Canadian media virtually NEVER covers policy. It would have been nice if you’d been saying this stuff during the last federal election when a major political party was also doing it, or when the provincial liberals first talked about it years ago, however, this is an example of where blogging can help out because Canadians simply never see the options. Most of europe has been doing this for years, interestingly enough I’ve talked to a lot of people who just instinctively seem to admit that europe is doing a lot more things right than Canada.

    However, its hard to get people to wrap their heads around the idea that paying more for stuff can ever be a good thing.

    I’d be interested in knowing how many of those 40,000 companies are owned by Irving and McCain. It certainly is no surprise the media talks like this.

  2. mikel says:

    My point was, good blog post:)

  3. Anonymous says:

    David, you didn’t mention one very important thing: there is plenty of evidence that less than half of tax cuts go to consumption (I believe that it was only about 30% in the U.S. after the last Bush tax cuts). The bulk of it goes to savings – and this share can only increase in times of uncertainty about the future.

  4. Anonymous says:

    (to avoid any kind of confusion, I meant personal income tax cuts)

  5. There is irresistable political benefit from cutting taxes – even small cuts. Very few people will criticize tax cuts.

  6. Anonymous says:

    So this would cut into the amount of money a low income earner, which is the majority of NBer’s, would have to spend on food and heat? You been talking to mckenna?

  7. Independent says:

    @Anonymous

    The low-income person would be paying no income tax, which would make up for the increase in consumption tax.

  8. Read the whol post, as Anon says we need to make provisions to ensure that lower income people aren’t disadvantaged here but that is done already with HST rebates and other mechanisms that could be ramped up to the new level.

  9. Anonymous says:

    The low income pay no tax now, after being promised for 15 years. And the GST is a killer for low income. Many were shopping in the U.S either by Computer and having shipped to places near Border, but low Canadian dollar and credit card companies ripping another 5% for what ever reason, combined with huge mailing costs in Canada, along with tax on object is bringing an end to that habit of spending ones last cent anyway. Pretty sick getting a 200$ hydro bill and 30$ tax on it!! In order to support the outrageous situation of having a government with the same idea of spending its last cent even if it means hiring more of what gets the most votes, as a civil servant in the hydro, or roads division.

  10. Anonymous says:

    I think you are right….to a certain point. Once consumption taxes reach a certain point, it becomes worthwhile avoiding them. Think the illegal smokes trade, underground economy with home renos etc. One thing about income tax, unless you find those rare opportunities to work for cash, it is pretty tough to avoid paying them.

    I agree with your point that low taxation is not such an important factor economically; it is only important politcally. Sure, everyone complains about taxes, more so when there are blatent examples of waste, but for the most part, I don’t think people consider it in their top 10 priorities when they are choosing a place to work and live.

    Tonight there was a Robert Jones piece on CBC showing the 2007 clip of the Premier dennouncing the prior governnment’s lower tax policy saying it simply did not work to stimulate the economy. He then showed the speech from yesterday saying precisely the opposite. Seems like the government has a hard time with this issue as well.

    Ironically, one of the more significant “transformation changes” Canada has undergone is the introduction of the HST. It cost a government an election but it sure strengthened Canada’s economy. Remember how the federal Liberals got elected? Their key promoise was to abolish the HST (and also NAFTA). Seems taxation policy can quickly swing voters but voters have a short memory.

  11. Tom Rivington says:

    I love the idea of driving up the HST and lowering income taxes, I’d be happy with no income taxes and a very high consumption tax. Make sure you take into account low income earners of course but I sure would rather take that other 50% of my income and buy stuff, invest or simply save for my retirement rather than have government decide where it goes.

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