The Canadian government issued $60 billion in tax relief this week. Here’s a brief breakdown.
* GST cut one percentage point to 5 per cent, effective 1 Jan 2008
* Personal income tax cut retroactive to Jan. 1, 2007, cutting lowest marginal tax rate to 15 per cent from 15.5 per cent
* Jump in basic personal exemption to $9,600, retroactive to 1 Jan 2007, increasing to $10,100 in 2009
* $10-billion in federal debt relief
* One percentage point cut in corporate tax to 20 per cent in 2008
* Reduction in corporate tax rate to 15 per cent by 2012
* Small business income tax reduced to 11 per cent by 2008
Overall, a good tax plan. Apply surplus to the debt, cut corporate tax, and reduce income tax.
A couple of comments though.
Generally, I agree with corporate tax cuts. I am especially intrigued by the plan to have the lowest corporate tax rate of any industrialized nation. I am just not so sure giving a blanket tax cut is th right idea. I believe what we need is more diversity in our economy. Our economy is still very heavy in manufacturing (despite the western boom in energy). Blanket tax cuts will encourage manufacturing companies (and export companies for that matter) to use the extra surplus to compete with our strong dollar. Hopefully, they’ll use the surplus to invest in mechanisms that will help them as the dollar pushes higher, but I am sceptical it will get used for much more than profit.
I’d like to see tax structures in place that encourage more economic diversity, so we can prosper no matter the position of our dollar.
The second comment was toward personal income tax. I am glad they are raising the personal exemption amount an decreasing income tax for the lowest tax bracket. when we consider, however, that they raised the income tax for the lowest tax bracket and lowered the exemption amount when they first took power, it’s hardly much of a cut. It brings us back to nearly what we were at when the Liberals were in power.
The GST cut is my last point. I disagree with it. I mean, honestly, 1% savings? How am I going to benefit from getting $1 back for every $100 I spend? Superstore gives me more back in coupons when I shop (e.g $30 for every $250 spent). The only way I can benefit from a smoke-and-mirrors cut like this is making large purchases like homes and vehicles, but these are not things I buy frequently.
How about cutting the lowest tax bracket to 14% and raising the cap to $40,000? Now, that would be a nice tax break. Oh, and make the universal child benefit tax-free.