2007 Conservative Tax Plan

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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.

11 thoughts on “2007 Conservative Tax Plan

  1. What was the personal exemption rate at before the changes were announced?

    Also the 1% drop in GST may be little more than “smoke and mirrors” as you say, but if they keep it up, maybe it will eventually go away. As of January 1st we’ll be able to give them credit for a 2% drop, and so on if they keep reducing it.

  2. I would have liked to have seen a greater increase in the personal exemption base amount. That number directly impacts the people in our society that need the most help.

    The GST is a wash for me – until the whole thing is done away with, it continues to be pointless to discuss decreases in it. The majority of downside, from my point of view, is the immense amount of extra man-hours put into dealing with, adjudication of, and enforcement of the GST. Make it go away, and you’ll have my attention.

    I too agree with Kim in the opinion that targeted tax cuts would stimulate particular businesses and a flat rate reduction is less than optimal. I hate to think that someone like Barbardier is receiving the same tax cut as some business who really needs it.

    Overall, I felt like the speech was in the right direction although I didn’t necessarily agree with every choice made. I’m sure many felt the same way.

  3. What was the personal exemption rate at before the changes were announced?

    $8,929. Keep in mind, however, that prior to the Tories taking power, the exemption rate was around 9,300. So the $700 increase is really an increase of just $300, less than the $500 increase the Liberals implemented before losing power.

    if they keep it up, maybe it will eventually go away

    They won’t keep it up anytime soon. Harper’s campaign promise was for 2 percent over 2 years. He has no plans for any further GST cuts. Even so, it’s a terrible source of tax cutting. Close to 3/4 of my net income goes to goods and services not taxed with GST.

    GST tax cuts require people to purchase goods and services taxed by GST if they want to benefit from it. Income tax cuts on the other hand put money into the hands of all employed persons in the country before they even receive their paycheques. That’s the way to put money in the back pockets of Canadians.

  4. I’d rather have seen some of the money go towards municipal infrastructure projects – but perhaps that’s completely off topic.

  5. I don’t think it’s off-topic at all. I would love to see that increased as well, but I would hope such an increase would be percentage-based so mid-sized cities (Regina, Kamloops, Lethbridge, Brandon, Sudbury, etc) aren’t screwed.

  6. When it comes to municipal projects, I prefer to see project based funding i.e. Money for THAT bridge, or THIS overpass.

    When we get ratio based funding the smaller centres usually end up applying ‘patches’ rather than replacements; and we are in need of many a replacement in Southern Alberta.

  7. Only if that project is more important, and if it’s more important it should probably be done first anyway.

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