Anyway, I think it will be interesting to see if Harper announces any more tax cuts. Personally I would like to see a slight GST tax cut (maybe 0.5% or something) with a plan to reduce it as much as 3% total over 10 years or something like that. Maybe some sort of plan to reduce it at the same rate that the federal debt goes down (since that was the reason for the GST in the first place). Also, increasing the GST rebate for lower income levels I would consider a good move (I am currently in one of the higher tax brackets so I’m not suggesting this for my own good).

Let’s take the EI premiums. The govt. has been running massive surpluses in the program. Both the 40K and 80K earners are overcontributing. But, who gets hurt more in the pocketbook?

Lower income Canadians benefit more than they put in through taxes. For example, the 40K earner and 80K earner would get the same healthcare, though the 80K earner has paid more. That is the price of being in a more caring society.

In fact, it could be argued that our tax system is currently regressive. Compare someone making $40,000 who has to pay the full EI premium and CPP contributions with another making $80,000 who pays the exact same EI and CPP amounts.

The income elasticity of demand is less than 1 for most things (needs), however, you are right that the IED is greater than 1 for luxury items, but income elasticity of savings (I just made that up) for the rich is probably greater than 1, which I think would imply IEDregressive, but it’s hard for me to say because I don’t know which items (some essentials I believe) aren’t taxed by GST. Even if some essentials aren’t taxed, I’d say that brings the IED closer to 1, but still

And Mr. Harper has said that he has more tax cuts announcements to make as the campaign progresses. My guess is the GST cut would be on top of the Liberal tax cuts.

My complaint against cutting the GST is that it encourages consumption and penalizes saving. The savings rate in Canada is already negative and the last thing we need is to encourage consumption.

But, like you point out, I think that more tax cut proposals will be announced by the Tories. In the last election, they had a tax-prepaid savings plan (no tax deduction for contributions, but withdrawals are tax-free), which would be a great idea for everyone and especially lower-income Canadians.

In Canada, we are overtaxed. That’s a simple statement of fact based on the massive surpluses, shuttling of funds into foundations with no oversight (over $7B last I heard) and unnecessary government expenditures (adscam, gun registry, HRDC boondoggle, etc) we’ve seen for years.

So clearly, there is room for massive tax reduction in Canada with no discernbile decrease in services. Therefore, it is possible to reduce both income and consumption taxes.

Another statement of fact would be that the Canadian populace, as a whole, is not very economically astute. As a result, the advantage of a decrease in consumption taxes is that it is visible to all Canadians, and is therefore more difficult to increase in the future. In that sense, it can almost be considered permanent, whereas payroll taxes, as we’ve seen in Ontario via health care “fees”, can be added back quite invisibly.

The other factors in this debate are that the Liberal tax decreases are very small, and that the Conservatives have not ruled out income tax cuts of their own. Historically, the Conservative position has been to increase the personal exemption and make it 100% transferable between spouses. They have also championed a flatter tax rate across income levels, as well as removal of surtaxes currently applied to those making over about $60K. Those changes would represent a far greater reduction in income tax than the Liberals have proposed.