Tuesday, January 27, 2009

The Inconvenient Truth of Tax Cuts

Tax cuts by a government running a deficit are a different creature than tax cuts by a government with a balanced budget. The latter is merely a distribution of surplus. The former, the tax cut we have in the Harper budget, is a distribution of borrowed money.

The Harper government wants stimulus spending and tax cuts. The stimulus spending alone will put the government budget into deficit. That means the added tax cuts will have to be funded by increased government borrowing, by new debt that will have to be repaid, with interest, by future taxpayers.

In essence, Stephen Harper is doing what Bush did during his regime - playing politics with tax cuts his government couldn't afford. Bush was putting his partisan interests ahead of his country.

Stephen Harper, like Bush, is putting his partisan interests ahead of Canada's. It's that plain, that simple.

If those tax cuts would actually generate economic stimulus they might be more tolerable. They won't. Those who do get a tax break are those lucky enough not to have lost their jobs, those who still have an income in a highly uncertain economy. They will do what those in such vulnerable circumstances inevitably do - they will hoard the money or use it to pay off debts for things they bought long ago, goods and services past, that have no stimulus effect.

Middle class tax cuts are a partisan political scam, compounding the ills of an already defunded federal government. Harper is giving away money the government doesn't have. He is going to borrow every last dime needed to fund this programme.

The only question now is whether the interim leader of the Liberal Party will condone this sham. It's been a hallmark of Harper's style of government that he doesn't hesitate to put his partisan political advantage ahead of the interests of Canada. Now he's extending his hand, asking Iggy to do the same.


Beijing York said...

What a con job. This budget is mostly about pandering for votes. The EI provisions are near useless in combating the incredible rise in unemployment that is bound to increase in the next year.

Most of the tax remedies put money into the pockets of those middle and upper middle class families who are in a relatively comfortable position. Frankly, if I was a recently laid-off worker or a single mother in a low wage job, I would have been insulted to hear how the renovation/upgrade tax credit could even apply to your cottage.

The lack of gravitas in using cottage renovations as an example of the government's commitment to help the most vulnerable during a global economic crisis is absurd. To further suggest that those credits will help restore the forestry industry is laughable.

Chrystal Ocean said...

Am writing a post now on how this budget completely FAILS anyone whose earnings are too low to pay income tax. With food prices continuing to go up, there are going to be more homeless. Had the tax cuts been in the form of actual cheques in the hands of the poorest, there'd have been stimulus.

The Mound of Sound said...

Ah Chrystal. Just how many votes do you think Harper figures he can buy from the poor? A lot of the poor don't vote but, of those who do, they don't vote conservative.