Title: from the CCPA:rich benefit from GST cut, others
lose
Date: Thu, 6 Apr 2006 13:37:00 -0700
(GMT-07:00)
![www.policyalternative/32FFDA0E]()
April 6, 2006
New opinion piece from the
CCPA
Dear CCPA friends and members,
Below is an opinion piece by Ellen
Russell and Sheila Block based on their recently released study
Standing Up For Which Families? Who Benefits from the Conservative Tax
Cut Promises. Both the study and opinion piece are available on the
CCPA web page: http://www.policyalternatives.ca
Who will benefit from the GST cut?
By Ellen Russell and Shelia Block
Imagine a tax cut that you only get when you buy stuff. The more you
spend, the more you get from the tax cut.
Skill testing question: who would benefit
more from this tax cut, the poor or the rich?
Well, the rich buy more stuff than the
poor. So affluent people will get more cash from this tax cut then low
income people will.
You now understand what is wrong with the
Conservatives' plan to cut the GST.
The Conservatives have pledged to focus
on five priorities in this Parliament, one of which is "lowering
taxes for working Canadians." Harper plans to support working
Canadians by lowering the GST rate from 7% to 6%.
Since this measures is a tax cut that
rewards consumption, we had our doubts about how beneficial it would
be for "working Canadians" so we crunched the numbers.
We looked at how the Conservative's tax
cuts affect families with lower incomes (a family income under
$40,000) vs. high-income families (with family income of over
$150,000).
As of 2007, it is estimated that 48.6% of
Canadian families will make under $40,000 in family income. This means
that a whole lot of families barely make it above the poverty line.
Only 5.4% of Canadian families are estimated to have household incomes
of $150,000 or more.
Which families does the GST cut help?
Lower income families will get an average of about $129. On average,
higher income families will get about $907. This is to be expected:
the more your consume, the more money you save from a cut in sales
tax.
This GST tax cut costs a lot of money: we
think about $5.3 billion in 2007. Consider the portion of GST cut
which will benefit families. Lower income families will get about 23%
of the benefits that flow to families - and remember they are almost
half of all Canadian families. The relatively small group of highest
income families get 18.3 % of the benefits.
This is a tax cut which
disproportionately favours high-income families. For every dollar of
this tax cut received by low-income families, over 3 dollars goes to
families that are not low-income.
If the Conservatives really wanted to
help low-income families, the GST cut would be a silly way to do it.
We already have a mechanism to deal with the GST's impact on
low-income people: the GST credit. At a fraction of the cost of a cut
in the GST rate, enhancing the GST credit could target low-income
people much more effectively.
Over five years, the Canadian government is going to hemorrhage money
paying for the GST cut. The Conservatives estimate it will cost $32.3
billion over five years. We (and Don Drummond of the TD bank) think
that the GST cut will cost much more.
Expensive tax cuts like this are exactly
why there are so many spending cuts lurking in the fineprint of the
Conservative electoral platform. We do know they will cut the national
child care program and the climate change fund, but at least another
$22.5 billion of cuts is yet to be disclosed.
The Conservatives are hoping that we will
be so mesmerized with our GST cut that we won't ask what will be
sacrificed to pay for it. And this is the real travesty for low-income
Canadians-the small amount of money they will save in GST will be
dwarfed by what they lose as child care and other public services bear
the brunt of the profligate GST cut.
Sheila Block is Director of Health and
Nursing Policy with the Registered Nurses' Association of Ontario and
a CCPA Research Associate. Ellen Russell is the CCPA's Senior Research
Economist.
Their report, Standing Up For Which
Families? Who Benefits from the Conservative Tax Cut Promises, was
recently released by the Canadian Centre for Policy Alternatives (http://www.policyalternatives.ca).
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