Sunday, May 15, 2005

 

Would Martin Scrap The GST To Win An Election?

OTTAWA May 15 (Canwest News Service)– Jean Chrétien’s former pollster says he knows how Paul Martin might win the next federal election: By scrapping the GST.
“It’s something every part of society would like,” says Michael Marzolini, who took the pulse of the nation for the former prime minister through three federal election majority victories.
“From the point of view of the Liberal Party it has always been a vulnerability on their flank. It is an unpopular Mulroney holdover and they promised to get rid of it.”
The Chrétien Liberals promised to scrap the much-hated Goods and Services Tax during the 1993 federal election campaign but they inherited an economy in such poor condition that eliminating such a lucrative source of revenue would have been fiscal suicide.
A dozen years later the economy is buoyant and the government has billions of taxpayer dollars to spend.
But the GST, a cash cow pumping about $40 billion into federal coffers this year, is still with us. So why not reduce the GST, get the monkey of a broken political promise off their backs and put cash directly back into the pockets of grateful voters?
It may sound logical but the chances of it happening appear to be slim to non-existent.
Marzolini advocates a gradual reduction of the GST of one percentage point a year (worth around $6 billion) and although he pushed the same policy when he was part of Chrétien’s inner election circle, Liberal economic advisers rejected the idea.
Reducing the GST has some appeal, said Carleton University economics professor Frances Woolley – but there’s a huge potential downside, she said.
“The current fiscal position of the federal government is extremely good but there are lots of reasons to expect that this won’t last. We are going to be hitting the baby boom generation retiring. When people retire they generally aren’t paying income taxes and they will be drawing on services.”
Rather than scrap the GST, University of Toronto economics professor Tom Wilson said reform of the tax is long overdue.
“I can’t see the Liberals touching the GST because it will remind people of the broken promises in the past. It is the skeleton in the Liberal cupboard. But I would like to see the GST addressed as a tax reform issue.”
Others, however, said broadening, reducing or eliminating the GST are non-starters.
“For Canada, cutting back consumption taxation would be a terrible mistake,” said Jack Mintz, president of the CD Howe Institute, an economic think tank. “There is a lot to be said for a GST because it has less impact on the economy compared to other types of taxes.”

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