A Fraser Institute senior economist, unperturbed by the last six months, is calling for Stephen Harper’s Conservatives to bring in a balanced budget with lower taxes.
Niels Veldhuis, in a January 12 Fraser Institute news release, called on the government to emulate newly cost-conscious Canadian households:
“There is certainly room to trim wasteful spending. A recent study by European Central Bank economists found approximately 25 per cent waste in Canada’s public sector. Our government needs to follow the lead of many Canadian households and begin by trimming the fat, not taking on more debt.”
Veldhuis also offered four specific suggestions for reducing taxes:
Reduce middle and upper personal income tax rates: the middle two income tax rates (22 per cent and 26 per cent) and the top rate (29 per cent) should be reduced by one percentage point in each of the next two years, 2009/10 and 2010/11. Reducing middle and upper personal income tax rates would be a good first step to a single-rate personal income tax.
Eliminate the Capital Gains Tax: the capital gains tax is one of the most damaging taxes in Canada in that it encourages the owners of capital to hold on to their investments and has a detrimental impact on entrepreneurship by reducing the return that entrepreneurs, venture capitalists, and other investors receive from risk-taking, innovation, and effort.
Accelerate and build on the reduction in the corporate income tax: over the next four years, the general corporate income tax rate should be reduced to 11 per cent, the preferential rate levied on small businesses. This will significantly improve the incentives for business investment and will eliminate the barrier, or disincentive, for small businesses to grow beyond $400,000 (the threshold for the preferential rate).
Facilitate the harmonization of provincial sales taxes with the GST: Harmonization with the GST would exempt business inputs from provincial sales taxes and improve the incentives for business to invest in productivity enhancing machinery and equipment.
Veldhuis went on to say:
“Various levels of government have spent more than $182 billion on corporate welfare over the past 12 years. Throwing more money at troubled industrial sectors merely transfers tax dollars from healthy businesses to unhealthy businesses and delays the day of reckoning.”
The Hook will look for Mr. Veldhuis’s response to the details of the budget when they emerge.
Crawford Kilian is a contributing editor of The Tyee.
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Rod Smelser
3 years ago
EUROPEAN CENTRAL BANK
Is there a link to the European Central Bank study which states, or is said to state, that fully 25% of public spending in Canada is wasted? That is simply not believable.
Rod Smelser
3 years ago
FOUND MY OWN LINK
Here is a link to the ECB study the FI is relying on:
http://www.ecb.int/pub/pdf/scpwps/ecbwp242.pdf
The figure of 25% waste in the Canadian public sector can be derived from Table 3. Efficiency scores: public expenditures as a % of GDP in 2000 and Public Sector Performance indicator, which is on page 22. It uses a method of analysis known as Free Disposable Hull, or FDH. I think it's safe to say that this particular methodology is rather unusual.
Grumpy
3 years ago
Probably not 25% - try 50%!
Quote:
"that fully 25% of public spending in Canada is wasted."
I would think 50% of public spending is wasted.
Example: RAV light-metro costs about 3 times more to build and about twice as much to operate than a comparable LRT line without any additional benefit.
With my endeavors trying to deal with the bureaucracy in this country to try reason with them why my mother, who has a monthly income of $1,100 and change, has to pay $54 dollars a month MSP, one gets the impression that we have way too many overpaid government workers.
Canada has been a wastrel country and always will be because our politicos and bureaucrats waste so much money on stuff and nonsense.
Rod Smelser
3 years ago
"With my endeavors trying to
"With my endeavors trying to deal with the bureaucracy in this country to try reason with them why my mother, who has a monthly income of $1,100 and change, has to pay $54 dollars a month MSP,..."
You're confusing waste and inequity, or at least, inequity as you perceive it. No doubt the Fraser Institute and several of our blog correspondents would be quite upset if the BC Govt relieved all Canadians who live in this province and are in your mother's $12,000 per year income bracket of the burden of monthly medical premiums, and instead financed those amounts through a progressive income tax.
Skywalker
3 years ago
The Fraser Institute?
That is all we need, more people to float the trickle-down theory. Isn't that what got us here? Do they think we are all stupid?
Rod Smelser
3 years ago
FOOL SOME PEOPLE ALL THE TIME
Skywalker
Do they think we are all stupid?
Yes, roughly speaking. They remember that Lincoln advised that you can fool some of the people all of the time. As long as that's about 40% or more, they're in good shape.
zalm
3 years ago
Capital gains tax
"...it encourages the owners of capital to hold on to their investments and has a detrimental impact on entrepreneurship by reducing the return that entrepreneurs, venture capitalists, and other investors receive from risk-taking, innovation, and effort"
This is exactly what it's intended to do, only it isn't to reduce the return on investment of the above-mentioned holy groups, but to discourage speculation, which it does a modest job at, and to discourage the monopoly of limited resources by those seeking to profit from reduced competition.
Set up a food factory with auctioned equipment in the middle of your primary market, and only your business skill will prevent you from turning a profit. But if there's no land or equipment left, you might have to go to Spuzzum to try to make a go of it with new equipment. The disadvantages of location and higher capital cost (the tax on which was properly eliminated years ago) cannot be easily compensated for, leaving the lucky one who got there first in a prime location with little incentive to make things competitive for his captive market.
And that's what capital gains taxes are intended to discourage.
Only the Fraser Institute can't see what economists around the world have seen for years. They're stuck in that Ayn Rand time warp.
And incidentally, if it were up to me, I'd eliminate the capital gains exemption on the personal residence too. Think of how many other taxes we could eliminate (not to mention how much more affordable housing would be as a result) if we could only tax this major source of unearned wealth whose source is solely due to monopoly behaviour.
Grumpy
3 years ago
Ron............
............it wasn't the fact of my mothers MSP fiasco, rather trying to deal with it and trying to deal with the various government departments and even more bureaucrats.
Believe it or not, to deal with MSP problems, I have to deal with BC's Ministry of Housing! They didn't want to know and fobbed me off to another department and another, and another.................all waste, costing the taxpayer untold millions.
sunwukong
3 years ago
FDH & ECB study
The ECB study was performed in 2003 and an updated, far more rigorous paper was submitted in 2005.
http://www.ecb.int/pub/pdf/scpwps/ecbwp581.pdf
However, it only deals with new member states for the EU.
Long and short, the 2003 study could hardly be considered definitive as the methodology is still being refined, e.g., they consider both DEA and FDH as measures of efficiency plus they break apart the assumptions with much more rigour in the 2005 study.
Van Isle
3 years ago
It's there type of thinking
It's there type of thinking that got us in trouble in the 1st place; now they want us to do it again?
Ed Seedhouse
3 years ago
The Fraser institute has a
The Fraser institute has a record of being so absolutel, smashingly, completely wrong and utterly deluded that I am amazed they get any press at all these days.
That they do is surely part of the reason we are in so much trouble today. "We're in a terrible mess, so to solve it we have to keep doing the very things that caused the mess in the first place!"
Really, Tyee should only be covering these idiots to the extent that they reveal and criticise the scandal that the GI still gets any attention in the press at all.
But then, our press still publishes astrology columns!
munroe
3 years ago
If anyone richly deserves to
If anyone richly deserves to be unemployed, destitute and homeless, it is a Fraser Institute economist!