Thursday, December 01, 2005

The Conservative's GST move

Today the Tories announced a cut in GST. I think this is a brilliant economic and political move. It is a tangible benefit that people will be able to tangibly benefit from. My prediction is that these types of announcements will continue: look for Harper to take the ease off of the gas pumps soon.

The only thing I worry about is that it is forgotten come poll time. Then again, if the Conservatives waited, it could be seen as desperate. On second thought, it is best to remind people during the debate.

Here is some of the reaction to the move.

Liberals (CBC): "Cutting the GST favours the rich, finance minister Ralph Goodale said on Thursday."
NDP: No reaction yet. But they did propose the idea in 1997.

Blog reaction?
Paul Wells: "I should point out that Harper's announcement of a GST cut from 7% to 5% over four years, unveiled this morning at a Mississauga video store, went relatively smoothly and it probably actually will win votes."
Andrew Coyne: I don't know what he thinks now. But 5 years ago, he wrote this.
Warren Kinsella: "This election just turned. I can feel it - this was policy, not politics, and it was big."
Political Staples: "This positioning plays right into the mainstream Ontario voter. Again smart."
Calgary Grit: "For what it's worth, I think this is a bad policy. You keep the administrative costs and cut revenue. But this gives Harper something he can point to as constructive policy. And it's going to be very difficult to argue against."

I just want to make one comment, and that is related to Goodale. Why do people always have to play the class card? In a sense, it is such "American-style" politics - that Conservatives are the party that favours the rich and so on. Of course the GST favours people who spend more; the more they spend, the more they save. But so what: are the Liberals saying the poor don't benefit? For poor people who don't pay income tax, the GST is one of the few taxes they do pay. In that sense, the class warfare rhetoric doesn't work. The poor do benefit.

2 comments:

issachar said...

I think this is a brilliant economic and political move.

It may be a good political move, but it's a lousy economic one. The Fraser Institute is of the opinion that cutting consumption taxes such as the GST is the least effective of all tax cuts, as are most economists.

Credit to Don here for the best phrasing of this I've seen so far.

Find me 5 conservative economists who dislike consumption taxes and I'll show you 5 conservative economists who only want to get elected.


The main issue I have with the GST is that it makes shopping in the US cheaper than shopping in Canada and encourages people do "forget to declare" their purchases at the border. But that's not Harper's motivation and I suspect that a good economic analysis of the situation would show that consumption taxes are still better than other taxes.

I'm voting for the Conservatives, but this is not a good economic move and we shouldn't pretend it is.

Jonathan said...

Perhaps economists think it is a bad move. However, could it possibly be that cutting the GST will actually encourage more people to buy goods and services out of their savings, perhaps making up that revenue that was lost due to the cut?

How about a little psychology with that economy?