Tuesday, 4 March 2008

Tax relief may not be helpful after all

This is a real first. I have never before read an article based on research by the C D Howe Institute that I agreed with. It is a right wing "think tank" and its pholosophy seems contrary to most things I believe.

But on this occasion they have produced a factual and helpful piece which shows that poor people have to pay extortionate marginal tax rates. This is - oddly enough - becuase of the right wing philosophy that says poor people must not be given tax relief - or if they get any it must be clawed back. It is the same thing for welfare recipients, who are not allowed to keep any earnings. This is supposed to act like an incentive.
In dollar terms, that results in low-income Canadians paying taxes at a significantly higher effective rate on incremental income. In some cases that can be as high as 70 to 80 per cent, once clawbacks kick in on family-based benefits and tax credits

The standard conservative argument goes something like this: Tax breaks are for rich people. Giving "government money" to poor people means they won't bother to work, didn't you know. Only rich people are different, and if you give them tax incentives they work much harder - and their increased spending will "trickle down" somehow.

It is of course utter twaddle, and its nice to see the C D Howe folk acknowledging that. Though I predict that Harper and Campbell will find all sorts of excuses not to do anything about it.

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