[homeles_ot-l] Fwd: {ODSPAction} Re: Permanent tax cuts are no panacea

[Terrie]

---------- Forwarded message ----------
From: Jennefer Laidley (ISAC) <laidleyj at lao.on.ca>
Date: 2009/1/20
Subject: {ODSPAction} Re: Permanent tax cuts are no panacea
To: odspaction at googlegroups.com


 Check this editorial from the Globe and Mail (link below and entire story
follows):



http://www.theglobeandmail.com/servlet/story/RTGAM.20090119.weBudget20/BNStory/specialComment/home



Globe editorial
*Need and stimulus in harmony*

>From Tuesday's Globe and Mail

January 20, 2009 at 12:00 AM EST

Putting money in the hands of low- and moderate-income Canadians as a way to
stimulate spending is an idea with remarkably wide consensus. The big banks
in Toronto believe in it. Economists in Western Canada believe in it. The
poor apparently don't object, either. In the current situation, it makes
more sense than broad-based middle-class tax cuts.

Money spent on stimulus needs to stimulate. (Middle-class tax cuts
wouldn't.) It should also improve Canada's long-term productivity, where
possible (permanent tax cuts would), and it should not saddle taxpayers with
a permanent budget deficit (the tax cuts might). And there's an onus on
government to protect those who will be hardest hit in bad times.

Employment insurance is an obvious place to start. It is said to be an
"automatic stabilizer" of the economy, in hard times, because it puts money
in the hands of those most likely to spend it. But it is neither automatic
nor terribly stabilizing, at the moment. Across Canada, just 40 per cent of
those who lose their jobs qualify for benefits; in Ontario, fewer than 30
per cent do. And those who don't qualify for benefits do not qualify for
training programs through the employment-insurance system. On several
levels, these holes in the net will be harmful as unemployment rises.

Reducing the qualifying period is one option; extending the benefit period,
and making the benefits more generous, are others. Recognizing the economic
argument, the United States has put money on the table to allow state-based
programs to provide longer benefit terms. Prime Minister Stephen Harper has
expressed concern that more generous benefits would be unwise in the long
term. But there is no reason the changes could not be temporary.

Another program that should be strengthened is the Working Income Tax
Benefit, a small support for the working poor that gives up to $500 for
individuals and $1,000 for those with an eligible spouse or dependant, at a
cost of $400-million a year. Another $600-million in the pockets of the
working poor would be more likely to find its way back into the economy,
rather than bleeding into savings. Because it increases the gap between
low-wage work and welfare benefits, it should be sustained. Similarly, an
increase in the GST credit would reach into moderate-income households,
using a benefit structure already in place.

Saving the country through the pockets of the less well-off is not likely to
a big vote-getter. The votes, as always, are in the bulk of the middle
class. Especially at a time when auto companies and virtually everyone else
seem to have their hands out, people can be excused for asking, "What about
me?" But the sensible answer is not to treat the country as a collection of
interest groups, to be appeased and stroked according to their means. It is
to get a bang for the buck, and not to dig the country into a hole it can't
get out of.

There is ample evidence that short-term tax cuts or rebates, such as those
offered by President George W. Bush last spring, are useless. At worst they
are hoarded; at best, they pull demand forward a month or two. Economists
are excoriating about the Bush rebate. "A classic case of the most
extraordinarily bad policy I have seen in a long time," says Craig Wright,
chief economist of the Royal Bank of Canada.

Long-term tax relief would encourage work, saving and investing, all good
things, but its costs are enormous. A one-point cut in the marginal tax
rates would cost roughly $6-billion a year. Raising the income thresholds at
which the marginal rates are set would cost $2.9-billion a year. Any such
cuts will be nearly impossible, politically, to cancel.

What, then, should the government do to aid the middle class in a
responsible way? One measure would be to lower the employment-insurance
premiums paid by employers and workers, at least until unemployment falls
again (reversing how the system works, stupidly, now). The new Tax Free
Savings Account, which took effect on Jan. 2, is a form of middle-class tax
cut, since only those with savings can use it. That is the wrong policy at
the wrong time, although it is too late to change now. Providing further
relief for middle-class consumers will not promote spending. "Dumb beyond
belief," Don Drummond, the TD Bank's chief economist, says of lump-sum tax
relief at this time. The wait-and-see psychology is too strong. If it
wasn't, lower interest rates would have done the trick.

In these times, putting money in the hands of those who need it is good
policy. The test of leadership is to make good policy succeed politically.




 ------------------------------

*From:* odspaction at googlegroups.com [mailto:odspaction at googlegroups.com] *On
Behalf Of *abrowne
*Sent:* January 17, 2009 2:35 PM
*To:* odspaction at googlegroups.com
*Subject:* {ODSPAction} Re: Permanent tax cuts are no panacea



Never mind that tax cuts are hardly felt by those with low incomes.

--- On *Sat, 1/17/09, Mike Yale <theyales at surenet.net>* wrote:

Permanent tax cuts are no panacea



GLEN HODGSON

Globe and Mail, January 12, 2009 at 12:00 AM EST



The need for fiscal deficits appears to have been accepted, so public debate

has now shifted to the best form of fiscal stimulus for Canada. Recently,

the idea of a permanent income tax cut has emerged as a favourite in some

quarters. Is it the best form of fiscal stimulus available? No.






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-- 
Terrie ( mocharebyl at gmail.com )
"If you see an injustice being committed, you aren't an observer, you are a
participant." June Callwood
Prejudice is a burden that confuses the past, threatens the future and
renders the present inaccessible.  Maya Angelou
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