GST math confusion?

[mjp]

After reading a few of the topics from end to end, people are complaining over the Greens wanting to raise the GST 1%.

For the most part most people wont be effected by a sales tax increase unless their buying a boat, car, house or some other large luxury.

when the GST was cut by 2%, that took alot of money out of the coffers of the federal gov't, as well as saved a lot of rich people money.

Harper is wrong that the GST is NOT the most hated tax. That honor goes to income tax. Hands down.

Lets look at the math here.

a 1 million dollar house at 7% vs 5% GST, the savings of $20,000, Which I doubt you are all going to spend this year on GST.

a $20,000 car a savings of $400 for that 2% GST.

$2,000 bucks you'll spend on gas this year.. a savings of $40.

while it helps the small poor people sure, but not paying income taxes would do more for the people.

Now I think that best idea is to cancel income taxes all together and have just sales taxes on items that are luxuries. After all a person thats making 10 bucks an hour full time pays apx $1440 in income taxes, which they could be better spending on themselves and other items they need instead of using credit.

[cybercoma]

You lost me when you called shelter a luxury.

[mjp]

You lost me when you called shelter a luxury.

thats where GST needs to be addressed..

items that we need in life should not be taxed, but they are.

as for your comment on houses being taxed, people don't need a two million dollar house.

[eyeball]

You lost me when you called shelter a luxury.

I think shelter falls under the heading basic necessity which all people should have a right to. Actually owning a house can be viewed as a luxury while its also a right that's earned, often by forgoing other luxuries.

I guess the difference between these falls near the point where basic neccesities become luxuries. Perhaps the ability to call 911 is right that makes a telephone a neccesity. I'm sure this point or line is easily blurred every which way, especially when good times become bad and even good again.

As for cutting the GST, it seems pretty clear it was a populist move that most serious economists have said was a dumb thing to do and fiscally irresponsible. It was designed to win an election.

Consumption taxes on anything but basic neccesities, are good because they still leave the consumer with lots of choice to not buy luxuries or one's that pollute in the case of a shifted tax regime (something else many serious economists think is a good idea).

[mjp]

Thats the problem is necessities of life should not be taxed. only luxuries.

Owning a car that gets for a small family of 3 is a necessity. Having a second one is also a necessity. Assuming both parents work. But having a BMW or a big SUV for no reason other then to have one is a luxury. Having a Big ford F150 or bigger for no reason to have one is a luxury. But using it to make a living or on a farm is a necessity. Paying Taxes on farm equipment impo is part of the problem farmers also have.

Having a basic phone is a necessity, thus the ability to dial 911. Calling long distance to families and friends is a luxury. Thats why I say if your going to need that consider either vonage or shaw or rogers digital phones. If your in an area that you can get those things. If your in an area that does not have high speed cable or digital phone. I say use a call around service to lower your costs.

Having a regular house is a necessity, but having a 3 million dollar house is a luxury.

Eating out or going to a fast food restaurant and Going to a bar is a luxury. TIm Hortons, Starbucks, Mcdonalds and others are luxuries.

Its defining what is a luxury and what is required to buy.

Thats where taxation should be defined. The poor and middle class pay the brunt of all the taxes, while the upper class get the most benefit from the tax loopholes.

Clothing should be taxed only if its top end or designer clothing. After all we can not be running around with no clothes, but walmart as a rap on the cheap chinese low quality clothing.

Education, Educational Exhibits, and events, along these lines should not be taxed. A proper full quality education will make someone move from the lower to middle class.

This is why I say income tax should be canned and we should go right to consumption taxes. If people earned what they worked for, they would have more of an incentive to do better at their job. In addition, it would increase the economy of The country by 5 fold. Reason I say that is if a small business can hire another employee or two for the cost of taxes, that would alone would increase consumption taxes.

For example, Would Ford and GM would keep their lines open if they did not have to pay income taxes in Canada?? One would think so, but you still never know.

I think That we need to change our way of thinking on taxes.

[sharkman]

For the most part most people wont be effected by a sales tax increase unless their buying a boat, car, house or some other large luxury.

when the GST was cut by 2%, that took alot of money out of the coffers of the federal gov't, as well as saved a lot of rich people money.

Personally you lost me when you called buying a car a luxury. You also lost me when you called the GST cut taking a lot of money out of the federal government. That is the taxpayers money friend. Not the governments. Letting us keep a tiny bit more of our money is actually a good thing. We pay over 50% of our gross income in direct and indirect taxes, ever hear of tax freedom day? That's the day in July when we've earned enough to have paid off all of the taxes we will owe during the year. It's a sad state of affairs when a people get taxed by their rulers so heavily it's at a rate over 50%.

I see you are trying to use class envy as an argument, referencing 'rich' people, and luxuries. The rich will always pay more than their fair share in Canada since higher income people are taxed at a higher rate. A crummy 2% GST cut is not going to make anyone rich.

As for your concern of government coffers, don't you think a 10 billion dollar surplus is enough? How much extra money do you think the government should collect above what they spend in a year? 20 billion? 30 billion? Would that be enough? Just so you can feel better about people involved in the luxury of hitting the drive thru at Timmies?

What other people do, or can afford to do is none of your concern. Your definition of a luxury threshold means the vast majority of Canadians are buying luxury items 2 or three times a day! And of course this is not true. Going to a bar or a fast food restaurant is not a luxury.

You need to change your way of thinking on taxes.

[Smallc]

We pay over 50% of our gross income in direct and indirect taxes, ever hear of tax freedom day? That's the day in July when we've earned enough to have paid off all of the taxes we will owe during the year.

Tax Freedom Day is on June 14th, meaning we pay just under 45% of income in taxes (though the numbers are published by tax hating people, meaning they are probably somewhat exaggerated).

You need to change your way of thinking on taxes.

It's not really your place to tell people how they should think about things.

Edited October 5, 2008 by Smallc

[Chuck U. Farlie]

numbers are published by tax hating people, meaning they are probably somewhat exaggerated

I just wonder who the tax loving people are?

[Smallc]

I just wonder who the tax loving people are?

There's a line...and I don't really remember who said it, but t went something like this:

I enjoy paying taxes, because taxes are the price of civilization.

[Chuck U. Farlie]

I don't mind paying my share as long as it is well spent on services that benefit myself or Canada as a whole.

I am a tax hater because I can't stand how my taxes are wasted on huge salaries and pensions for useless politicians and support staff, squandered away to the lazy, and thrown away to subsidize private companies and individuals (scandalous or not).

[independent]

I don't mind paying my share as long as it is well spent on services that benefit myself or Canada as a whole.

I am a tax hater because I can't stand how my taxes are wasted on huge salaries and pensions for useless politicians and support staff, squandered away to the lazy, and thrown away to subsidize private companies and individuals (scandalous or not).

Most of us have a problem with where some of the money gets spent. If governments were more transparent the public could help identify the misspending. Every party seems too promise more transparency and instead they become more secretive when they get into government.

[White Doors]

I have a HUGE problem with someone defining what a luxury is and is not. Especially the OP.

How about you mind your own business and stop trying to control others?

The far left wing have become the evangelical do-gooders of the 21st century!

They say history repeats itself, but really, this is getting crazy.

You mind your business and I will mind mine. sound fair enough?

[Moonbox]

The GST vs Income tax debate was really based on a GST cut of 1% vs an Income Tax cut of 1%.

On this basis, the income tax cut was better for almost everyone except for the very wealthy or the ridiculously poor.

A 2% GST decrease, however, is a great deal better than a 1% income tax cut by the very simplest of math.

I'm young, I'm working for slightly less than $20/hour, and given my spending habits the GST cuts save me almost $400/year.

My income would have to be over 40,000/year for me to save 400/year with Dion's previously promised 1% income tax cut, but then if I was making 40,000 per year I'd be spending enough to offset the difference either way.

The other benefit is the GST cut encourages consumption which, regardless of what Green economists say, drives our economy.

[independent]

The GST vs Income tax debate was really based on a GST cut of 1% vs an Income Tax cut of 1%.

On this basis, the income tax cut was better for almost everyone except for the very wealthy or the ridiculously poor.

A 2% GST decrease, however, is a great deal better than a 1% income tax cut by the very simplest of math.

I'm young, I'm working for slightly less than $20/hour, and given my spending habits the GST cuts save me almost $400/year.

My income would have to be over 40,000/year for me to save 400/year with Dion's previously promised 1% income tax cut, but then if I was making 40,000 per year I'd be spending enough to offset the difference either way.

The other benefit is the GST cut encourages consumption which, regardless of what Green economists say, drives our economy.

If I have excess money beyond what I put aside for savings I spend it. It really doesn't matter whether the money came from income tax reductions or GST reductions.

[stignasty]

Thats the problem is necessities of life should not be taxed. only luxuries.

Owning a car that gets for a small family of 3 is a necessity. Having a second one is also a necessity. Assuming both parents work. But having a BMW or a big SUV for no reason other then to have one is a luxury. Having a Big ford F150 or bigger for no reason to have one is a luxury. But using it to make a living or on a farm is a necessity. Paying Taxes on farm equipment impo is part of the problem farmers also have.

Can you imagine the administrative nightmare it would be to decide on a case by case basis on who should pay goods and services tax and on what?

[normanchateau]

Harper is wrong that the GST is NOT the most hated tax. That honor goes to income tax. Hands down.

I agree. Yet the incompetent Harper seems not to understand this.

In 2005, our marginal income tax rates were 15%, 22%, 26% and 29%.

In 2006, Harper raised the lowest marginal rate to 15.25%.

In 2007, Harper announced to the media that he'd lowered income taxes

In 2007, Canada's marginal income tax rates were 15%, 22%, 26% and 29%.

Economists who've compared the stimulatory effects of GST vs income tax cuts, overwhelmingly favour income tax cuts. To those who disagree, please provide a citation indicating that GST cuts are more economy-stimulating than cuts in income tax rates.

[mjp]

in everyone's augments they forgot to mention the national debt that was created by the previous governments. What people don't get is the fact that we pay interest to service the national debt every year, and that at it's highest 45 billion of our tax dollars were going to just paying the interest alone. The fact that the governments are paying off the debt is creating surpluses and allowing the government to lower some of the taxes.

The more the government pays down the national debt the less interest we have to pay on it. That means more money can be put forward to paying off the national debt and lowering taxes. The problem we have is people seem to think that the gov't does not have debt.

Our Governments over the years figured that spending insane amounts of money would have no consequences. What we are now doing is paying for that stupidity of our previous governments over the last 50 or so years.

Fact remains that whoever is in government better follow the same policy of paying of the debts. In the end thats 45 billion dollars that either the government can lower in our taxes or use some of that money to fund education, health care and other projects.

Thing is if everyone were able to get a post secondary education, that would raise up people into the middle class income bracket.

Currently the national debt is down to 467.3 million, because of the debt being paid off. From what I am seeing the conservatives will be paying off less of the national debt over the next two years in their projections. http://www.budget.gc.ca/2008/glance-apercu...ef-bref-eng.asp (table 1).

The less debt we have the less taxes we can have. The national Debt must be paid off.

[CrazeeEddie]

Personally you lost me when you called buying a car a luxury. You also lost me when you called the GST cut taking a lot of money out of the federal government. That is the taxpayers money friend. Not the governments. Letting us keep a tiny bit more of our money is actually a good thing. We pay over 50% of our gross income in direct and indirect taxes, ever hear of tax freedom day? That's the day in July when we've earned enough to have paid off all of the taxes we will owe during the year. It's a sad state of affairs when a people get taxed by their rulers so heavily it's at a rate over 50%.

Yes, the taxes are our money, so why not eliminate, or decrease the income tax rather than the GST? Cutting income tax by 2% would save me anywhere from $700 to $800 annually. GST savings for me have been marginal, given that most of the items I consume have risen drastically in price anyway.

I see you are trying to use class envy as an argument, referencing 'rich' people, and luxuries. The rich will always pay more than their fair share in Canada since higher income people are taxed at a higher rate. A crummy 2% GST cut is not going to make anyone rich.

I see you are assuming that all Canadians who make large amounts of money pay the taxes they should. A crummy 2% cut in GST means nothing to someone who can't afford a car, gas, McDonald's, etc, where the income tax cut would.

As for your concern of government coffers, don't you think a 10 billion dollar surplus is enough? How much extra money do you think the government should collect above what they spend in a year? 20 billion? 30 billion? Would that be enough? Just so you can feel better about people involved in the luxury of hitting the drive thru at Timmies?

Yes, the OP must be, which is why they suggested leaving all taxes high. Oh wait, they didn't, they suggested cutting a different tax.

What other people do, or can afford to do is none of your concern. Your definition of a luxury threshold means the vast majority of Canadians are buying luxury items 2 or three times a day! And of course this is not true. Going to a bar or a fast food restaurant is not a luxury.

Really? Please explain to me how going to a bar is a necessity to survival? How many have died without their daily McDonald's?

When so many can afford so little, it most certainly is a concern to me. But hey, I'm only human...

You need to change your way of thinking on taxes.

I think you might want to look in the mirror.

[msj]

True, at its peak debt servicing costs were about 38 cents out of every tax dollar.

That number is now a more manageable 22 cents (iirc).

The debt does not need to be paid off entirely although I would like to see it come down a little bit more (granted, this is quite arbitrary).

Debt makes sense especially when the government borrows to purchase long-lived assets (in the same way it makes sense to borrow to buy a house [assuming prices aren't stoopid], borrowing to invest in a business or borrow to purchase a car).

There is nothing wrong with paying a small cost in interest over many years to match the economic benefits derived from the asset.

Businesses do this all the time and the government is smart to follow suit.

Which is why the government needs to implement full accrual accounting, but that's for a different thread.

Aside from that, you also forget the benefit that savers get from the government issuing debt.

At a time like this there are many people who are, or will be, thankful for government debt that they are able to buy since this is the safest debt one can buy.

In the US, savers were so grateful that they were pricing T-bills with an effective return of 0% just last week.

Commercial paper doesn't get that kind of treatment which may boost the reward but for those who can't stomach the risk this is a moot point.

[normanchateau]

Economists who've compared the stimulatory effects of GST vs income tax cuts, overwhelmingly favour income tax cuts. To those who disagree, please provide a citation indicating that GST cuts are more economy-stimulating than cuts in income tax rates.

Those citations are pouring in aren't they?

[Moonbox]

Those citations are pouring in aren't they?

GST vs Income Tax Cuts

There's one. Whether people know enough to understand him will be interesting.

[CrazeeEddie]

GST vs Income Tax Cuts

There's one. Whether people know enough to understand him will be interesting.

In only one section in this whole diatribe does he touch the GST vs Income Tax, and even then, does not provide any numbers as to how the Income Tax cut would save the average person. However, I did notice mention of how cutting the GST was making the tax break more 'even' between the middle class and low income class. Now which group do you suppose needs it more?

I also noticed mention of how the two results that showed that GST would not save more did not assume that these savings would be passed on in lower pricing. Care to explain to me exactly what prices have gone DOWN in products that matter most to lower class Canadians?