$6.7 billion Surplus? Cut Taxes

[August1991]

Ottawa is running a $6.7-billion budget surplus five months into the fiscal year, $2-billion ahead of where it stood one year ago.

This poses a political dilemma for Ottawa, but also appears to give Finance Minister Jim Flaherty more spending room to address provincial cries about a fiscal imbalance between Ottawa and the provinces and to deliver tax cuts.

However, it's also potentially embarrassing for the Conservative Party, which vowed to end the former Liberal government's practice of lowballing surplus estimates.

That's because the Tories forecast a surplus of only $3.6-billion for this fiscal year.

G & M

Why cut taxes with this "windfall"? Here are seven reasons.

1. The federal government should never have collected this money in the first place.

2. If the provincial governments want to solve the "fiscal imbalance", let them raise their own taxes in the tax space the federal government has vacated.

3. Tax cuts will make it difficult for any future federal government to raise spending.

4. Tax cuts will make the Conservative government popular and give it a majority.

5. Canada's debt market needs the federal government paper for liquidity.

6. The federal debt can be rolled over at low cost.

7. Flaherty and the bureaucrats can have fun deciding which taxes to cut. Announce the tax cuts as permanent.

[Riverwind]

This poses a political dilemma for Ottawa, but also appears to give Finance Minister Jim Flaherty more spending room to address provincial cries about a fiscal imbalance between Ottawa and the provinces and to deliver tax cuts.

I wish the feds would have the balls to confront provinces on the bogus fiscal imbalance. Flaherty should introduce a plan to cut taxes but give each province the choice to forgo those tax cuts and collect the money directly. If they refuse then Flaherty can correctly say that the fiscal imbalance problem must be solved.

[Figleaf]

The fiscal imbalance really amounts to nothing but the province's unwillingness to tax their citizens at the level needed to cover the services they would like to deliver. Blaming Ottawa is an excuse for wanting it both ways, and the Federal gov. should tell them to bugger off.

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

-investing in key public-good infrastructure ('public goods' meaning valuable things for which market incentives don't operate sufficiently to produce private investment, and 'investing' meaning with the expectation of a measurable pay-off).

[daniel]

...

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

-investing in key public-good infrastructure ('public goods' meaning valuable things for which market incentives don't operate sufficiently to produce private investment, and 'investing' meaning with the expectation of a measurable pay-off).

And to restore funding and programs cut and downloaded by the Liberals to appease the right-wing doom and gloom scenarios.

And to build a real Green Plan by investing in alternate energy technology just to catch up to Germany, Denmark and China.

[Charles Anthony]

And to build a real Green Plan by investing in alternate energy technology just to catch up to Germany, Denmark and China.

Providing tax incentives for people to produce your "alternate energy technology" so that people can catch up to any country they want -- if they can.

[Remiel]

What exactly does it mean to be able to roll over the federal debt at low cost?

As long as the interest on the debt is higher than inflation, doesn't the mean that you are making net savings by paying down the debt?

[daniel]

Providing tax incentives for people to produce your "alternate energy technology" so that people can catch up to any country they want -- if they can.

That would be preferable over maintaining the current subsidies for the oil and nuclear industry.

[blueblood]

...

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

-investing in key public-good infrastructure ('public goods' meaning valuable things for which market incentives don't operate sufficiently to produce private investment, and 'investing' meaning with the expectation of a measurable pay-off).

And to restore funding and programs cut and downloaded by the Liberals to appease the right-wing doom and gloom scenarios.

And to build a real Green Plan by investing in alternate energy technology just to catch up to Germany, Denmark and China.

It shouldn't be the taxpayers responsibility to fund post-highschool education, if you want to fund that lobby the feds to pass a law stating that banks should not charge interest on student loans and that every Canadian going to post secondary be given a shot at it.

I'd say inject the money straight into healthcare, it's what ALL canadians use, make our system better.

That green plan wouldn't be too bad either, put her all into biodiesel and ethanol plants which creates jobs and put all our alberta and newfoundland oil to export, nuthin wrong with more money in Canada and putting those terrorist oil exporting countries out of business.

Funny I said not to invest it in agriculture, it's the whole special interest groups thing that i have a problem with.

[Wilber]

The fiscal imbalance really amounts to nothing but the province's unwillingness to tax their citizens at the level needed to cover the services they would like to deliver. Blaming Ottawa is an excuse for wanting it both ways, and the Federal gov. should tell them to bugger off.

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

-investing in key public-good infrastructure ('public goods' meaning valuable things for which market incentives don't operate sufficiently to produce private investment, and 'investing' meaning with the expectation of a measurable pay-off).

Perhaps one reason Provinces are reluctant to tax more is because people figure they are already being taxed too much and one reason for that is the Federal Government is taking too large a slice of the pie. Better to have the money closer to home with provincal or municipal governments instead of our least accountable level of government, the Feds.

Education is a provincial jurisdiction, not federal.

[Wilber]

I'd say inject the money straight into healthcare, it's what ALL canadians use, make our system better.

Heathcare is a provincial jursidiction, not federal.

[Argus]

Health care, infrastructure (bridges and interprovincial roads) and the military, esp the army.

[daniel]

Health care, infrastructure (bridges and interprovincial roads) and the military, esp the army.

?? Can you clarify? Did you mean the military should be a provincial responsibility? That could effectively make each province its own independant country.

[August1991]

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

Why do I suspect that you are a university student?

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

Why do I suspect that you have a low income?

-investing in key public-good infrastructure ('public goods' meaning valuable things for which market incentives don't operate sufficiently to produce private investment, and 'investing' meaning with the expectation of a measurable pay-off).

If these are really good investments, then the government should find the money elsewhere by cutting other "bad" investments.

As others have pointed out, education and health care are provincial jurisdictions. The federal government should respect this.

PS. I agree with you about the personal exemption. This would simplify income tax collection.

[blueblood]

well if everything we want better falls under provincial jurisdiction, why not split up the surplus amongst the provinces. Or else we could make existing programs better that benefit the majority of Canadians, army or RCMP anyone? That being said there are still a lot of bad investments to go. I wouldn't say tax cut as 6.7 billion dollars over 30 million people isn't going to make any difference in my tax load, may as well spend it, and i think the gov't has allotted some money to pay the debt down too.

[Hydraboss]

well if everything we want better falls under provincial jurisdiction, why not split up the surplus amongst the provinces.

This would amount to another version of equalization transfer payments.

Give me back my money.

[geoffrey]

well if everything we want better falls under provincial jurisdiction, why not split up the surplus amongst the provinces.

This would amount to another version of equalization transfer payments.

Give me back my money.

Agreed. Most of this country doesn't even contribute on a net basis, why give them any of the bonus. Give it back in a cheque to the taxpayers... overcollection of taxation means they took too much... it should be promptly returned.

Niether you or I gave the government a mandate to collect many billions more than they needed, that's our money and I think we should have it back on a proportional basis of what we paid in.

[Figleaf]

As for the 'surplus', it should be directed:

-to reducing financial barriers to post-highschool education;

Why do I suspect that you are a university student?

I'm not. And I deliberately didn't specify university funding.

The reason I think money should go to education is that knowledge and know-how are the surest source of growing wealth into the future.

-alleviating the tax burden at the lower income levels (I suggest raising the amount of the personal exemption); and

Why do I suspect that you have a low income?

Maybe because you can't imagine anyone caring about anyone but themselves?

BTW, raising the exemption benefits everyone, it just has more impact on the poor.

As others have pointed out, education and health care are provincial jurisdictions. The federal government should respect this.

The Feds can spend money in those areas without violating the constitution.

[Ricki Bobbi]

Agreed. Most of this country doesn't even contribute on a net basis, why give them any of the bonus. Give it back in a cheque to the taxpayers... overcollection of taxation means they took too much... it should be promptly returned.

Niether you or I gave the government a mandate to collect many billions more than they needed, that's our money and I think we should have it back on a proportional basis of what we paid in.

*IF* there were no net debt I would completely agree.

But not paying down at least part of the debt while we can just puts a greater burden on future generations.

[geoffrey]

Agreed. Most of this country doesn't even contribute on a net basis, why give them any of the bonus. Give it back in a cheque to the taxpayers... overcollection of taxation means they took too much... it should be promptly returned.

Niether you or I gave the government a mandate to collect many billions more than they needed, that's our money and I think we should have it back on a proportional basis of what we paid in.

*IF* there were no net debt I would completely agree.

But not paying down at least part of the debt while we can just puts a greater burden on future generations.

My debt is at 5.5% on my car and 17.5% on my credit card. The government debt is at 4%. Who needs the money?

[blueblood]

6.7 billion divided by 30 million people, that's gonna amount to a couple of hundred bucks a person, if i'm spending thousands of dollars on tax, that's just a drop in the bucket, to others it would be significant, it would be fair to everyone to make our already existing programs better like the police force and military or to create jobs, just something that benefits everyone. If they were to give back say 10% i'd be with you saying give me my money. i was implying that if everyone was wanting money for provincial matters well then split it up and hand it out, not a fan of that with the case in point being the uneven distribution that comes with it, if it was even then i'd be okay with it. I personally would like to see the government invest it in a program that would result in positive net returns which everyone here could think of, why be rich when you could be richer.

[Ricki Bobbi]

My debt is at 5.5% on my car and 17.5% on my credit card. The government debt is at 4%. Who needs the money?

So the national debt shound never, ever be paid off? Or paying it off should just be postponed until you are gone?

[Remiel]

If the government returns that money to you Geoffrey, how do we know that *you* are going to pay down your debt? And what about the 20 million other yous?

[Charles Anthony]

how do we know that *you* are going to pay down your debt? And what about the 20 million other yous?

Who cares?? That is none of your business. They can do whatever they want with their own money.

Do you think the government should take GeofFrey's ability to manage his own affairs away?? or, to what degree?

My debt is at 5.5% on my car and 17.5% on my credit card. The government debt is at 4%. Who needs the money?

So the national debt shound never, ever be paid off? Or paying it off should just be postponed until you are gone?

Correct. It should not be paid at all. The government should declare bankruptcy.

Repudiating the National Debt

In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract.

Murray N. Rothbard, 1992

This one is the best:

Apart from the moral, or sanctity-of-contract argument against repudiation that we have already discussed, the standard economic argument is that such repudiation is disastrous, because who, in his right mind, would lend again to a repudiating government? But the effective counterargument has rarely been considered: why should more private capital be poured down government rat holes? It is precisely the drying up of future public credit that constitutes one of the main arguments for repudiation, for it means beneficially drying up a major channel for the wasteful destruction of the savings of the public.

same article

So.... the national debt can be solved and forever avoided overnight. All you people who:

- want balanced budgets

- want governments to spend within their means

- complain about government

- complain about leaving a burden to the future generations

have a permanent solution.

Today's tax-payer did not consent to the borrowing of yesterday's debt-spender.

[Jerry J. Fortin]

I will suggest that the government formulate legislation that would serve to channel all excess funds toward debt repayment. Until that debt is repaid I would not reccommend tax cuts.

[mcqueen625]

Ottawa is running a $6.7-billion budget surplus five months into the fiscal year, $2-billion ahead of where it stood one year ago.

This poses a political dilemma for Ottawa, but also appears to give Finance Minister Jim Flaherty more spending room to address provincial cries about a fiscal imbalance between Ottawa and the provinces and to deliver tax cuts.

However, it's also potentially embarrassing for the Conservative Party, which vowed to end the former Liberal government's practice of lowballing surplus estimates.

That's because the Tories forecast a surplus of only $3.6-billion for this fiscal year.

G & M

Why cut taxes with this "windfall"?

1. The federal government should never have collected this money in the first place.

2. If the provincial governments want to solve the "fiscal imbalance", let them raise their own taxes in the tax space the federal government has vacated.

3. Tax cuts will make it difficult for any future federal government to raise spending.

4. Tax cuts will make the Conservative government popular and give it a majority.

5. Canada's debt market needs the federal government paper for liquidity.

6. The federal debt can be rolled over at low cost.

7. Flaherty and the bureaucrats can have fun deciding which taxes to cut. Announce the tax cuts as permanent.

Now we have the idiots from Quebec attempting another round of blackmail. Give us $3.9 billion or we will bring down the government when the budget is voted on in the Spring, says Gilles Duceppe. Maybe it is time that the feds tell Quebce that the Liberal's are gone, and the present PM is not from Quebec, Thank God, and that the feds are through trying to pay-off Quebec in hopes that someday they may just be happy to be part of Canada. They already get far more out of Canada than they give, and that has got to stop.

Most province have Ottawa collect all Income taxes and then decide how much will come back to that province in teh form of transfer payments. In the case of Quebec, Ottawa never gets their hands on Quebec's portion of income taxes because they run their own little tax bureaucracy, talk about duplication of services. Anyway Quebecois do not send the provincial income tax to Ottawa, and then want all of the federal portion, and then some sent to them as well. Time to turn off the faucet, until Quebec;

Quits whining

Quits threatening to leave

Quits asking for more than their share .

Until they do, give them less or tell them they know wherer the door is, and not to let it hit them on the way out.