Saturday, April 2, 2011

Liberals' Tax Hikes - Didn't Work For Ontario, Won't Work For Canada

Remember how Ontario went from tax cuts and balanced budgets to deficits and tax hikes? Back in late 2003, the PCs were looking forward for a balanced budget. McGuinty's Liberals however predicted $2.2B deficit - and used that as an excuse to cancel personal tax cuts (scheduled for 2004,) to reverse corporate and small business tax cuts and to abolish the Equity In Education tax credit. Did that address the shortage? Of course not! By the time Ontario Liberals released their first budget, the deficit swell to $5.5B. Again, they responded with more tax hikes; the 2004 Ontario budget introduced the health premiums and cancelled a few more tax incentive programs such as the Ontario Home Ownership Savings Plan. Still, the deficit didn't get any smaller. It was about $6B for 2004 and Ontario has been in red ever since.

Now, Ignatieff promises to do the same on the Federal level. His rhetoric is almost identical to that of Dalton McGuinty 8 years ago - he won't raise taxes, but he favors "strengthening the CPP" (which means yet another premium hike) and he wants to reverse those tax cuts "for large corporations" (under the current rules, that means - any business with more than 7-10 employees). On top of that he promises lots of new spending - childcare, subsidized university education, a billion here, a billion there... How is he going to pay for all that? No, raising business taxes won't be enough.
Ignatieff claims that reversing the recent business tax cuts will add $6B to the tax revenues. Many independent experts suggest it's just $4.5B and even that doesn't factor in the capital flight. Considering all those businesses that will move to a lower tax jurisdiction should Canada increase its corporate tax rates, factoring in all the losses the provinces will suffer because of the reduced tax base, Ignatieff's tax hike is likely to bring... no increase in tax revenue.

Guess who is going to pay for the Liberals' campaign promises then. That's when we'll be reminded of Michael Ignatieff's views on the GST hike, on carbon tax, on higher CPP premiums etc. And, since his government will be greatly dependent on the NDP and the Bloc, then its obvious that their guiding principle will be "why do you need money when there's government that gives you all sorts of freebies"? Unless the Conservatives win enough sits to stay in power, expect to be treated like a child who is well taken care of by the nanny state and therefore - doesn't really need anything more than a pocket money allowance.

1 comment:

Anonymous said...

Tax hikes always have the same results. One only has to study the history of past nations like Rome to understand how unbalanced spending destroys nations.