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About those taxes (III)


 

Sent an email to TD’s Don Drummond seeking an informed opinion.

Q: Do you have any reaction to Michael Ignatieff’s musings over the past day about the necessity of future tax increases?

A: I would need to see a transcript of what he said or even better his plan … The federal government can get back to budget balance if they apply a dose of spending restraint once the economy begins a sustained recovery. The government will need to keep program spending growth below 2 per cent per annum.  That will be tough but it is highly feasible. If they do that tax increases will not be required. Nor would they be appropriate.

To put that in perspective, here, as best my rudimentary math skills can figure, is how program spending has fluctuated over the last six years, and how it’s projected to over the next six. 

2002-2003 +7.7%
2003-2004 +4.8%
2004-2005 +14.8%
2005-2006 -0.7%
2006-2007 +7.5%
2007-2008 +5.9%
2008-2009 +3.7%
2009-2010 +10.8%
2010-2011 +3.2%
2011-2012 -0.6%
2012-2013 +4.0%
2013-2014 +3.9%


 

About those taxes (III)

  1. Given an increasing population, inflation, and particularly strong growth in demand in area such as health care, restricting program spending growth to two per cent would essentially mean a drop in service levels. To maintain existing service levels in, say, health care, would mean not insignificant cuts elsewhere if we were to seek to stay under Don’s 2% cap. Then there’s transfers, and all the other fun stuff the feds fund.

    So the question still is what do we cut to balance the budget? Or do we increase revenue to avoid program cuts.

    • What to cut? Start with Equalization.

    • Heck, just given inflation alone keeping spending growth below 2% means cuts.

      The CPI’s at 1.4 right now I believe, and tends to hover somewhere between 1% and 3.5% in recent years. So, not that there’s anything wrong with this necessarily, but it should be clear to anyone that keeping program spending growth below 2 per cent per annum means cutting services. And, as you say, if one doesn’t want to cut any health care services, it’d likely mean somewhat significant cuts elsewhere (again though, that might be what needs to be done).

    • Yes the population increases….but at 1% a year. Ihttp://www40.statcan.gc.ca/l01/cst01/demo02b-eng.htm
      Inflation is mininal (now) . Health care with an aging population is a wild card I agree. So…is 2% that far off as a target for spending increases? Not so much I think.

      • is 2% that far off as a target for spending increases

        Maybe not, but I think that BCer’s main point was that it would be more accurate to refer to that as a service decrease then a small “spending increase”. And Don’s not saying we should have 2% spending increases, he’s saying we need to stay below that.

        As you say, a 1% population growth plus a 1% inflation rate means anything less than 2% would require cuts. And we may decide we need significant cuts. It’s just that “here’s what we’re going to cut” is the most straight forward and honest way of putting that. Saying “we’re only going to increase by (for the sake of argument) 1.5%” makes a bunch of CUTS sound like an increase is all.

        • Ridiculous to talk about cutting program spending (adjusted for inflation) at the same time we’re spending money to “stimulate” the economy. Contradictory and just ridiculous.

        • It’s worse than 1% population growth plus 1% inflation.

          The most expensive demographic – baby boomers turning seniors with rising medical costs and drop in revenue generation – are upon us. So the increase in spending will rise quicker than the increase in overall population because of the increase in the number of seniors.

          • And health services inflation has consistently been above the CPI lo these many years, I saw it written somewhere more than once. Put that into the econometric model with the baby-boom-bulge working its way through ever-increasing health care consumption. Good luck with the 2%, folks.

    • Only when one deals with government does one hear the argument that spending more actually means making cuts. Solution: spend EVEN more!

  2. Legalize euthanasia, increase probate taxes.

    • Good luck running that platform past the boomer-voter demographic, Jenn. Here’s a tip: don’t spend too much of your $1.95 per anticipated vote on a campaign, you still need some sort of minimum before that obscene free taxpayer money gets showered on your party.

      “In the next federal election, vote for a REAL renewal of Canada. Vote for the Geezer-Cleansing Party.”

      You’re right. Needs work.

      • Nuts! And I just had all those signs printed.

        But kidding aside, maybe probate taxes would be a good thing to raise–after all the person who made the money can’t use it anymore, and beneficiaries shouldn’t be counting on the money anyway, right? And I don’t mean raise it to 100% or anything silly like that, but I believe it’s very low right now. And I’m talking only if (when) we need to raise taxes.

        • Dear aging successful Canadian: dump your wealth on the next generation NOW, and-or don’t bother being terribly productive anymore. Retire destitute, there’s a bunch of government cash waiting to subsidize your cat food lunch and your Meals-on-Wheels twice a week (and your medicare-funded euthanasia when you’ve had enough of cat food — Nine Lives my a**). We think. See, Jenn has devised this plan, see, that reduces marginally (she has yet to show by us how much on her campaign signs — they’re back at the printers) the incentive for you to accumulate wealth to pass on to your heirs. Blow it all now in middle and upper-middle age, we’ll pay for your irresponsibility later. Wow, that last sentence sounds like a slogan, Jenn, and it has the added virtue of accurately describing the current state of Canadian affairs only too well…

          • After all, if you can’t pass on every red cent, there’s no sense in saving any pennies at all, right?

          • I was thinking something more like, “THEY’LL TAX YOUR CHILDREN TO DEATH. We’ll tax you, after death.”

          • Alrighty Jenn, shall you gather up the focus groups, or shall I?

          • Oh, you do it, thanks, myl.

            After all, those focus groups ain’t cheap, and I have to redo all those signs!

  3. Ya, Mike Harris did this. How’d that turn out folks?

  4. Everyone please revisit Coyne’s article a while ago about the demographic time bomb staring us down right now. Balancing the budget isn’t good enough–we should be running surpluses.

  5. Very interesting.

    Don Drummond is on every reporter’s speed dial. He is one of those guys that newspapers always get a quote from. In this case, Don Drummond seems to disagree with Ignatieff’s premise that raising taxes will be absolutely necessary.

    Has a single reporter contacted Drummond to report his expert opinion that Ignatieff’s tax proposal may not be a good idea…you know, like they do when he disagrees with Harper?

    • Of course I mean other than Aaron. I’m usually all over you for doing nothing but spill bile at Conservatives but I give you full credit for being all over this story.

    • Sigh. I’ve tried 5 times to post a note thanking Aaron for his focus on this issue and they don’t get through.

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