Scott Clark and Peter DeVries propose a new tax plan to fix the government’s structural deficit.
First, the current plan has only slightly reduced the high effective marginal tax rates imbedded in the personal income tax structure, which seriously inhibit labor force participation. Without getting into detail, what is required is a lowering of the marginal tax rates. This could be expensive. Lowering all rates by 1 percentage point could cost $5 billion annually. Getting rid of all the special tax preferences introduced over the past five years would be a start.
Second, the government should restore the two points to the GST bringing back the $13 billion that was lost. This would more than pay for the cut in tax rates for all Canadians but would also allow a larger reduction in the corporate tax rate than is currently planned.