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Down with taxes, up with inequality


 

Stephen Gordon troubleshoots a proposal—championed by the New Democrats and Conservatives in Ontario, but also the federal NDP—to cut the sales tax on home heating bills.

Removing the HST on heating will cost a certain amount of money – apparently on the order of $350m. The share of those foregone revenues that will go to households in the highest income quintile is almost three times the share that will go to the low-income households that the measures’ proponents loudly insist are its focus. More than half of the money will go to people in the top 40%; only a quarter will go to the bottom 40%. As redistributional measures go, it’s more progressive than offering free yacht maintenance, but not as progressive as actually giving more money to those with lower incomes.

More from Livio Di Matteo.


 

Down with taxes, up with inequality

  1. Yes, yes, yes, thank you.  A poorly designed policy if there ever was one.  If you want to design a policy that helps low-income households afford home heating, then design a policy that targets low-income households.  Not everyone.

    • What on earth made you think they wanted to design a policy that helps low-income households?  They’re MPs, they wouldn’t see any benefit from that.

      • I agree, to the extent that the sweet spot for votes is always the middle class.

        I think part of the reason the NDP likes this so much is the “optics”, the way you can sell this by invoking the vision of some poor little old lady sitting in her cabin in the woods, running out of winter fuel, etc.  As with most political rhetoric, it’s got very little to do with logic, and a lot to do with stroking emotional chords.

  2. It doesn’t cost $350 million, it actually saves tax payers $350 million.

    How about we raise the level of income people can earn before they have to start paying income taxes. I don’t understand logic of making poor people pay taxes to employ bureaucrats to give them some of their money back. Lower taxes and reduced inequalities is what we should actually be trying to achieve. 

    Lower taxes and less bureaucracy = fewer inequalities. 

    Library Of Economics ~
    Becker showed that discrimination will be less pervasive in more competitive industries because companies that discriminate will lose market share to companies that do not. He also presented evidence that discrimination is more pervasive in more-regulated, and therefore less-competitive, industries. The idea that discrimination is costly to the discriminator is common sense among economists today, and that is due to Becker.

    http://www.econlib.org/library/Enc/bios/Becker.html

    • “It doesn’t cost $350 million, it actually saves tax payers $350 million.”

      Sure, but there are a lot of ways to save $350 million for taxpayers.  Income tax cuts, corporate tax cuts, across-the-board HST cuts, other tax credits.  The point is an HST home heating cut ranks very low on the spectrum of smart ways to cut taxes; as Prof Gordon points out, just barely above tax credits for yacht maintenance.

    • Unless they lower expenses by an equivalent amount, it hasn’t saved the tax-payer a dime. At best it puts off the payments. At worst, it costs the taxpayer even more as services later have to be decreased by that amount plus interest.

    • Eliminating HST on home heating fuel will eliminate precisely none of the bureaucracy. The HST is still in place. Providing a rebate to low income families does not increase bureaucracy because the system is already in place.

      90% of the $350 million goes to people who are not in the bottom 20% of income. So, this policy is really bad at helping ‘poor’ people.

      This doesn’t save taxpayers $350 million, because that funding will have to come from somewhere. It will need to be funded by other taxes, borrowing, or cuts in spending. Since government spending is not entirely useless (I know, a controversial proposition for you), a reduction in government spending is still a cost to taxpayers in foregone services.

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