How we got here

by Aaron Wherry

Mike McNair, a former advisor to Stephane Dion and Michael Ignatieff, blames Conservative tax policy for the current deficit.

The federal deficit, this year estimated at $26 billion, would already have been wiped out had the Harper Conservatives not taken more than $30 billion per year out of the federal tax base.

The Conservatives used budgets and fiscal updates from 2006-2008 to introduce sweeping personal and corporate tax changes. Federal revenue in 2014-15, the last full year of the Conservative mandate, is estimated to be $285 billion, which means that Conservative actions have reduced the tax base by over 10 per cent since they took office. While many of these tax reductions were small, targeted tax credits (such as the fitness and public-transit tax credits), significant revenue was lost through a handful of much more consequential measures.




Browse

How we got here

  1. If I were a member of the opposition, I would never say “Stephen harper”.  I would say “the deficit Prime Minister”.

  2. He’s quite right….things were doing well the day before Harper took over.

    Not long afterwards, the surplus was blown,  revenues were cut, and Harp was agreeing with Bush and the G20 to ‘stimulus’ spend.

    And now we have a structural deficit.

    • Go back and look at the chart Macleans helpfully provided Emily.

      Revenue has been flat since 1960. Tax evasion, leakage, deadweight loss – for a number of reasons there is a limit to how much money the government can squeeze out of the economy.

      Spending has been relatively flat too. We’re talking small movements around the margins, even during Martin’s supposedly drastic cuts in the 90′s.

      So what explains deficits ? It has nothing to do with Harper.

      The cyclical nature of the bussiness cycle. Its luck of the draw who’s in power when the economy is on the up and when its on the down.

      Don’t get voted in during a recession. Just ask Bob Rae.

      •  I can see you don’t comprehend the situation, and I’m even going to try explaining it to you….neither the time nor the patience. Sorry.

  3. Of course he’s right. What we have to get past is the idea that this gang gives
    a damn about deficit or debt about as much as Dick Cheney did. It’s all an
    exercise in gutting gummint to a level where we have a military equipped for
    flag waving purposes and a business movement whose every stated need is met.
    Of course they’ll have to pay some passing attention to some public services
    sometimes … but their heart is not in it … because they have not  degraded
    our sense of society to that point yet.
    An interesting pov …

    http://www.johnkay.com/2012/03/28/my-generation-should-repay-its-good-luck#.T3LzC12ZBsU.twitter 

    • That’s why DND took the biggest cut in this budget? Gimme a break.

      • Please do not disrupt the lefty narrative.  That is a Thoughtcrime in Wherryland.

  4. This analysis is why I’ve been scratching my head for years now – everyone just blithely spouts off that the Conservatives are ‘dominating’ the economy issue but no one ever counters them. It’s just taken as fact that a party with the word “Conservative” in it is fiscally responsible when it has so far been proven that they are far from it.

    Bankrupting the state has zero net benefit for its citizens – I always find it weird that people love a GST cut but it’s the most democratic of all taxes. Cutting the GST sees major savings on massive purchases only – I’m willing to bet that the average Canadian will only buy one house in their lifetime. Probably only two cars, several pieces of large furniture – these large-priced items are the only time you’re going to notice large tax savings in a GST cut. The rich, however, might buy more houses on average, more cars, more appliances – so they get to save even *more* money because they’re more frequently buying big-ticket items.

    The GST cut is just a tax cut for citizens who are already well-off.

    • Why is a GST cut any worse than an income tax cut in terms of being “visible”? I’d argue an income tax cut is just as “invisible” as a GST cut, when it’s spread across 26 paychecks per year.

      Sure, you don’t really notice the GST cut on each individual purchase, just like you don’t really notice an income tax cut on each individual paycheck. It’s how it nets out at the end of the year that counts.

      And you say a GST cut is just for well off citizens…how does an income tax cut help the poor schmo trying to get by on $20K a year, who already doesn’t pay a dime in income tax? A GST cut is the only tax relief that guy’s ever going to get.

  5. Aaron, I’m confused…Here are the Government of Canada revenue numbers between 2005 and 2009:

    2005: $212M total: Income $133M, Consumption $47M
    2006: $225M total: Income $144M, Consumption $49M (GST cut from 7% to 6% July 1st)
    2007: $231M total: Income $153M, Consumption $45M
    2008: $253M total: Income $167M, Consumption $49M (GST cut from 6% to 5% Jan 1st)
    2009: $237M total: Income $153M, Consumption $42M (recession year)

    Aaron, do you have any idea what McNair is referring to when he says that with revenue of $285M forecast the Conservatives have reduced the tax base 10% since taking office? I’m not seeing it.

    Of note…revenue from consumption taxes in 2008 was the highest its ever been, even though the GST was at 5% for the entire year. Explain that, GST-cut haters?

    • Tax revenue increases as GDP grows.  By pulling out $30bn (figures from Tory budgets), revenue is $30bn less than it otherwise would have been.  If Government of Canada revenues had been able to grow without those tax reforms there would be no deficit today.  That does not mean that tax revenue in absolute terms would shrink from 2006 onwards.

  6. Yes, let’s criticize the budgets from 3 years ago. Great talking points guys.

Your email address will not be published. Required fields are marked *