It’s the GST, stupid

Stephen Gordon tries to figure out the federal deficit.

And here we have an explanation for the structural deficit: the cuts to the GST. Each percentage point of the GST generates about $5b-$6b in revenues (the figures above are net of the GST rebate), so the gap between what current revenues are and what they would be if the GST had stayed at 7% is about $10b-$12b – which is also the PBO’s estimate for the structural deficit.