Quote:
Originally Posted by powderjunkie
Income taxes seem like they'd be far too slow to respond, and since they are only an annual touch point they probably wouldn't impact consumer behaviour as much.
Increasing sales tax might work a bit better/faster, but again I'm not sure they'd have the same impact to consumer behaviour.
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I think if you wanted to fight inflation and slow down the economy a temporary hike to the GST would be a great tool. Make it temporary with a fixed end date - that would cause people to delay consumption until the tax ends, which has the opposite effect of inflation expectations. Inflation becomes entrenched when people expect it and buy stuff as soon as they can to avoid future price hikes. Providing an incentive to delay consumption would offset that.
It would also generally take money out of the economy quickly but in a reasonably fair way (especially if you bumped rebates to compensate for low-income). If they repaid debt (or at least reduced the deficit) with the money instead of finding something to spend it on it would also lower money supply.
But no politician wants to run on that platform, so it'll never happen and the BoC has to fight inflation by itself.