Flaherty promises new tax relief, pledges to eliminate federal debt

[Mccree]

Originally Posted by jharp

is that based on a per capita level?

I think it is a percentage of GDP

[Lurch]

Originally Posted by jolinar of malkshor

What?? They got rid of the debt. But I would agree that they have no vision currently.

Not sure I follow this. US is running a big deficit and growing slowly. Canada is growing faster and running a surplus. As such, as a ratio of debt to GDP, I believe Canada will have less debt than the US in 2006 and most likely the foreseeable future.

[Calgaryborn]

Originally Posted by jharp

is that based on a per capita level?

It's Cowperson's link. I believe it is based on percentage of Gross Domestic Product. That is probably a more accurate way of determining a countries ability to maintain and/or pay off their debt. You can have a lower debt per person but still have no means of servicing it.


http://www.answers.com/topic/list-of...by-public-debt

[Cube Inmate]

On a side note, it would be a really refreshing change if government would stop announcing initiatives with impressive-sounding dollar figures (e.g. "22 Billion in tax cuts") and instead give us the real goods. A promised $22B over six years, by a government that will fall within the next 8 months, doesn't inspire confidence.

[jolinar of malkshor]

Originally Posted by Lurch

Not sure I follow this. US is running a big deficit and growing slowly. Canada is growing faster and running a surplus. As such, as a ratio of debt to GDP, I believe Canada will have less debt than the US in 2006 and most likely the foreseeable future.

Sorry Lurch, I quoted the wrong post. My apologies.

I agree with you.

[jolinar of malkshor]

Originally Posted by jharp

in principle that would be fantastic, but any party in power that long...looses its edge (see current AB gov't).

What?? They got rid of the debt. But I would agree that they have no vision currently

[MarchHare]

I haven't run the numbers, but perhaps this level of tax cut can be accomplished without cutting, but rather by just stemming the growth!

That's not what I'm saying at all. In fact, I'd even be in favour of cutting program spending further and using the money saved for debt repayment (perhaps not to the same degree that was done here in Alberta in the 90s, though). What I'm saying is that the $22 billion tax cut shouldn't happen and that money should instead be spent on debt repayment. Rather than giving back a few hundred bucks per year to the average Canadian taxpayer (which in the grand scheme of things doesn't really amount to anything), take that money and use it to eliminate the debt sooner.

I'm also curious to see whether or not this tax cut goes beyond what the Martin Liberals gave us a few years back. If you remember, Harper's Conservatives repealed the last Liberal income tax break in order to pay for their reduction of the GST. Will they be restoring taxation levels to what they were when the Liberals left power, or will they be going a step further (or perhaps not even going that far)?

[Calgaryborn]

It appears from the Reagan economic model that the more you cut taxes the more the economy grows. If you give a person a $500 raise they will spend the raise and borrow that much more. That investment will have an impact all the way down the line. Companies make more money when they are producing at full capacity and that has a trickle effect all the way down the line.

[Phaneuf3]

Originally Posted by Calgaryborn

It appears from the Reagan economic model that the more you cut taxes the more the economy grows. If you give a person a $500 raise they will spend the raise and borrow that much more. That investment will have an impact all the way down the line. Companies make more money when they are producing at full capacity and that has a trickle effect all the way down the line.

good thing. i was getting worried about the economic depression we've been having here in alberta the last little while - lets kick start the economy, get unemployment down again and get this province back on the rails!

[Cube Inmate]

Originally Posted by MarchHare

That's not what I'm saying at all. In fact, I'd even be in favour of cutting program spending further and using the money saved for debt repayment (perhaps not to the same degree that was done here in Alberta in the 90s, though). What I'm saying is that the $22 billion tax cut shouldn't happen and that money should instead be spent on debt repayment. Rather than giving back a few hundred bucks per year to the average Canadian taxpayer (which in the grand scheme of things doesn't really amount to anything), take that money and use it to eliminate the debt sooner.

I'm also curious to see whether or not this tax cut goes beyond what the Martin Liberals gave us a few years back. If you remember, Harper's Conservatives repealed the last Liberal income tax break in order to pay for their reduction of the GST. Will they be restoring taxation levels to what they were when the Liberals left power, or will they be going a step further (or perhaps not even going that far)?

Your sentiment has some merit... why offer a tax cut if we're trying to pay down the debt, when we're already used to paying a certain level of taxes? Valid opinion, but others have a different philosophy on taxation.

To me, taxation and spending is a big balancing act with a value placed on every dollar going in and out. If you were keeping score, you would ideally add "points" for every dollar spent wisely, and subtract points for every dollar taxed from the people. Essentially, a tax dollar is well-spent if the value obtained by the government spending it is greater than the value that would have been had if the taxpayer had spent it.

It ain't that simple, though, because value is a subjective thing. It's further complicated by the fact that you can't necessarily evaluate costs as you would personally, using a "future value" type of calculation, because those who are paying are at all different phases of life. Debt repayment has a lot less value to a 90-year-old than it does to a 20-year-old.

In present terms, government debt servicing appears to amount to about $33.7B annually. Unfortunately I've lost my sources, but I recall that about 75% of that is internal debt, with only about 25% being international. Correct me if you can. Maybe this is simplistic, but it would seem to me that as long as this money is only being re-distributed within Canada from debtors (the taxpayer) to creditors (presumably other taxpayers), then it shouldn't be considered to be a 100% waste of money.

In the thinking of this government, (I guess), spending the mythical $22B to pay down the debt would have less value than allowing the people to spend it themselves. Frankly, that's true in some circumstances and false in others. If I send my tax savings into an RRSP earning 7%, I'll benefit more than if my taxes had been spend on debt repayment. If I spend my tax savings on a Jenna Jameson blow-up doll, then I'd agree with your take.

To me, it all comes down to this question (and answer): Who would you trust more to handle your money? To me, the less money the government gets its hands on, the better.

Sorry for the long and somewhat disjointed reply. As a non-economist, all I can say is that it comes down to a simple philosophy, and apparently you don't agree with Jim Flaherty's. Whether he's right or you are is simply a matter of perspective.

[FireFly]

Sometimes if you pay off your debt early you end up with penalties. I imagine the 22 billion in tax breaks takes that into consideration.

[Phaneuf3]

Originally Posted by FireFly

Sometimes if you pay off your debt early you end up with penalties. I imagine the 22 billion in tax breaks takes that into consideration.

i'm sure it has more to do with trying to win the next election. doing what's best for the country isn't always the same thing as doing what'll get your party another term in office. if it was, the liberal and NDP parties wouldn't have made even a single government.

[FireFly]

Originally Posted by Phaneuf3

i'm sure it has more to do with trying to win the next election. going what's best for the country isn't always the same thing as doing what'll get your party another term in office. if it was the liberal and NDP parties wouldn't have made even a single government.

Perhaps it does, regardless, I'm sure they're aware of the potential penalties to paying off the debt early, and have beased their schedule accordingly. If that's the biggest thing they want to do, that's the first thing they'll look at in regards to budgeting.

My point was that it's likely the debt reduction and tax breaks are independant of each other, but take each other into consideration. The government didn't select random years and random amounts. And the reason that 22 billion in tax relief is not being put towards the debt has to do with paying it off too early and facing penalties for it. Although they could put it to say health care... But then again, if Canadians have more money in their pockets, they spend more, and pay more tax that way (GST). Also, with the taxing of income trusts, they'll likely gain a lot of money there.

[Cowperson]

Originally Posted by Calgaryborn

It's interesting that we have a greater debt load than the States even with their investment in war .

If I'm not mistaken, the simple increase - not the total - in tax receipts in the last two years in America has been greater than the Pentagon's entire budget.

As well, the economic footprint on Gross Domestic Product of the "military industrial complex" is at one of its lowest points in history, about one-third the footprint it was when Eisenhower issued his warning 50 years ago and about one half the footprint of the Reagan spending binge.

America has a very large, very dynamic and very diversified economy including, I think, that its the number two or three oil producing nation in the world, something people tend to forget.

But Lurch is right that Canada and the USA are going in dramatically different directions at the moment . . . . .

It used to be that our short term money rates were about three-quarters to one percent higher than America's to support our currency . . . . . now its the opposite case as the Bank of Canada tries to keep our currency from appreciating too much.

Still . . . . . time changes all things. Canada's performance relies a lot on commodity prices right now and that's a pyramid too.

My thoughts.

Cowperson

[Lurch]

Originally Posted by Cowperson

........
It used to be that our short term money rates were about three-quarters to one percent higher than America's to support our currency . . . . . now its the opposite case as the Bank of Canada tries to keep our currency from appreciating too much.

Still . . . . . time changes all things. Canada's performance relies a lot on commodity prices right now and that's a pyramid too.

My thoughts.

Cowperson

BoC has no exchange rate mandate. Inflation is its sole agenda - exchange rate is merely a side effect. More accurately, IMO, is that Canada's improving exchange rate has allowed the BoC to hold off on further rate increases that would have been needed to put the brakes on the economy absent the currency appreciation.

[FlamingLonghorn]

Originally Posted by Calgaryborn

It appears from the Reagan economic model that the more you cut taxes the more the economy grows. If you give a person a $500 raise they will spend the raise and borrow that much more. That investment will have an impact all the way down the line. Companies make more money when they are producing at full capacity and that has a trickle effect all the way down the line.

Reagan wasn't the first to think of this model. In fact Hoover used the very same model right before the Great Depression. I think that different economic strategies work in different situations. I don't think "Reaganomics" will bail a country out of a recession and/or recession, however it might strengthen an already strong economy. The problem with Reaganomics during a recession is that the corporations just pocket the money because they don't want to spend it during slow times...

[Cowperson]

Originally Posted by Lurch

BoC has no exchange rate mandate. Inflation is its sole agenda - exchange rate is merely a side effect. More accurately, IMO, is that Canada's improving exchange rate has allowed the BoC to hold off on further rate increases that would have been needed to put the brakes on the economy absent the currency appreciation.

Currency stability is a tool, not a goal.

Cowperson

[Frank the Tank]

I can't help but be pessimistic and say to myself, "I've heard this all before". I'm sure my tax releif will be to the tune of $100/year or something equally as awesome. Just like my child care benefit.

[jolinar of malkshor]

Originally Posted by Frank the Tank

I can't help but be pessimistic and say to myself, "I've heard this all before". I'm sure my tax releif will be to the tune of $100/year or something equally as awesome. Just like my child care benefit.

Well....if you have a child it is $1200 a year.

[Frank the Tank]

Originally Posted by jolinar of malkshor

Well....if you have a child it is $1200 a year.

Really? Wow. Thats awesome.

Daycare (part-time) runs me $150/week, so $100/month in support is far from awesome, like most people were claiming during the last election. That was my point.