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Thursday, March 26, 2009
2009 Ontario budget includes tax cuts.
OK, so there are some pretty bad parts of Ontario's 2009 budget - namely the fact that they are spending billions and billions of dollars more than they have. $57 billion more than they have over 7 years, which, like the federal budget, is likely an underestimation of their deficits.
But there are a few things to be happy about - namely, income tax cuts. Dwight Duncan has raised the personal exemption on Ontario's income tax cuts, and corporate taxes are being cut to 10% by 2013.
I don't feel that strongly about the harmonized sales tax, but there are plenty of economists who do and are going to be very happy about it. I think it would have made a lot more sense to shave a few points off the sales tax than to start sending out cheques, but hey, it is Dalton McGuinty we're talking about, here.
Posted by Janet Neilson on March 26, 2009 | Permalink
Comments
$57 billion more than they have over 7 years, which, like the federal budget, is likely an underestimation of their deficits.
Posted by Janet Neilson on March 26, 2009
Likely? And what facts have you based that on? Or is it mere speculation on your behalf?
Posted by: The Stig | 2009-03-26 3:34:00 PM
It is speculation, since it's, you know, the future. If I ever become reliably precognitive, I promise I'll use my powers to make gobs of money and not to harass you by speaking ill of the Dear Leader.
TD Bank has also forecast that the federal deficits over the next two years will be around $18 billion higher than the government planned for.
Posted by: Janet | 2009-03-26 4:30:55 PM
Janet, I am curious to see how this all washes out. My guess is that, if you did the accounting, it would be a net tax increase. They will be spending more than they will ba taxing, and this money has to come from the same place it always does. Then out of the other side of their mouths, they announce tax cuts.
The more I type the more I am convinced this is indeed a tax increase. The announced tax cuts are a diversion. If they need to "stimulate" the economy, it is because they feel they need to spend more money. If they believe this then they would not cut the very source that will fund it.
Posted by: TM | 2009-03-26 6:36:04 PM
Stig,
It's called not being naive. Government, like corporate, revenue projections for recessionary periods are usually over-optimistic. People usually underestimate growth when times are good and overestimate when times are bad.
Posted by: Charles | 2009-03-26 7:09:37 PM
Tax cuts coupled with deficit spending (unless the tax cuts are much larger than the deficit -- when has that ever happened?) are pretend. Either Ottawa prints money for them (and lowers the value of everyone's money -- a hidden tax) or they borrow money that future generations will have to pay back with interest in the form of taxes.
This old trick is what Republicans use to win votes from simple people unaware of economics. It is more pernicious than no "tax cuts" at all or raising taxes to cover the increase in spending.
Posted by: Michael Cust | 2009-03-26 7:34:47 PM
Stig,
It's called not being naive.
Posted by: Charles | 2009-03-26 7:09:37 PM
No, it's called guessing. And anyone who thinks they can predict what will happen to the economy next year let alone for 7 years is the one who's naive.
Posted by: The Stig | 2009-03-26 8:34:30 PM
"Duncan has raised the personal exemption on Ontario's income tax cuts"
This is actually a very bad idea. Tens of thousands of voters will, as a result of that move, no longer care what the rate of income taxation is. When one is no longer required to pull the wagon, one has little reason not to hop upon it.
Cutting income taxes is indeed preferable to cutting sales taxes, but - when it is done gradually - the right way to do it is to work toward eliminating progressive rates. Instead of lowering the tax rate on the first tax bracket, the rate on the last tax bracket should have been moved downward, closer to the rate on the first tax bracket (so that brackets can be eliminated). Reducing the number of people who pay any tax is, politically, the route to ensuring that the tax (a) remains in place, and (b) transfers more wealth from those who earn it to those who do not.
Posted by: Paul McKeever | 2009-03-26 8:39:03 PM
My understanding is that the combined taxes have no exemptions, unlike the GST. which had many.
The price for living in Prince McGuinty's nanny state just went up.
Posted by: peterj | 2009-03-26 8:50:44 PM
“…corporate taxes are being cut to 10% by 2013.”
By 2013, the only corporations left in Ontario will be the one who make tumbleweeds. (I got that joke from a Family Guy episode. Funny?)
Posted by: Matthew Johnston | 2009-03-26 9:11:11 PM
Stig, you are right for the most part. But here is my prediction anyway; there will be an economic recovery.
I have more that are just as good. Increased tax rates will slow down the economy/recovery.
How about this one; if hiding a fact benefits the ruling party, they will hide it.
Posted by: TM | 2009-03-26 10:46:01 PM
Excellent points Paul.
You know, you should consider running for political office or something... or maybe produce a platform full of similarly excellent policy ideas for the big parties to steal.
But seriously: Will the FPC be running candidates in the next Federal election? Do you have ideas about how you might attract the large number of now-disaffected fiscally conservative CPC voters?
Posted by: Kalim Kassam | 2009-03-27 6:58:48 AM
Tax cuts coupled with deficit spending (unless the tax cuts are much larger than the deficit -- when has that ever happened?) are pretend.
Posted by: Michael Cust | 2009-03-26 7:34:47 PM
Mike - I agree, but I do have to think that going into deficit to fund tax cuts is better (well, less bad) than deficit spending to fund even more, say, government infrastructure spending.
Posted by: Janet | 2009-03-27 7:47:34 AM
Janet, good point.
Posted by: TM | 2009-03-27 6:05:51 PM
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