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Kevin Gaudet
 Canadian Taxpayers Federation 
Kevin Gaudet, Ontario Director CTF -  
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Dianne Saxe
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Kevin Gaudet
 Canadian Taxpayers Federation 
Kevin Gaudet, Ontario Director CTF -  
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GST Hike A Bad Idea

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THUNDER BAY, ON - February 8, 2010 - Kudos to Liberal MP Gerard Kennedy for having let the tax-hike genie out the
bottle. Recently, he went on national TV and speculated that Canadians would
accept a hike in the Goods and Services Tax (GST). Mr. Kennedy deserves
credit for putting this policy proposal in the window. It is only through
such open and honest debate that such a poor idea can be thoroughly and
resoundingly debunked and rejected.

Hiking the GST is a bad idea supported by a vocal few who can afford to pay
higher taxes. It would be bad for the economy and would serve merely to fuel
the federal government's already dangerous spending addiction.

Tax hikes for budget balancing is the easy path too often taken by
politicians. Compare how often politicians name a program that should be
reduced or eliminated versus how often they talk about a tax that should be
raised.

The federal government needs more tax revenue like Tiger Woods needs another
girlfriend. There's more than enough already. The problem isn't that we need
more. The problem is not being mindful of what we already have.

To put the argument that "this deficit is only due to a drop in revenue" to
the test, today's level of program spending should be put up against what
that level would otherwise be if it had only increased by the combined rates
of inflation and population growth - 2.5 per cent. Doing so from a base year
of 2003?04 would yield a difference of $65.2 billion today, leaving a
surplus of more than $10 billion. A similar analysis solely for the Harper
government, from when it came to power in 2006?07, reveals the deficit today
would be less than 9 per cent of what it is today; coming in at only $4.9
billion.

Importantly, this much smaller deficit would be truly cyclical, and not
structural.

It is widely reported that the Harper government's reduction of the GST by
two percentage points deprived the federal treasury of $12 billion it should
have had to spend. This just isn't true.

The reductions of the GST rate, from 7 per cent to 6 per cent in July 2006
and from 6 per cent to 5 per cent in January 2008, have seen a GST revenue
decline of only $10 billion, not $12 billion. GST revenue (net of rebates)
was $33 billion the year before the reductions and is projected to fall to
$23 billion this fiscal year. Not only has the revenue decline been much
less than reported, but the decline also comes during the current recession,
when all tax revenues have fallen.

Relatedly, those who favour a GST hike fail to note that total government
revenue over the same period has only declined by $5 billion, most of which
can be attributed to reduced revenues collected from business and personal
income taxes. Again, this revenue decline also coincides with the current
recession.

Raising taxes is a punishing approach to dealing with the recession. People
in British Columbia and Ontario this year will already suffer a huge tax
hike when the new harmonized sales tax kicks in; increasing the cost of
services by 7 per cent and 8 per cent respectively. Adding another point or
two to the GST would increase the cost of services by 10 per cent. As well,
Nova Scotia's Premier also is considering a 2 percentage point increase on
the HST. Talk should be about reducing taxes not hiking them further!

Increasing the GST will drive more tax avoidance and black market activity.

Hiking consumption taxes also hurts lower income earners more. Consumer
expenditures as a proportion of income fall quite dramatically as income
rises. This is because low income families must spend a much higher
proportion of their income on essentials.

A GST hike is neither a good way to spur job growth, nor is it a good way to
balance the budget. It is, at least, an honest proposal out in the open. Too
often politicians aren't straight on tax issues. At least Mr. Kennedy is
being honest about what he wants to do.

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