Saturday, January 24, 2009

A self-funded budget proposal, creating immediate stimulus to Canada's economy

I would institute the following four broad measures to provide immediate stimulus to Canada’s economy:

(1) Reverse the income trust tax, to restore the collection of taxes on corporate earnings, in amounts greater than is otherwise collected from these companies, while at the same time providing a means of retirement income for seniors and those saving for retirement. Such a measure would stimulate direct investment in the Canadian economy and provide Canadian companies with immediate access to much needed investment capital, and a low cost of capital competitive advantage.

(2) Institute personal tax reductions of $15 billion a year, targeted at low income and middle income Canadians

(3) Institute an increase in the GST rate from 5% to 7% effective, January 1, 2011, which represents $15 billion in additional annual tax revenue for the government, sufficient to fully fund the tax cut in (2) above. The effect of (2) will also be to put more money into the hands of consumers, and the effect of the two year holiday on the GST increase will mean that more of that increase in after tax income will be devoted to consumer expenditures, than would otherwise be the case, since the “ GST tax window” would accelerate large ticket purchases by consumers on items like cars, home renovation, appliances etc. The other obvious effect of these two measures is they would, in combination, avoid creating any ongoing structural deficit whatsoever.

(4) The remaining portion of any budget initiative that I would institute would be devoted to expenditures in infrastructure, with an emphasis on green infrastructure, such as investment in wind and solar and creating high speed rail links in places like the Windsor-Quebec City corridor. These projects would be done on a basis that allows for investment participation by Canadians through their personal savings and RRSPs, to the extent possible, rather than the type of Private-Public-Partnerships that Flaherty is contemplating, that (no doubt) will favour offshore investors like MacQuarrie Infrastructure Group (part owner of Flaherty’s 407 give-away). To the extent to which these infrastructure projects can be funded with investment by average Canadians, they will not create deficit spending by the government and again provide a means for average Canadians to invest in Canada, rather than simply offshore investors and those 25% of Canadians who belong to pensions.


Polyian said...

Makes sense so it won't happen with Tubby and Stubby at the helm

Dr Mike said...

Simple with an immediate result--how cool is that.

Now if we just didn`t have a bunch of politicians standing in it`s way.

Dr Mike.

Anonymous said...

Another good reason to restore trusts or to lower the combined tax rate (corp and personal) on dividend income is to provide a Canadian investment that can compete with private and foreign-financed LBOs. Too many Canadian companies and trusts have been taken over by foreign-financed LBOs. It results in a huge loss of tax revenues since all of the interest expense associated with the debt flows to foreign investors, who pay no withholding taxes on the interest payments or income taxes here in Canada.