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Wednesday, 04 September 2013 14:25

Federal Conservatives need to get their fiscal house in order

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A Conservative mail-out asks “Who’s on the right track to enhance Canada’s fiscal strength?”

An action listed is closing tax loopholes. Yes, it is right to close tax loopholes, but more importantly the tax rates need to be right.
The corporate share of federal revenues fell three per cent, from 16 per cent in 2006-07 to 13 per cent in 2011-12, after the federal government cut business taxes to prime the economy.
The priming analogy proposes that private sector employers will spend tax savings on job creation and research and development. However, unlike water, money does not follow intractable physical laws.
Large Canadian corporations have a $300 billion pool of stagnant money so the priming could have flowed into this pool, not the economy.
Even if the three per cent was used as a fiscal multiplier for economic growth as the government hoped, would it have been more effective to lower only the small business rate as smaller companies generally do not let money stagnate?
Could the government have directed the three per cent to the public sector to create even more jobs?
These are two “tracks” not taken so we will never know.
Whether free market economists like it or not, our government is responsible for approximately 40 per cent of our GDP. Every track it takes is a positive or negative fiscal multiplier. Once the three per cent money is out of government hands, we have no control over its flow.
We need more evidence-based routes, not hopeful analogies, before taking any track.
Nancy Carswell, Shellbrook, Sask.

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