Sunday, April 10, 2011

Promise: Tax Cut Test ... A thumbs ....

I spent the last two hours researching tax cuts. Before, I share the "new found knowledge", I have to write the motivation behind seeking the knowledge. I have to vote on May 2!

The phrase tax cuts is frequently used in a non-fact based rhetoric by politicians as a way of promoting the partisan agenda of the party. Although there is nothing offered in the promise to substantiate what tax cut means, the term has a very powerful effect on non-interested voters, who will give you five minutes to make your pitch, and casual voters, who will skim literature, read headlines and can be seduced by a meaningful phrase.

I skim literature and read headlines, but I am a skeptic and do my own research and find my facts before believing what I read, or hear.

Here is what I found out around and about the world wide web on this topic.

The tax cut increases disposable income and encourages consumer spending. The increase in consumer spending increases the GNP, Growth National Product, which is an economic indicator of nation's wealth. At the same time the tax cut decreases government revenue which may create a budget deficit, or prompt cut on many government funded or subsidized programs to avoid the deficit.

Taxes are a percentage of a value, where percentage is 1, 2, 16% and the value is income, price of goods or any other item or category that is taxed. Clearly the larger the value the higher the tax therefore lowering the tax rate is equal to higher savings. For example lowering sales tax by 1% will save ~$150 on the purchase of Honda Fit ($14,480 CAD) and ~$400 on the purchase of a Mercedes C 250 ($38,800 CAD).

Bottom line the major benefactor of tax cuts are those who are well-off and don't rely on any federally funded program.

Canada has the lowest Corporate Tax in the Group of G7, 16.5%. The government is going to decrease this rate further by 1.5% to 15% (effective Jan 2012). The budget deficit is $5.93 billion. Government needs to think strategically and prioritize according to what is needed for the majority of the citizens not a select few.

My verdict for the platform who is committed to lowering the corporate taxes further before the federal budget deficit is handled is a big thumbs down.

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