Chapter 4 Media Article

"GST a Taxing Debate"
- The Vancouver Province January 16, 2006 -

This article contrasts personal income tax with consumption tax (GST) and their roles of government intervention in Canada. According to economic theories, lowering personal income tax or consumption tax will provide more incentives for people to spend on goods and services, thus can promote local economies. However, this is also one of the crises faced by the Stephen Harper’s Administration after their recent victory in the federal election. The Conservatives, apparently, have promised to lower the GST as well as to improve public services; however, it is evident that Canada cannot afford to lower taxes and improve public services simultaneously without risking more national debts. How is the "Progressive Conservatives" (an oxymoron) planning to pay for more public services while reducing our consumption tax simultaneously? The Liberals believes not. The Liberals believes Canada should not reduce its consumption tax. It, on the contrary, advocates the reduction of personal income tax instead, and this article agrees with the Liberals by suggesting that it is more sensible for the government to tax on consumptions rather than to tax on individual incomes.

Relation to Chapter 4 – Government Involvement, Level of Taxation, Progressive Approach in Taxation

The high marginal tax rate due to Canada's progressive taxation system have frightened many indigenous intellectuals to move to more economically-freed nations such as the United States, where personal incomes are higher while personal income taxes are lower. This high marginal tax rate of highly-paid professionals is caused by government intervention in our society. As government expenditure increases due to more public services, taxes from taxpayers are the only way to finance these excessive expenses. One of the ways to raise taxes would be to to increase consumption tax (GST); another way would be to increase income tax rates in our progressive taxation system. However, according to this article, why "'punish' employment with our progressive income-tax system", and risk losing even more professionals to the United States, when we can "'punish' people who consume goods and use services"? Therefore, an increase in taxation on employment will only discourage people's willingness to work. Ultimately, to offset the financial trouble the Harper administration will soon be facing, this article concludes by stating it is much wiser to follow what the Liberals have been doing for the last few years - cut public services, and maintain taxation rates at a steady level. In whole, I believe this article addresses the need of taxation in Canada, and how it is impossible to lower tax and increase public services at the same time without risking more debts. However, this article also makes me realize why the previous governments would want to tax more on employment rather than consumption - because employment is a definite, fixed income for them, whereas people can choose to not buy anything and thus making consumption taxes an unreliable source of income.