It's Tax Cut Day

When is a tax cut not a tax cut? Apparently when the CPC creates it.

The CPC just took 1% off the GST starting today. Great - at first blush, it's going to cost me less to make a lot of purchases. Or is it?

"Budget 2006 proposes to increase alcohol excise duties to offset the impact of the GST rate reduction," the May 2 budget document said.

So...really what's happened is the government has done a shell game - they've shuffled taxes around so that the 1% GST reduction is simply moved into other taxes that are less visible to the consumer.

Next, how big is a 1% GST cut? They've been floating the $200-$300 savings that are to be had on purchasing an average car. A couple of hundred bucks isn't chicken feed, until you realize that to realize that savings, you have to spend $20,000-$30,000. Waitasec - most of us don't have that kind of disposable income each year. Most people replace their cars every 3-5 years. Assuming it's every 5 years, you suddenly realize that the $300 savings on a $30,000 car works out to the princely sum of $60/year. In Calgary, that's one good meal out at a restaurant.

A quick review of my grocery shopping receipts for the last few months shows that the GST is a very small fraction of my purchases each week. The biggest portion of my food bill are items that are already GST-exempt, and the minor things I do purchase mean that only a tiny fraction of the grocery costs in a month carry GST - so my weekly trips to the grocery store aren't going to save much; and my other shopping habits are fairly frugal - meaning that the 1% tax cut doesn't really add up to much.

Looking through some of the other bits of the conservative budget and its tax cuts, we find the following:

July 1 will also see other changes to the tax rules, including:

A new tax credit on employment income of up to $500 for the last half of 2006, rising to $1,000 in January for the full year of 2007.
The rate on the lowest tax bracket will go to 15.5 per cent on July 1, after the Liberals cut it from 16 per cent to 15 per cent in their fiscal update in November 2005.
The introduction of the annual $1,200 payment for each child under six.
A tax credit on transit passes.

Remember - a "tax credit" merely reduces your taxable income - often by a fraction of the maximum credit. This "employment tax credit" will probably work out to $20 or so a year for someone that pays taxes.

For low income Canadians, the Conservatives have delivered a slap in the face, increasing their marginal tax rate by half a percent. In my view, this is near criminal behaviour on the part of the government.

... and I've discussed Harper's $0.65/hr taxable child care payments before.