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PostPosted: Tue Mar 13, 2007 8:46 pm    Post subject: Budget Should Aim to Improve Canada's Productivity Reply with quote

My dream come true. The full Story at


Here's the top three initiatives Flaherty needs to take in Mondays budget.

Cut taxes In good times and bad, Conservative government or Liberal, Canada remains one of the most heavily taxed jurisdictions in the world. Take, for example, the effective tax rate on capital. Sweden's is 17.8%. Ireland's is 14%. Canada's is 36.6%.
Complicated, distorted and onerous, our business tax system absolutely saps productivity, discouraging investment and innovation across the board.
Canadian families have it even worse than business. The average family in this country spends approximately 46% of its income on taxes, virtually guaranteeing a moribund standard of living. (Most OECD countries come in at around or below 40%.)
A competitive corporate and personal tax structure is critical to improving Canada's productivity -- and through it our prosperity.
The chamber is calling on the federal government to reduce personal income tax rates across all tax brackets, but particularly for low-and-modest-income Canadians, those who earn up to $37,178 in taxable income. Their tax rate should be restored to 15%, reversing the regrettable half-a-percentage point increase of last May's budget.
In order to attract and retain the highly skilled human capital that we so desperately need, the top federal marginal personal income tax rate of 29% should be raised to $150,000 from the current $120,887.
Mr. Flaherty can begin the much needed overhaul of our business tax system by immediately reducing the general corporate income tax rate from 21% to 20% -- and by one percentage point in each of the following three years.
And he should ensure that the Capital Cost Allowance rates in Canada are competitive for Canadian industry to encourage needed investments.
The cost of these measures would be a little over $2-billion, but the payoff from these and other tax cuts would be far greater.
Cut spending The federal government may be awash in budget surpluses ($7.3- billion at last count) but it continues to siphon off more revenue than it requires from the Canadian taxpayer in order to spend more than it should.
Between fiscal 2000-01 and 2004-05, program spending at the federal level rose to an average annual rate of 8.2%, well above the pace of Canada's economic expansion.
The current government has called for a 7.1% increase in program spending in fiscal 2006-07 and 4.5% in 2007-08. It's not exactly harsh restraint.
The chamber has recommended that program spending be held to 3% annually, which would accommodate anticipated increases in inflation and population. Any new spending must be found through the reallocation of priorities (just as business has to do), not by asking taxpayers to remit even more.
It's all about discipline, which should be the theme of a comprehensive fiscal program that would leave the government more room for tax relief and other productivity incentives.
Cut the national debt At $481-billion, our debt is still too high -- 15 of every dollar the federal government collects in revenue goes to service it. That's money that will never be spent on improving our infrastructure, or on research and development, or on social programs.
The chamber is calling on the government to bring down the debt-to-GDP ratio to 25% (from its current 35%) by 2012.

Of course, savings realized from lower interest payments on a reduced public debt would leave Mr. Flaherty with more room to cut taxes, putting Canada on a more competitive footing. That's a virtuous circle.
If we're going to improve our productivity, major changes will be required in a range of areas -- external and internal trade, immigration, labour laws, infrastructure, energy and the environment, technology development and our relationship with the United States, among others.
But productivity growth starts with the foundation of solid fiscal policy. And Canada's foundation requires some major reconstruction.

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PostPosted: Wed Mar 14, 2007 8:19 am    Post subject: Reply with quote

Paying down the debt also has the advantage of freeing up savings for private sector investment and lowering interest rates.
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Budget Should Aim to Improve Canada's Productivity

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