There's been a lot of talk in this campaign about cutting the GST and/or cutting Income Tax. Which is fairer? Which helps out low and middle income Canadians the most?
Let me offer my own modest tax proposal -- let's scrap income tax and raise the GST.
Now before anyone calls the looney tuner on me, consider these numbers:
Canadian Government Fiscal 2004 Revenue
Income Tax $84,800,000,000
Corporate Tax $27,400,000,000
Note that the GST revenue is almost exactly one third the amount of income tax revenue. So scrapping income tax and raising the GST from 7% to 28% would be revenue neutral.
Yes, 28% is a whopping tax to spend on purchases, but on the other hand there would no income tax deductions off my paycheque. For me personally, that's a savings of around $350 a month. Suddenly, my idea doesn't seem so wacky now, does it?
The GST is strictly a voluntary tax. It automatically taxes an individual based on the taxpayer's ability to pay. For instance:
- a rich person might spend $4000 on a wide-screen HD TV. That's $1120 in tax.
- a middle-class person might spend $1500 on an LCD TV. $420 in tax.
- a lower-income person might spend $500 on the last of the tube TVs. $140 in tax.
Clearly, there are some problems with my idea. Low-income Canadians who pay little or no income tax are not going to benefit from this scheme, so some sort of equalizing payment would have to be developed.
And rich people, some of whom will do anything to avoid paying taxes, will undoubtedly try to import goods from other countries to avoid the new GST.
But in fact, higher income earners should love the new GST. The higher the income bracket, the bigger the income tax savings.
And imagine the other savings. Imagine a vastly downsized CCRA, not spending money to track, compile and check tax returns.
No more income tax audits, and no more income tax forms. No more loopholes for smart accountants to exploit.
I think there's something here. Paul, Stephen, Jack... any comments?