The government should think big and promote economic growth by lowering overall tax rates
Nobody ever argues in favour of a more complex tax system. Yet that’s what we get when we try to balance a long list of competing objectives – some high-minded, others perhaps more tactical in nature.
A recent example is the package of tax changes to assist families. They include a non-refundable credit of up to $2,000 for couples with children under 18; an increase to the child care benefit for families with children under 6; a new monthly benefit for families with kids between 6 and 17; a $1,000 hike to the child care expense deduction; a doubling of the children’s fitness credit, and a proposal to make it refundable starting next year.
Reasonable people can and will disagree about the wisdom of each of these proposals. But there are two things on which I suspect most of us can agree.
The first is that the goal of making life easier for middle-class and lower-income families is a laudable one.
The second is that I seriously doubt whether more than a handful of parents actually understand all of these various changes well enough to be able to explain them to their neighbours.
If it’s not exactly tax policy as conceived by Rube Goldberg, it comes pretty close.
I believe the government was right to focus on tax relief for workers and families. But at least on this occasion, it missed an opportunity to think big – to revise the tax system in a way that makes it easier for Canadians to do their taxes, while promoting economic growth.
In 1987, around the time I was entering politics, the federal government published a White Paper on Tax Reform. It was a Conservative government, and I was running for the Liberals. But there were a lot of ideas in that White Paper with which I agreed.
Mike Wilson, the Finance Minister who tabled it, said the central objective of tax reform is to reduce rates – because lower rates are the best incentive for growth, investment, savings and job creation.
His prescription was simple: “To get rates down, we must reduce tax preferences and broaden the tax base.”
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