How To Cut Taxes
You've read a lot in our almost exclusively right-wing media about howdesperately we need tax cuts. One of the right's most higly-toutedways to cut taxes is to move to a flat tax, like Alberta will nextyear and as the newly-renamed Reform party advocates.
These flat-tax plans are supposed to be great for everyone; all peoplewin! That is not the case. If tax cuts are really what is needed to``boost the economy'' (which seems to be doing quite well withoutboosting), then there is a much better way than flat-taxes.
The flat tax Alberta will be moving to next year and ``Solution 17'' [beware the centered text] advocated federally by Preston Manning's Reform party are quite similar: personal exemptions will increase slightly and the current indexed system will change to a single rate.
What does this do? If the single rate is low enough (as in the two examples) then everyone does indeed pay less tax. However, lowering taxes this much requires a huge drop in revenue and hence cuts to spending. The lost spending is almost a billiondollars in the case of Alberta. Advocates claim that this drop will be made up by a more buoyant economy. Whether this is true or not, moving to a flat tax from our indexed system means that the richer you are, the bigger your tax savings; this only worsens the problem of the rich seeing farmore improvements as our economy grows. The lowest- income tax-payers will see almost no savings in a move to a flat tax, whereas the extremely high-income tax-payers will see the most.
The way to use these same government cuts as tax cuts is to simply raise personal exemptions (and change little else, with the exception of much higher stay-at-home spousal exemptions). This means that everyone sees the same tax savings. It also means also that the tax burden doesn't get moved toward the lower incomes, as with a flat tax.