We Need a Goods and Services Tax - Like CanadaPermalink +
Fri, Dec 28, 2012, 12:33 pm // John Lesow
"I don't even know what street Canada's on...."
--- Al Capone, 1929
Mr. Capone did not let geographical challenges impede his success in business. An ardent capitalist, he gave the public what they wanted. He also qualified as a liberal redistributionist long before FDR. Capone set up soup kitchens for the poor during the Great Depression. What a guy.
And he certainly had no hesitation about admitting his lack of knowledge about Canada. Even today, a lot of Americans don't know much about Canada. And could care less.
As a Canadian citizen and taxpayer, I was interested in a reference to Canada on Jean Melious' blog, Get Whatcom Planning. Jean has recently posted several articles on "Agenda 21. "
Apparently, references to Canada and the United Nations are made in Glenn Beck's latest book of the same title.
I certainly don't want my tax dollars funnelled into support of some silly new world order, so I checked out Jean's links.
Fortunately, the commentary about Canada's purported endorsement of One World Government centered around some stale statements by Jean Chretien, our former Prime Minister (1993-2003). In politics, 9 years is an eternity. I doubt if Chretien's vague support of the UN/Agenda 21 program carries much weight in Canada today. There are more important matters to attend to.
As we teeter towards the "fiscal cliff" in the U.S. we would do well to consider some tax policies of our neighbor to the north. Specifically, the Goods and Services Tax, now applied to just about everything one purchases in Canada, with the exception of groceries and medical services.
Introduced by the Conservatives in 1991, supporters of the GST claimed it was necessary to maintain the high level of government services to which Canadians have become accustomed.
As with most new taxes, the GST was reviled by most. Particularly because most Canadian provinces, with the exception of Alberta, already had their own sales tax .
In Canada, the average provincial sales tax is about 6% (like Washington). Still, adding an additional 7% federal tax on top of an existing provincial tax was a pretty good whack. Particularly on big ticket items like cars, boats, homes and RVs.
Instituting the Goods and Services Tax was a tough political sell. Dubbed by opponents as the "Gouge and Screw" Tax, the defeat of Brian Mulroney's Conservative party in the 1993 election was largely attributed to public outrage over the GST.
Although the UN loving, Agenda 21-promoting Jean Chretien campaigned against the GST in the 1993 election, he kept the tax in place after the Liberals won. Who expects politicians to keep their promises?
Besides, the GST provided a reliable revenue stream for all those great government programs that Canadians like to crow about.
Chretien's successor, Liberal Paul Martin, vowed to reduce the GST but wisely retained it during the stormy economic period in the late 90's, when the value of the Canadian dollar slumped to 62 cents U.S. and Canada was, proportionately, nearly as debt ridden as the U.S. is now.
Due to unsupportable unemployment insurance benefits, out of control transfer payments for education and health and a host of other extravagances the country could no longer afford, Canada was facing it's own "fiscal cliff."
Or, as Liberal Prime Minister Paul Martin put it, "Canada hadn't reached debt Armageddon, but we could see it from there."
Fast forward to 2012.
The Canadian dollar is over par with the U.S. buck and will likely stay that way for years.
Due to prudent regulation, Canada's banks avoided the fiscal meltdown experienced by most American institutions in 2008. Fluctuations in the Canadian real estate market have been minimal. Even in these tough economic times, it is still difficult to find a shotgun shack in the Vancouver area for less than half a million. Canadians are flocking to Whatcom County and scooping up our distressed real estate at fire sale prices. A mixed blessing, for sure.
Internationally, Canada was recently ranked 9th on the list of the Top 10 Countries in the World. The U.S. came in 16th.
The reliable revenue stream provided by the GST can't claim all the credit for Canada's economic good fortune, but it has certainly helped. As well as the fact that Steven Harper's Conservative government has held sway for 8 years and counting.
As we lurch toward a possible recession in 2013, it would be a good idea if Democrats and Republicans could agree to institute a national sales tax, similar to Canada's GST.
Stop arguing about the definition of "rich." Whether you pull down $250,000 or a million a year, raising the rate to 39% on these folks is not going to pull the United States out of the fiscal mess created by current and past administrations. Even Harry Reid would (or should) admit that.
But pols have been surprisingly silent about introducing a national sales tax similar to Canada's GST. Even if you are a class warrior and hate the rich, it could be argued that a Goods and Services Tax is, in fact, an indirect tax on the rich. Most of the rich people I know like to buy expensive stuff.
Moreover, consumption taxes give all citizens "skin in the game" as our president likes to say. More than half of Americans pay no income tax at all. Compared to most industrialized countries, we are undertaxed.
Given the results of the last presidential election, plus previous judicial endorsement, it's a pretty good bet that the Affordable Care Act is here to stay. Why not earmark the revenues from a national sales tax to pay for it?
Prices and taxes are higher in Canada, but with a steady stream of funding from the GST, income taxes have been held in check over the past few years and recently the Harper government was able to lower the GST rate by two percentage points to 5%
Canada's universal health care system remains relatively intact, we still have a functioning government pension program and a stable banking system.
Canadians can thank the Liberal and Conservative governments for putting aside their ideological arguments 20 years ago and supporting the GST.
The Democrats and the GOP could take an economic history lesson from Canada as we approach the "fiscal cliff."
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