Link: http://www.canada.com/reginaleaderpost/news/story.html?id=7db9e52c-6e3c-4bf6-8488-0c73f1c29307&k=47423
Chapter 4
“Flaherty promises more tax cuts”-Canada Post, Published on October 17th, 2006
Tax is always a concern in every country to attract more businesses and employees to work in their country. On October 16th, 2006, Finance Minister Jim Flaherty announced there will be further tax cuts. Its purpose is to encourage businesses and workers to invest or work in Canada. Flaherty hopes this act will be able to compete with Americans. Flaherty also stated that even though tax reductions are taking place, Canada must continue to improve our tax competitiveness further more. His goal is to improve Canada’s tax system to the benefit of Canadian families and businesses. In the first budge in May, 2006, the Conservative government has announced over $20 billion dollars of corporate and personal tax has been cut. This includes tax cut in GST, which will affect greatly in small-businesses. The government announced an increase in the amount of workers after an elimination of corporate surtaxes in an earlier time. The government also encourages businesses to train apprentices and help tradespeople pay for their tools. However, Flaherty believed this change would disappoint the people when they are moving from social assistance into the job market. Flaherty admits that people who work would lose the benefits they get from social assistance and they have to pay for their marginal tax rates. Flaherty noted that Canada is one of the few industrial economies that still imposes capital taxes and retail sales taxes on business investment, so that will be his next goal to eliminate or decrease the rate. In conclusion, the federal government promises to make further changes in the tax system of Canada while making sure that they keep the budget balanced.
Relationships to Chapter 4
Personal and corporate tax are important aspects of a progressive income tax system. Personal tax includes marginal tax rates is the extra income tax paid in relation to an increase in income. The more you earn, the higher your marginal tax rates. Yes, it is true that when marginal tax rates is so high, more people would rely on social assistance because the amount they received from the government has not much difference compare to their income after they paid their personal tax. Also, why does Canada have lack of laborers? One of the reasons is due to a relatively high marginal tax rate. Some employees who earn over $20 000 a year would have to pay around $4 000, which is 35% of their income. Why do employees work so hard to earn more, then pay more? If personal and corporate tax cuts are really occurring, then there will be a change in the market. More entrepreneurs would enjoy investing in Canada because they can pay less; more employees would go back to the workforce. Canada can get more labour force and people might consider to work in Canada other than America. If GST is lower, it will affect greatly to small businesses because more consumers will spend more on the market. I think this will benefit families and businesses but I think the federal government should make sure they keep the budget balanced because the huge debt in Canada will go worse.
1 comment:
I agree that there is a lack of labor in Canada due to the high marginal tax of Canada. To avoid the next tax bracket, people rather take a vacation off from work rather than working so hard and having to pay more taxes. Since Canada is using the marginal tax system, I think that on top of having a tax cut, they should make a rule of making acception to those people who are just a few thousands off the next tax bracket. In the long run, this will have a better effect on Canada's economy. More people would actually want to stay working instead of taking vacations. Less people will complain about the lack of labor, especially those in health care.
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