OECD says "Cut Taxes"
Bob Olsen
http://www.canada.com/newscafe/getcp.asp?bk=world&sk=981202/w120218.html
NATIONAL POST, 2 Dec 1998
Canadians' standard of living could fall, OECD warns
LONDON (CP) - The Canadian standard of living could fall
sharply during the next two decades, the Organization for
Economic Co-operation and Development says in its annual
report on Canada.
The Paris-based think-tank suggests that unless action is
taken, the Canadian standard of living could drop
substantially in comparison to the other 28 countries in the
organization, whose members are drawn from among the most
industrialized countries in the world.
"The lack of productivity advancement combined with both the
slow growth of labour inputs and the capital stock could, if
ongoing, lead to a substantial decline in Canada’s per
capita income (measured in purchasing power parities)
relative to the OECD average," said the report, released
Wednesday.
One possibility envisaged by the report’s authors is that
the Canadian standard of living could drop from about 110
per cent of the OECD average to just below the average.
The report says that compared with the major and fast
growing smaller OECD countries, "Canada has not kept pace on
several accounts over the 1990s." Those factors include a
decline in productivity, a situation unique to Canada among
OECD members.
Given the significant economic reforms Canada has instituted
since the mid-1980s, the country’s disappointing performance
on this front is hard to fathom, the organization says.
"These developments are difficult to explain . . . (But) the
implication of ongoing weaknesses is much clearer: without a
pickup in underlying economic performance the present high
level of Canadian per capita income, relative to the OECD
average, is unlikely to be maintained."
The report suggests a number of policy priorities are needed
to "arrest, or at least slow," this anticipated fall in
living standards. One will be music to many Canadian ears,
while another will likely draw groans.
Governments should consider cutting taxes as long as the
fiscal situation in the country continues to improve, the
organization says. But it also urges Canada to take measures
to discourage people from retiring early - or even at 65 -
to forestall a projected decline in the labour force.
In its recent global outlook, the OECD said Canada needs to
continued to pay down its debt to reduce the country’s
vulnerability to external pressures. It repeats that advice
in this report, but adds that debt reduction should not
close the door to tax cuts.
Those cuts should include, in order: a faster than presently
envisaged cut to payroll taxes such as Employment Insurance;
making a start towards reducing the high marginal and
average personal income tax rates; eliminating the increased
burden caused by the partial indexation of the personal
income tax system; and finding a way to persuade the
provinces that have refused to harmonize their sales taxes
with the GST to come on board.
"Reductions in the burden of personal income taxes should
clearly be the government’s highest priority among possible
tax reductions in this regard. This is justified on both
economic and social grounds."
Once progress has begun in the high priority tax sectors,
the organization urges the federal and provincial
governments to move in a co-ordinated fashion to solve what
it calls "the serious and highly complicated problems in
corporate taxation" in Canada.
In addition to cutting taxes, Canada needs to implement
policies to keep people in the workforce longer, the OECD
says. While the current trend towards early retirement is
not as marked in Canada as it is elsewhere in the OECD, the
impact of Canada’s huge baby boom generation - many of whom
dream of early retirement - threatens the country’s standard
of living, the report says.
"Thus, while the current emphasis is on ‘early retirement,’
the demand for ‘postponed’ retirement will continue to
grow."
It urges the government to dump laws requiring mandatory
retirement in certain sectors and get rid of tax provisions
that discourage people from working past retirement age. It
also encourages the government to strengthen training
programs for older Canadians to make staying in the working
world viable.
© The Canadian Press, 1998
Copyright © 1998 Southam Inc. All rights reserved.
.......................
Bob Olsen, Toronto, bobo...@tao.ca, http://www.tao.ca/~tdrc/
"The contest for ages has been to rescue liberty from the
grasp of executive power." Daniel Webster
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brew...@ecn.ab.ca
Bob Olsen (bobo...@tao.ca) wrote:
>http://www.canada.com/newscafe/getcp.asp?bk=world&sk=981202/w120218.html
> Those cuts should include, in order: a faster than presently
> envisaged cut to payroll taxes such as Employment Insurance;
> making a start towards reducing the high marginal and
> average personal income tax rates; eliminating the increased
> burden caused by the partial indexation of the personal
> income tax system;
BURDEN? Burden for the rich?
Bracketed tax makes more sense than that clause.
A much better idea would be ending the subsidy (2 or 3 to 1 deduction)
for political contributions. That would increase the take enough to cut
whatever the average rate is, and that's about the last thing I'd expect
from this self-serving government.
The OECD has little knowledge of Canada's tax system, so I think they're
wasting their time telling us where cuts would do the most good.