Tag: tax policy

Glen Hodgson is a senior fellow at the C.D. All too often, proposed changes to the tax system have been designed first and foremost to win popular support, regardless whether there is any hard evidence that it would be good for the economy and society. Economic analysis suggests sales tax rates should be raised and personal income taxes cut to improve incentives to work and save. For example, increasing the top income tax rate was justified by the current Liberal federal government as a way to improve tax fairness. The latest example of opportunistic tax politics crowding out good tax policy is carbon pricing. Putting a price on them creates an incentive to innovate and to modify behaviour – consumers can avoid paying the tax by reducing their emissions. Using the price system to change incentives was once considered a conservative idea. History shows that political leaders are able on occasion to look past the short term and achieve alignment between successful tax politics and good tax policy. The Harper government successfully reduced corporate income tax rates to improve Canadian business competitiveness, with little serious negative public response. Ontario’s Liberal government successfully reformed its sales tax system, harmonizing it with the federal GST and got re-elected.