Governments must make interest payments on their debt similar to families who pay interest on borrowing for mortgages, vehicles, or credit card spending. These interest payments leave fewer resources available for important priorities such as tax relief and spending on public programs such as health care, education, and social services.
The tendency for governments to increasingly regulate the advertising industry, whether in the name of consumer protection or for health concerns, is already on full throttle. After cigarette packs, don't be surprised if sooner or later you see plain bags of chips on the shelves of convenience stores, or plain-packaged chocolate bars. Politicians stand on a steep, slippery slope that could lead to private property and intellectual property violations, and destruction of brands. The economic consequences should be weighted carefully. And such policies backed by solid empirical data, not merely good intentions.
It is true that smoking is a major public health concern, and one might be tempted to say that the change in behaviour is desirable, whatever the effect on government revenue. Again, Laffer tells us that things are more complicated than it seems. While it is true that some people are deterred from smoking by tax increases, this is not the case of all smokers.
The Canada Revenue Agency (CRA) has recently forced Oxfam Canada to exclude "preventing poverty" from their mission statement in order to keep their charity status. Now a fundamental question needs to be answered. Why does the CRA think that charities have to wait for individuals to fall into poverty's trap before the charities can help the disadvantaged? Isn't prevention better than a cure? The bigger concern, however, is with a black-and-white definition of poverty. The assumption that one is not poor one day, but wakes up to be poor the next day is completely flawed.
Restoring the corporate tax rate would be a good start. When Ontario began cutting that rate in 2010 it was based on an idea that companies would use the savings for job creation and to develop new markets and products. That has not panned out. Instead Canadian corporations are sitting on $600 billion of hoarded cash that benefits very few.
There has been much hand-wringing over the claimed disappearance of the middle class. At the national level important policy such as a stable currency and domestic peace matter to the creation of prosperity and the formation of the middle class. But domestically, consider one issue -- tax rates -- that can be easily compared across provinces and which has an effect upon wealth creation and thus opportunities and jobs.
As the saying goes, the first step is overcoming denial and the premier's recent comments suggest he understands the magnitude of Quebec's fiscal problems. The next step requires a bold plan to rein in government debt and improve tax competitiveness. The upcoming budget is a chance to move the province forward.
Not a day goes by without someone, somewhere, asking for politicians to levy another tax on a particular group -- ''the rich'', drivers, smokers, or taxpayers in general. And with fiscal deficits crippling many provinces -- especially Ontario and Quebec -- brace yourself. You can count on lobbies of all sorts and politicians to come up with ''innovative'' ideas on how to dig deeper into your pockets to pay for their pet projects.
Very little mitigation or adaptation activity is happening at any level of government. For example, the Mayor of the City of Toronto seems to have much more enthusiasm for tax cuts than installation of storm sewers, notwithstanding last summer's catastrophic storm which the TD economists price at $944 million.
With Ontario lagging behind other provinces on a wide range of economic indicators and recently becoming a "have-not" province, it desperately needed a bold plan to improve competitiveness and foster economic growth. Unfortunately, Thursday's budget failed to deliver and will only exacerbate Ontario's fiscal and economic challenges.
On May 1 Ontario Finance Minister Charles Sousa will stand in the provincial legislature to deliver this year's budget speech. Imagine if Sousa were to surprise us all and take a different track -- one that sets out a new agenda to return Ontario to its historical position as the economic engine of the country.
For a real-life example of how scaling back government has led to positive and practical economic benefits, Americans should look north. In Canada the conventional wisdom for much of the second half of the 20th century favored increasing the size of government. This led to significant growth in government as a share of the economy.
Tax season has begun. This yearly tradition is dreaded by many Canadians, but it doesn't need to be. Taxes are what keeps our roads paved, our schools running, and our health care free. When we think about the money we give to the government, we don't always realize that our money is going towards things we take for granted every day. So, approach the upcoming tax filing deadline with a positive outlook.