Tax Relief Without Risk For Canadians
Contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582 Email: suzannew@fraserinstitute.caRelease Date: 5 February 1999
VANCOUVER, BC>>> To reduce the federal debt and spur economic growth in Canada, Finance Minister Paul Martin should introduce a system of tax rebates, paid directly to Canadians, equal to the amount of the fiscal surplus, says a new paper, Using Cash Rebates for Tax Relief Without Risk, released today by The Fraser Institute.
It is estimated that the surplus for the current fiscal year will be approximately $7.5 billion. Significantly, annual surpluses are expected to rise gradually from approximately $7.5 billion in 1999 to $10 billion in 2000. If the federal government were to simply cut tax rates to the full amount of the surplus the revenues of the government would be in jeopardy if the economy were to dramatically slow down. This would open the possibility of a deficit and the loss of fiscal credibility for Mr. Martin.
"To eliminate the risk of deficits we propose that fiscal surpluses be returned to taxpayers as cash rebates at the end of the year they are realized. Current surplus projections would yield a personal income tax rebate of up to 20 percent of total tax paid in the last taxation year. If the surpluses continued they could safely lead to permanent tax cuts at the end of the following year," says Michael Walker, co-author of the paper.
The 1998/99 fiscal surplus should be returned directly to Canadians through tax refund cheques. In the following fiscal years—assuming the economy stays on its normal growth path, and interest rates remain unchanged—a combination of permanent tax cuts and direct rebates would be possible.
The paper points out the clear need to reduce Canada's debt (which still ranks as the third highest among industrialized nations), and recommends that the government retain its current policy of using the contingency reserve to pay down portions of the debt at the end of each fiscal year.
The Institute reiterated its position that the total spending of the Federal government be frozen until a target level of 15 percent of GDP is reached.
"The only new expenditures should be those permitted by the reduction in interest servicing costs of the public debt which would result from debt repayment," said Walker. "Mr. Martin got credibility by picking a deficit target and sticking to it, to retain his credibility he needs to pick a spending target and ensure that he reaches it."
According to the Institute, the combination of a spending target and retroactive tax cuts would ensure that Canada maximized its economic opportunities while not risking the fiscal position of the country.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information, or for a copy of Using Cash Rebates for Tax Relief Without Risk, contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580
You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.