Fraser Institute Says Federal Deficit Reduced on the Backs of Canadian Taxpayers - Not Spending Cuts
Contact:
Jason Clemens, Director of Fiscal Studies,
The Fraser Institute, (604) 714-4544 Email: jasonc@fraserinstitute.caRelease Date: 16 February 2000
VANCOUVER,BC>>> With the next federal budget about to be announced, the Canadian public must understand that increased revenues from personal and corporate income taxes, not spending reductions, have accounted for the bulk of the improvement in the federal budget balance. So says a new article, The Spending While Saving Conundrum released today and published in the February issue of Fraser Forum, The Fraser Institute's monthly magazine.
In fact, revenue increases - including income taxes - accounted for an overwhelming majority (fully 77 percent) of the net improvement in the federal fiscal balance.
"Revenue increases were overwhelmingly responsible for the elimination of the deficit, while discretionary spending by the federal government changed very little between 1993 and 1998," says Andrew Kosnaski, author of the article and Associate Fellow at The Fraser Institute.
Kosnaski points out that spending increases that are less than the relative rate of growth of the economy (GDP) will result in a decrease in the ratio of government spending to GDP even though spending is increased. In fact, because federal discretionary spending actually increased $4.2 billion over the period 1993 through 1998, it actually hindered deficit reduction.
The government's own discretionary spending (which consists of total spending less transfers to persons and provinces, National Defence, and Crown Corporation subsidies) actually increased over the period from $38.6 billion to $42.8 billion, or 10.9 percent.
The article further demonstrates that reductions in Employment Insurance (EI) expenditures (33 percent) and reductions in spending on National Defence (21 percent) and transfers to the provinces (25 percent) accounted for the entire net reduction in federal spending.
"What emerges from the data and what is probably most important to Canadians suffering under the heaviest personal income tax burden in the G-7 is that total income tax revenues contributed a full 70 percent to balancing the budget," says Jason Clemens, the Institute's Director of Fiscal Studies.
"Given the weight of tax revenue increases relative to spending decreases, the budget debate should be focused on the merits of tax cuts versus debt reduction, not on increases in spending," concludes Kosnaski.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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