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I completely agree with you and the 20 professional economist out there that wasting a $1 billion or so of federal revenue on this type of tax cut is very very foolish. However and like others I blogged about the Harper promise during the last election campaign the Liberals had already occupied the let's cut PIT area so the only place left was the GST whether Harper remembers any of his economics or no he certainly remembers his practical politics 101. I have to admit I'm starting to forget some of the bloody nonsense surrounding the introduction of the GST, but didn't Reform Party characters hate the tax and thus Harper, again from a purely limited political perspective would win by continuing with the additional 1% reduction. He gets to say he completed a promise to the Canadians who find life complex and confusing (maybe 65% of voters) and also pleases the nitwits in his base (maybe 15%) . Good or bad fiscal policy is not relavent Harper who is worried about a majority wins.

Actually, it's closer to $5b/yr.

Wouldn't there be a possibility to save this through a transfer to the provinces?
I mean, the provinces could increase their PST by 1%. Obviously, it would have to be a concerted effort for risk of individual premiers suffering the consequences if they went at it on their own. But Harper could actually score on his "asymetric federalism" concept with such a transfer... And Canada wouldn't have to suffer this horrible policy.

Good point - I was going to say something along those lines, but I forgot. I remember that when the GST was cut to 6%, Jean Charest said that the Quebec govt had thought of increasing their tax by a point, but they decided that the risks of taking away a tax cut that Quebecers had (apparently) voted for weren't worth the trouble.

But this time, it may be different: the cut wasn't part of an electoral platform, and the provinces (Alberta excepted) don't have the huge surpluses that Ottawa has. I suspect that provincial finance ministers are talking amongst themselves. And with any luck, they may indeed decide to co-operate to neutralise this proposal.

Given the poll results I find this comment odd:

The Conservative Party's campaign pledge to trim the hated goods and services tax was widely regarded by political pundits as a master stroke that helped the Tories win office, even though economists panned it as the wrong cut to make.

It seems this tax is hated in the same way as every other tax but less so.

The phrase 'hated GST' is something of a cliché now, dating back to the days when it was first introduced. And clichés have a way of outlasting their original context...

How many meaningful tax cuts have there been in the last 40 years? Maybe five? You just got a tax cut. Who cares which tax. Enjoy it you ingrates. Where is all the outrage and debate over whether the latest spending announcement is the absolute best use of taxpayers money? When was that ever the case?

If you don't like this I suggest you send a check to the gov't at the end of the year for the amount you saved and then tell me how you benefited from it. Good luck!

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