Voters' economic acumen underestimated

The Conservatives' promise to reduce the GST to 6% put economists once again in the painful position of witnessing economic sensibility being sacrificed for electoral gain. 'Why', we asked ourselves, 'is bad economics good politics?'

Maybe it isn't. From this morning's Globe and Mail:

Voters cool to GST cut, Tories warned: The GST cut at the centre of the 2006 federal budget got a surprisingly rough ride from Canadians in focus groups that Ottawa commissioned to road test its fiscal plan.

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.

But many Canadians canvassed for the Department of Finance appeared to agree with economists, telling market researchers in focus groups that they felt there were better ways of offering tax relief.

"The most frequent argument raised in many of the sessions was that the GST was not the best tax to reduce," said a report prepared for the department and obtained by The Globe and Mail.

...

Canadians surveyed didn't buy the notion that the GST cut was the best way to deliver broad-based tax relief for all, Ottawa was told.

"This statement was viewed by many individuals as not true," the market researchers said.

Critics told focus group moderators they'd like Ottawa to chop income taxes or hike the taxable income threshold instead.

It may be that the Conservatives won the last election despite the GST proposal, not because of it.

Comments

[happyjuggler0]

I'm not Canadian, and I haven't been following this. However what it looks like to me from afar is a pretty clear cut case of voters either:

A) not wanting a tax increase, and voting for a party that is campaigning on a tax decrease is a good bet to acheive that goal.

B) wanting an tax cut, but probably not a consumption tax cut. But in the absence of a major party calling for income tax cuts, they voted for the next best thing.

So it looks to me that the Conervatives ought to simply say, "ok, we had the right idea, wrong execution. But after further study of what the people want, we are cutting income tax rates instead".

[Stephen Gordon]

I don't think tax policy had much effect one way or the other on the election - the main issue was Liberal corruption and sleaze after 13 years in power. But I do hopw that the Conservatives cancel their plans to further reduce the GST to 5%.