The government's decision to cut personal and corporate income taxes, while increasing and expanding sales taxes has many people scratching their heads. Why increase one tax in order to raise $871.6 million in revenue, only to reduce other taxes and lose $107.5 million in revenue, while still posting a $685 million deficit for this year?
Finance Minister Doherty partially revealed the logic behind this shift in an address to the Regina Chamber of Commerce:
“The best social policy we have is a job. So if we can incent employment, incent businesses reinvesting in their businesses, we ought to do that and the way you do that is by competitive tax policy."
So the government's rationale for this curious tax shift is that cutting corporate tax rates will result in more employment and more investment.
Maybe the government hasn't been paying attention for the past decade, but corporate tax reductions haven't been the panacea conservatives have hoped for. According to Canada's own Department of Finance, if you want policy to encourage job creation, cutting corporate taxes is the weakest option (20 cents growth from every dollar of tax cut). Spending on infrastructure has the most impact ($1.50 on every dollar spent). Finance shows spending on income supports for the unemployed and low income Canadians has an equally big pop, and housing initiatives are almost as good ($1.40 for every dollar spent).
They believe that they were responsible for the boom. Sky-rocketing commodity prices were incidental to the boom in the minds of the saskatchewan Party in comparison to the tax and regulatory policies they implemented to "free" the economy from the heavy hand of government.
So with the obvious response to the end of the boom is to double-down on those policies that they believe ignited the first one.
