Question of the Day to an economist

10Dec08

From the lede of a CP story:

“Could a third cut to the hated goods and services tax be just the elixir needed to revive Canada’s sick economy?”

Later on in the story, reporter Julian Beltrame explains why the answer to that question tends to be ‘no’.

Given a choice, economists much prefer governments cut personal and business income tax because they create incentives on individuals to work and invest, and on businesses to modernize, buy new equipment and expand. All these things are good for the economy longterm.

Reducing consumption taxes does little except boost spending.

Nevertheless, it’s worth asking some more economists. If Harper cuts the GST as part of an economic stimulus package in January, it would probably be universally applauded as good politics. The last time he did this, it was of course panned as terrible policy.

This is the first time I’ve heard this idea floated during these Times of Economic Uncertainty.

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