Raise the Hammer

JonC, >> So no to the fact we pay less taxes already (despite a higher rate). It seems to counter your entire opinion. People should be flocking here based on your logic (since people pay taxes in dollars, not percentages)

From fiscal 2006 (Mar 06) to fiscal 2008 (Mar 08), nominal GDP has gone up 7%, from 1,450,490M to 1,551,891M. In that same period of time, the GST was cut from 7% to 6% (May 2006) and again on Jan 1, 2008. As of fiscal 2008, GST revenue was 72,162M, while it was at 69,460M at the end of fiscal 2006. Therefore, while the economy as a whole has grown by 7%, GST revenue during that same time period only grew at 3.89%. Bad right? Not so fast.

However, if you take into consideration that the TAX RATE was only 6/7 (and 5/7 from Jan 1, 2008 to Mar 31, 2008) of what it had been previously, you see the tax cut actually stimulated more spending. Look at it this way, if we multiply the fiscal 2008 GST number by 7/6, which is equivalent to returning the GST back to 7%, we find that 72,162M becomes 84,189M. That's the theoretical GST revenue the government would have brought had it not cut the GST. When you divide 84189/69460 we get a 21.2% increase.

Therefore, even as the economy as a whole only grew at 7% (nominal), GST applicable transactions went up by 21.2%.

Even more impressive, in 1999, the ratio of GST revenue to personal income tax revenue was 37.23% (47566M/127763M). In 2008, this same ratio was 37.29% (72162M/193491M). Therefore, even after cutting the TAX RATE from 7% to 6%, GST revenue relative to personal income taxes (where rates have been flat) has gone up.

Do you get it yet? The GST tax rate was cut from 7% to 6% and yet it brought in a bigger revenue increase than did personal income taxes, NOT LESS, BUT MORE, even though income tax rates were essentially unchanged.

Just because you cut TAX RATES does not mean you decrease tax revenue. DO YOU UNDERSTAND? The GST numbers show that by cutting TAX RATES, you increase the amount of things people buy.

Similarly, if you cut property TAX RATES, you would increase the amount of demand for Hamilton property. For example, if you have a 180K home in Hamilton and the city decides to cut the tax rate from 1.65% to 1%, this makes owning property cheaper and the result is many more people wanting to own property in Hamilton. As a result, buyers will bid prices up until the total cost of owning property in Hamilton is similar to other locals. However, at this point, even though the city charges a lower TAX RATE, it makes up for it by increased demand.

Lower tax rates = greater demand for Hamilton property = increased property values = more revenue for the city, even at lower tax rate.