Chapter 6: Tax Cuts Scheduled for 2007 Canada
[ http://www.tax-news.com/asp/story/story_
open.asp?storyname=26449 ]

In this article, Jim Flaherty, Canadian Minister of Finance, stated that changes were being made with the tax system in that the Fiscal policy will be put to use in a "fair" and "principled" approach. The Canadian government plans to decrease taxes to help citizens, allowing them to spend more of their own money. With the tax cuts, the Conservatives have saved $20 billion from Canadians, which is more than what the previous four budgets had altogether. One of the major tax cuts were to the GST, which went from 7% to 6%. Another one was a 2% cut in the general corporate tax while cutting the corporate surtax and federal capital tax entirely by 2008. They also plan to increase the amount of income for the lowest rate of corporate tax, which benefits small companies. The bottom rate will be decreased to 11%, a 1% cut by 2009. These tax cuts were targeted to corporate companies and to personal taxpayers.


The government is currently using the Fiscal Policy to control the money supply in our economy. They are decreasing several different types of taxes, while even doing away with some of them. This is because a decrease in tax will cause the taxpayers to have "more money", which therefore causes an increase in spending. If there's an increase in spending, there is an increase of the money supply in the system. This move by the government will be economically beneficial to the country. By increasing the money supply, it supports the growing economy of Canada. This cut in taxes also proves as an opportunity for businesses, especially smaller ones, to expand. Because the tax will be less of a burden, small businesses will be more willing to pay their taxes, which will help with the issue of “tax theft”. Of course, the increase of spending isn’t limited to just consumers. With more money, businesses can spend and increase their capital. When you add the increase of spending by taxpayers and the expansion of businesses, what do you get? A booming economy!


The only problem that may arise with the decrease of taxes may be inflation. The government needs to be careful about how low they make taxes. If spending increases to the point where inflation sky-rockets, then the taxes have gone too far low. Since our economy is already in expansion, it means that our money is under inflation. Inflation is a good thing, when it is gradual and under control. Overall, the government is doing a good job, as the tax cuts have benefited the country and inflation is still under control.

--Commented on Pauline Lee's Ch.6 blog.