To the editor,
Re: Editorial "Put some thought into Tax Proposal," Feb. 17
This thought-provoking editorial causes me to respond:
Income splitting is presently allowed for some types of pensions, and seems to work fairly equitably. I agree with Finance Minister Flaherty that, as proposed, this program will benefit the high-income earners, more so than the low- and middle-income earners. I do not believe that Flaherty, myself, nor many others begrudge the high-income folks their lot in life. They obviously worked for it, and, these are often the ones driving the economy.
However, when one considers Maslow's hierarchy of needs, low-income families are barely meeting the first level, that being food, clothing and shelter, etc. Many have to rely on social programs to meet this level, and many are only able to "exist" at this basic level. Middle-income families usually meet this level of need and move a step or two up the ladder of needs. Higher-income families have their needs met and any excess income may or may not be returned to the economy.
In this regard, one way to target the groups who will actually return the money to the economy would be to target the type of income. Low- and middle-income families usually have income from wages only. Higher income families have investments, capital gains, dividend income, etc. Simply disallow those types of income from income splitting.
If the goal of the federal government and especially the Province of Nova Scotia is to ignite their economies, in my opinion, the best route is tax bracket adjustment. Increase the basic exemption for low- and middle-income families, leaving these targeted groups with more after tax dollars which will be returned to the economy probably 100 per cent. Nova Scotia has had frozen tax brackets for many years now, and this has left fewer after-tax spendable dollars in the hands of every working person in the province. Although this may mean a few extra dollars in the provincial treasury in the short term, the economy suffers when there is less money being spent meeting everyday family needs.
John Maynard Keynes, a much-respected economist during the 1930s, studied the decade-long Depression and concluded that different monetary/fiscal policies could have cut the Depression period by as much as half. Subsequent governments have tried to follow his theory that during recessions you spend and, in good times, pay down deficits, etc. I'm not convinced that they succeeded on the second half of this policy! Recent stimulus spending by the federal government and the belt tightening afterwards is a direct example of this. Nova Scotia could ignite their economy if they adjusted the tax brackets to reflect the reality that low- and middle-income families face on a daily basis. Social programs would also then be left for the more needy.
Nova Scotia has been concerned for some time now with population shifts and out-migration. I have no proof, but suspect that some retirees and perhaps others leave here to settle in provinces that have lower taxes.
Opponents of this letter will state that these proposals will mean that it will take longer to balance budgets, and to start paying down the debt. My experience has been that new businesses actually have a five-year or so plan, to get their business established. Government is a business. Both income splitting and tax bracket adjustment may mean some short-term pain, but I believe that the long-term gain would greatly outweigh any short-term decreases in revenue.