Tuesday, August 22, 2006

Worst Tax Cut Ever!

This is what Stats Canada had to say in June about the possible effects of the Tories One Percent GST Cut:

Since the price changes measured by the CPI take into account the value of the consumption taxes paid by Canadians, this 1% decrease will have an impact on the CPI.

A rough estimation of the impact of this reduction on the level of the CPI suggests a decrease in the order of 0.6%. This estimation is based on the assumption that the entire amount of the decrease will be transferred to consumers and that the industrial structure that underlies the way that prices are determined will remain the same.

Since some products, such as many foods sold in supermarkets, are exempt from GST, the resulting decrease will necessarily be less than 1%.

And here's what they had to say today about the actual effects:

On a monthly basis, the CPI increased 0.1% in July. This suggests that price increase pressures were important enough in July to more than compensate for the expected effect of the 1.0% reduction in the GST.

The CPI release in The Daily on July 21, 2006, suggested that the CPI could fall by roughly 0.6% following the 1.0% reduction in the GST. Based on a simulation exercise, this estimation rests on the assumption that the entire amount of the decrease is transferred to consumers and that the industrial structure that underlies the way that prices are determined remains the same. In addition, this measure of impact does not take into account the increase in the Federal excise taxes on tobacco products and alcoholic beverages announced by the government.

So a predicted 0.6% DECREASE becomes a 0.1% INCREASE.

THE CONSUMER GOT DOODLY HO!

2 comments:

Mike said...

Hey come on, its not Steve's fault - I mean he's just an economist by training....


Oh, never mind.

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