Cut taxes to boost economy

Re: The Christmas present our economy needs, Michael Smart, Aug. 24

A real Christmas present to the people of Canada would be a marginal cut in the rates geared to ramping up savings and investment that would lead to jobs and growth. Eliminate the top bracket of 33 per cent and start the new top bracket of 29 per cent at $500,000 rather than the present $216,000 taxable income (and reduce the other rates by 10 per cent as well). Better yet, bring in the Personal Expenditure Tax so that only consumption is taxed and not investment and savings and their gains.

As a great thinker once said, capitalism needs capital. As well, a marginal cut would not only leave more money in people’s pockets but also create a substitution effect where people would work harder to make more money under the lower rates. Even more importantly, it’s hard to spend money when you don’t have a job.

The revenues collected from the boom created (and from reducing our many tax expenditures) would more than pay for the “cost” of such a cut and help to reduce the deficit. Better this approach than yet another Keynesian tax cut (like the many tax credits in the Tory platform) that does nothing to create a virtuous long-term cycle of growth and prosperity. Perhaps Erin O’toole’s pledge to launch a comprehensive review of Canada’s tax system “to improve competitiveness, bring down rates and simplify the rules” could help deliver such a Christmas present to us after all.

John M. Farant, Kingston, Ont.