Prescriptions for an ailing economy
Frontier Centre for Public Policy president Peter Holle thinks the economic slowdown is an opportunity to improve public policy.
Peter Holle - December 31, 2008
The current economic slowdown, as challenging as it might be, gives us an opportunity to discuss some much-needed reforms we should be implementing. While change is always difficult, these prescriptions, I believe, will better prepare us to face the future.
There are three areas in which we must take action:
Tax and Transfer Payment Reform
Lower Taxes on Capital
The federal government should lower corporate taxes across the board and eliminate the capital gains tax by a combination of 1) eliminating grants and subsidy programs to corporations and businesses and 2) improving the productivity of federal spending (see third section below). Corporate welfare is a $19-billion line item for the three levels of government in Canada, and it should be replaced with a neutral approach to employment creation. The reality is that we do not know who will be the next Microsoft or which company can create 20,000 jobs. But we do know who it will not be: existing companies on the verge of bankruptcy.
Replace Equalization with a Harmonized GST and PST
The federal government should replace the divisive and increasingly unworkable equalization program with a transfer of the GST to the provinces. The transfer would require harmonization with provincial sales taxes. This would 1) immediately boost the struggling Ontario economy, which can no longer bear carrying these transfers, 2) eliminate duplicate administrative processes that burden the business sector and 3) further boost capital spending and productivity by removing sale taxes on capital inputs.
Tie Healthcare Transfers to Structural Reform
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