The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
When the NDP warned during last yearÕs Saskatchewan election that Brad Wall had a secret agenda, they wouldnÕt have guessed that he wanted to out-flank them with policies more redistributionist than their own. And yet, that is exactly what the Wall governmentÕs approach to tax cuts has done. By raising the basic and child exemptions, the new tax policy chooses immediate windfalls and shifts responsibility for funding government services up the income scale. It contrasts with the direction of other provinces, other countries, and even the previous government. So far as giving immediate benefits to as many people as possible, the new tax policy could not have done better. It has reduced taxes for every single earner. The cut feels biggest for low income earners because they get the same reduction off a smaller original tax bill. Higher income earners see a reduction even though the tax system has intensified its focus on them Ð the provincial government is now funded by a smaller group of taxpayers. What the new tax measures will encourage in the long-term, could scarcely have done worse. For all but a small minority, it does nothing to change the return on choosing to earn an extra dollar. It does nothing to promote choices towards earning more income through investing, working and acquiring more skills. For the 80,000 who were paying the bottom rate but are now exempt from all tax, the tax on earning an extra dollar has just gone from eleven per cent to zero. ItÕs a major marginal tax rate reduction for that group, but they represent only about one worker out of every eight. The government has made a choice with its new policy. And as with all choices, it is worth considering what the alternatives were and what the good and bad consequences are likely to be. An alternative would have been to reduce the actual tax rates. For a roughly similar reduction in total revenue, they could have reduced all of the tax rates by two per cent. This would not have had the same universal and immediate benefits, but would have improved the return on generating more wealth for the majority of Saskatchewan workers. A single rate tax may be a leap too far for Saskatchewan, but its popularity and success elsewhere puts the new Saskatchewan policy into perspective. Jurisdictions have adopted single rate taxes for reasons that sound a lot like the Saskatchewan governmentÕs. They too aimed to, and have, enhanced their various environments for sustained economic growth. Saskatchewan has chosen instead to use the proceeds of a commodity driven boom for redistributionist tax policy. This is an edited version of an editorial by David Seymour, Frontier Centre for Public Policy.
