When is a tax cut not a tax cut? When it's a G.S.T. cut.

I meant to write about this back in July when the G.S.T. cut went into effect, but somehow I never got around to it. Well, better late than never.

(For my blog readers outside of Canada, the Goods and Services Tax is a national sales tax. On July 1, 2006, it was reduced from 7% to 6%. It is slated to be further reduced to 5% next year. The G.S.T. is separate from the provincial sales tax, which in Ontario is currently 8%, bringing our total sales tax to 14%.)

On the same day that the G.S.T. was reduced from 7% to 6%, the federal income tax payable on the first $36,378 of taxable income was increased from 15% to 15.5%.

This means that if you make $36,378 or more a year, you are paying an additional $181.89 in federal income tax. This means that as a percentage of total income, the tax increase hits hardest those who make less than $36,378 a year.

This is equivalent to the 1% reduction in G.S.T. that you would have paid on spending of $18,189. If you spend more than that a year, you are getting a net tax reduction.

In other words, the G.S.T. reduction and income tax increase, taken together, benefit those who earn more and spend more, and hurt those who earn less and spend less.

Do we really need to be taking money from the poor to give to the rich? What happened to the idea of giving a hand up to those in society who need it most? I know we all complain about taxes being too high, but when it comes down to it I'm pretty sure that I could afford to pay a lot higher taxes than I am paying now, and still afford to put food on the table and a roof over my family's head.

Sadly, the same is not true of many other people who are living in poverty, and just barely getting by on a low income. This tax change hurts them and their children. It doesn't seem right that I would get a tax cut on their backs.

Or put another way, that they should go hungry tonight so that I can save 4 cents on a hamburger.


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