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The GST Cut is not so Stupid

Author

Listed:
  • Grady, Patrick

Abstract

This paper argues that the two-percentage point cut in the GST to 5 per cent proposed by the Conservatives in the January 2006 Canadian federal election and implemented in the 2007 budget was not “stupid” as suggested by many economists. To the contrary, it fortuitously turned out to provide needed fiscal stimulus of a particularly potent type just as the economy turned down. It also had a progressive impact on the incidence of the tax system. And finally the lower rate would make it easier to harmonize the GST with provincial sales tax.

Suggested Citation

  • Grady, Patrick, 2008. "The GST Cut is not so Stupid," MPRA Paper 59231, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59231
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    File URL: https://mpra.ub.uni-muenchen.de/59231/1/MPRA_paper_59231.pdf
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    More about this item

    Keywords

    Goods and Sales Tax (GST); tax cut stimulus; income distribution impact of GST cuts; harmonization of sales tax;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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