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The National Post reported that Ontario Tory leadership hopeful Christine Elliott (spouse of Federal Finance minister Jim Flaherty) is proposing to implement a “flat tax” for Ontario residents. Here’s how it would work: A tax rate of 8% will be applicable to all income over $18,000. So, an Ontario resident earning $50,000 would pay a flat tax of $2,560. The Post sees the proposal in a very positive light:
Implementing a “flat tax” would revolutionize Canada’s tax system by removing the current tax penalty on success and unleashing the efforts of hardworking and entrepreneurial Canadians.
If the flat tax is lower than every tax rate other than the current 6.05% rate levied on incomes of up to $36,000, how is the leadership-hopeful planning to deal with any revenue shortfall? Who is going to pay for education and health care? The plan seems to depend on rosy expectations that lowered income taxes will boost economic output and eventually bring in more tax revenue.
But, we’ve seen this movie before. The list of politicians who ran on lower taxes only to change their mind after getting elected is rather long. Hopefully, Ontarians will not fall into the same trap again and demand to see a plan with realistic expectations. It is one thing to demand lower taxes when times are flush; quite another to cut taxes when Governments are trying to boost economic growth through deficit spending.