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Dash8King
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[Canadian]Surplus Expected To Exceed $5-billion

Wed Feb 11, 2004 3:46 pm

For anyone who is interested

Surplus expected to exceed $5-billion


By HEATHER SCOFFIELD
Globe and Mail Update

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Ottawa — The federal government is to announce Wednesday that the surplus this fiscal year will top $5-billion — more than double the previous estimates — thanks in large part to a tax haul from Canadian banks.

The Department of Finance will explain that the unexpected windfall came from corporate taxes paid by financial institutions, which posted a whopping 62-per-cent rise in profits in 2003.

The last official estimate of the federal surplus was just $2.3-billion, announced in the government's economic update in November. Finance Minister Ralph Goodale stuck to that forecast until about two weeks ago, when he started hinting that corporate tax revenues would be higher and equalization payments to the poorer provinces lower than initially anticipated.

Finance officials will have new calculations for equalization later this month, but expect to save up to $2-billion this fiscal year because Ontario's economy did poorly. That means the discrepancy between the have and have-not provinces diminishes, letting Ottawa off the hook for some expected transfer payments.

Of the $5-billion or so in surplus that is now expected, already $2-billion of that is earmarked for the provinces to help pay for health care. But that leaves more than $3-billion available for the government to spend before the end of the fiscal year, on March 31.

More importantly from Prime Minister Paul Martin's perspective, it leaves more than $3-billion to spend before a spring election, if he can figure out ways to get the money out the door before the books close on March 31.

A formal notice of the new surplus forecast will be released Wednesday as part of the Department of Finance's monthly fiscal update, several Ottawa sources said.

An update on the surplus forecast is not normally included in the monthly reports. But Mr. Goodale has publicly recognized that there has been a loss of confidence in the federal numbers because Ottawa has consistently low-balled its surplus, booking billions in extra revenue at the end of the year that must automatically go toward paying down the debt since it was not budgeted for anything else.

The new minister has vowed to correct the lack of confidence by being more forthcoming about where the books stand.

An official, final figure for the 2003-04 fiscal year will not be ready until all taxes have been collected and calculated, and the year's spending has been sorted out. Usually, the number is published in September or October.

Still, Finance officials are renowned for their conservative estimates, and the government will likely feel comfortable enough with the estimate to start spending the money.

The challenge will be to find ways to spend $3-billion in just seven weeks.

At the top of the list, Ottawa is hoping to speed up deals with cities and provinces to rush out infrastructure funds before the end of March. But these arrangements are notoriously cumbersome to arrange.

Some of the details will no doubt come in the coming budget, expected probably on March 23, but could come earlier, on March 9.

Mr. Goodale will likely try to avoid booking any continuing programs that will ring up costs in coming years. That's because surpluses still look small in the next two years. However, a bigger surplus in 2003-04 means a better starting point for the 2004-05 fiscal year, and will mean more spending money than initially expected in that year too.

Rather, Mr. Goodale will be looking for ways to spend the money on one-time projects that can be cobbled together quickly enough to get the money allocated by March 31. When Mr. Martin was finance minister, he was a big proponent of year-end funds and foundations that would scoop up the extra billions left over at the end of the fiscal year and put them aside to be spent in later years. But Auditor-General Sheila Fraser dislikes such practices, and the government already has enough trouble with her office.


What do you guys think?

 
copper1
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 2:45 am

Not really surprised. I cry every second Thursday when I look at my pay stub. The leaching Liberals are sucking everybody and everything dry in their attempt to over socialize this country. Don't even get me started on the Auditor General's report released on 10Feb04.

Hopefully, Canadians will wake up before the expected spring election but I do not hold out much hope of this.

Jeff
 
AlekToronto
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 3:13 am

yeah..Canada!
Not

i agree with the tax situation...tax spend tax spend...some things never change...

What about our Debt??? can we start to work on that?

AS for the Auditor Generals Report - I have real respect for Ms. Fraser (I don't envy her job)...un..f'in real the way pork barreling goes on...
I would vote for Ms Fraser for Prime Minister...clean house baby!

cheers!
Alek
 
North County
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 3:42 am

They could always spend it on bringing their military into the 21st century....

What is the tax rate north of the border?
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 3:57 am

I'd like to see a realistic comparison of taxes in Canada versus the US just to compare. No doubt we get taxed more heavily up here, but I wonder what that amounts to for the regular citizen.

I also agree with Alek, please let's work on the debt.

By the way, this extra money wont even cover Air Canada's debts, just for some perspective!  Smile
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
CPDC10-30
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 3:58 am

Does this finally mean that we will be getting a replacement for the C-130s and Sea Kings, no excuses? I sure hope so.

North_Country, you mean bring the military into the second half of the 20th century  Smile/happy/getting dizzy The income tax rates in Canada are generally about 30-40% for most people, but there are a lot of loopholes and most people pay a lot less in taxes than their actual rate. Because of education tax credits and other rebates, my 2002 tax rate after my refund was only about 16 %.
 
airplay
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 4:13 am

They could always spend it on bringing their military into the 21st century....

So we can waste billions activating our military assets in illegal wars? I'd rather not.

The income tax rates in Canada are generally about 30-40% for most people

Are you sure you live in Canada CPDC10-30? Check here for the truth:

http://www.ccra-adrc.gc.ca/tax/individuals/faq/2003_rate-e.html

If you combine the income federal and provincial income tax for someone making $100K you'd be in the low 30% area....but that is certainly NOT the average for "most" people.

I believe a more accurate "average" wage is in the $50K to $60K range.

 
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JeffM
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 5:12 am

I'm sure the homeless and hungry people were glad to read that on the newspaper they call a bed.

...why don't they dump it into the health care system, so they will stay the hell home and quit using ours?

...and it would take more then that amount to fix their military in my opinion.

[Edited 2004-02-11 21:21:23]
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 5:39 am

I guess there aren't homeless people in the U.S.? And the homeless in Canada are because of taxes? Get a grip on yourself man.

Maybe part of the extra money is due to Americans buying medical drugs from Canadians because they can't afford to do so in the United States. And I'd be more worried about the 45 million or so Americans without health coverage instead of a few Canadians who cross the border.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
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Vio
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 5:51 am

All right! We have extra money in the pocket. Perhaps it can be spend more wisely. Like... 1. Plowing the damn streets. (Calgary). 2. Find a way to lower insurance rates....

I'm gonna start a new topic on that... pathetic  Sad
Superior decisions reduce the need for superior skills.
 
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JeffM
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 6:05 am

Hey Gomes,
The point being... if you have so much money...why do you have hungry homeless people?? Duh....

...and yea, I'm sure the extra money came from us buying your drugs...
..makes perfect sense, considering the source.
 
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Goose
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 6:55 am

If you combine the income federal and provincial income tax for someone making $100K you'd be in the low 30% area....but that is certainly NOT the average for "most" people.

I believe a more accurate "average" wage is in the $50K to $60K range.

--

Well, it looks like you're talking about "just" the Federal tax level.

Taken from the link you posted;

Federal tax rates for 2003 are:
16% on the first $32,183 of taxable income;
22% on the next $32,185 of taxable income;
26% on the next $40,280 of taxable income; and
29% of taxable income over $104,648.


Then you add to that the Pronvincial levels, you're looking at around 30% taxes, or more......

Does this finally mean that we will be getting a replacement for the C-130s and Sea Kings, no excuses? I sure hope so.

Well, the government tends to like half-measures when it comes to military spending. I doubt we'll see the end of substandard equipment for our Armed Forces (err.... sorry, just "Forces") until we have a competant leadership who realizes that a viable military is a key to maintaining sovereignty - especially given the size of our country.
"Talk to me, Goose..."
 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 7:21 am

Our health care system needs some serious work. It is better than the American system on an aggregate basis, but it is far from being ideal. Can I suggest if you're going to contribute to a thread, can you do it in an intelligent way? You make yourself look bad.

Says who Nuno? Canadian socialists? I've lived in the US and found the US health care system superior in every way to the Cdn one we have here.

What do you guys think?

As for the budget surplus....the only thing worse than a deficit is a surplus. That represents taxed income that was unnecessary. It should have remained in my pocket.



I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
airplay
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 7:35 am

Our health care system needs some serious work. It is better than the American system on an aggregate basis, but it is far from being ideal. Can I suggest if you're going to contribute to a thread, can you do it in an intelligent way? You make yourself look bad.

Very concise and accurate comment in my opinion.


Says who Nuno? Canadian socialists? I've lived in the US and found the US health care system superior in every way to the Cdn one we have here.

Very typical and inaccurate. Why don't you tell that to some homeless guy in New York with no health insurance YYZ717....
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 7:37 am

Oh come on Neil. You honestly are capable of making arguments using proper methodologies on most subjects, and yet you will take personal anecdotes (which could be used in either way) over actual studies? No matter how you look at the health care system, on an aggregate basis, it is better here in Canada. Refer to WHO, and check the statistics yourself. Canada spends less on health care and gets better results. We not only spend less in absolute terms, but also less as a percentage of our GDP. Not only that, but taking the burden away from the government, while not only decreasing the effectiveness (one of the rare times that happens), it increases costs, but also puts the burden of health care costs on businesses.

There are some distinct advantages to the US system for sure. Those with lots of money will receive better care than the Canadians will. There is more innovation due to the role of profit. It all depends on how you look at health care and the ideologies on a nation. In Canada and most of Europe, equality of certain things we deem as necessities is more important. Healthcare is seen as a necessity, so it is applied to everybody. In the United States, it is not seen as a necessity, so only those who can afford it will get it. Of those who can afford it, those with more money will get better health care. There is then a big discrepancy between different health care facilities, whereas that is not the case in Canada. Just a note though, those that are very poor do get medicare in the United States supplied by the government, as well as seniors.

Bottom line ... I was responding to JeffM's post. He seems to think that the $5 billion will take care of the homeless and fix our health care system. I replied saying that what he's suggesting is moronic and it is in his country that this is a concern, and not ours.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 7:47 am

Very typical and inaccurate. Why don't you tell that to some homeless guy in New York with no health insurance YYZ717....

What about the homeless in YWG? They have no more access than the homeless in NYC do.

No matter how you look at the health care system, on an aggregate basis, it is better here in Canada.

Nuno, the Cdn system is falling apart. Wait times for virtually ALL surgeries, specialist access & procedures are LONGER than in the US. Why are ALL 10 Cdn provinces sending critical care patients to the US for immed treatment? NO US states are sending their citizens up here.

The Cdn system needs some private sector knowhow and input. We need a 2-tiered system now. The private tier will provide better, faster & more effective service and keep the public system honest.

As for my anecdotal evidence Nuno...you're right...it is just anecdotal. But it's still real. The publilc hospitals in Tennessee (one of the poorer US states) are better equipped than Toronto's hospitals. The private TN hospitals are even better. Since you knock my anecdotal evidence Nuno.....what is your experience with US hospitals? Or are you just relying on the Cdn media mindset to oppose ALL US health care solutions???????
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 7:57 am

Neil, I don't have any personal experience with the US healthcare system. I also don't trust an article or study only because of where it comes from. However, what I do have is material here at home from many different sources, including American sources that use factual information to show how on an aggregate basis the system in the US is not as effective or efficient.

I can give plenty of personal examples of things that are not as they should be here in Canada. Like I said, the Canadian system needs a lot of work, and is far from being world class. Same could be said of the US system. It doesn't change the facts, that in Canada we are healthier, we have far better distributed coverage among citizens, and we spend less on health care. Wait times for surgeries are pathetic. Equipment levels are also poor in some cases. That's why we need some investment to take care of these two issues especially. Running a 2 tier system will not necessarily take care of these issues. What it will do is further decrease the quality of the public system by having resources shift from public to private (admittedly much like we lose doctors to the United States) and it will increase the overall cost for everybody. The only real advantage it will create is better coverate for about 10% of the population.

I want to reiterate, I don't pay attention to the socialist Canadian media as you suggest. I like seeing good results and monetary responsibility just as you do. But I think we disagree sometimes on the best way to implement these.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 8:05 am

The US & Cdn health care systems are both complex and can learn from each other. There are elements of the US system that can be implemented here. A private tier can be for-profit and hence self-funding so it need not draw money away from the public system.

Canada is the ONLY Western nation that outlaws any private health care....this is pure ideology.

Health care is an industry much like any other. It will benefit by the infusion of a private sector mentality and partial bottom line focus.

I reiterate.....Canada is sending critical care patients to the US for care....the US is NOT sending any here. Canada is also losing health care professionals to the US....Americans are not flocking here. These 2 points suggest strongly that in aggregate the US is better. I expect ideologues from YWG to disagree of course.  Smile
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
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JeffM
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 8:08 am

....the only thing worse than a deficit is a surplus. That represents taxed income that was unnecessary. It should have remained in my pocket.


Bingo...

Divide the extra money amongst the homeless and that will take care of the problem? Sounds like a stupid idea to me..

That would be stupid, and that is not what I implied... put it into some housing and job skills programs. Teach these people something, and then put them to work so they can support themself. Hand outs only create more problems...
 
Dash8King
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 10:10 am

....the only thing worse than a deficit is a surplus. That represents taxed income that was unnecessary. It should have remained in my pocket.

It's better then the 85 billion that the US has right now.

I have to agree with Nuno on this one. I personally would like to see it go to Healthcare which I believe it said in this article or a different one that 2 billion is already assigned to that.
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 10:47 am

I disagree that a surplus is a bad thing. I'd rather have a surplus than a deficit. The amount of money spent by the government changes all the time, and hence tax rates would have to change all the time too. Let the final results of the year come out and let them decide then what will happen to the surplus. Like Dash8King says, it's better to have a surplus that is then put to good use (hopefully) than to have a deficit of huge proportions.

By suggesting that any surplus is bad, then the way to rectify that would be for the government to initiate spending on things that aren't necessary, just to balance the budget. I'd rather they spend in accordance to meet the needs, and deal with surpluses or shortfalls afterwords, as they are doing now. But again, I really hope they use the money wisely, and that's up for debate.

By the way, that's a better way to contribute to a thread, Jeff.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
MD-90
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 12:09 pm

Obviously nows the time to cut taxes to make Canada's economy more competitive.
 
jutes85
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 12:24 pm

Obviously nows the time to cut taxes to make Canada's economy more competitive.

Now is time for the US to allow Canadian beef into the country. Not to mention getting rid of those lumber tariffs.
nothing
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 12:27 pm

MD-90, maybe, maybe not. I'm all for lower taxes, but not if it means destabilizing the economy. I'd rather see health care improved, the military improved as well as the debt taken care of. Once things are stable and show a positive long-term trend, then for sure, lower the taxes, but we have to do what we can to get to that point, and now is not quite the time perhaps.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
MD-90
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Thu Feb 12, 2004 5:57 pm

How can lowering taxes by the small amount (I shudder to say that in the hands of government $5B is a small amount) destabilize the economy? Spending more money on healthcare or the military is not going to improve the economy. And it'd take a lot more than paying off the debt by $5B to affect the economy.

Once things are stable and show a positive long-term trend, then for sure, lower the taxes, but we have to do what we can to get to that point, and now is not quite the time perhaps.

And most likely then never will be. Reagan slashed taxes and DOUBLED the revenue. You would think that a decade and a half later people would've start to understand. Ah, but some do, at least in places like China.
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 1:01 am

MD-90, what I mean is that you can't just raise and lower taxes every time there is a surplus or deficit, respectively. Just because there was a surplus now, doesn't mean there will be one this year. Hopefully there will be though, and if it indicates that the government can sustain itself the way Canadians want, then it is definitely time to lower taxes.

Clearly, the deficit has been well controlled in recent past. I still say, improve health care, the military, and pay off the debt as quickly as possible, then worry about decreasing the taxes. But continue cutting costs where they are not providing a meaningful service to Canadian citizens.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
AlekToronto
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 2:14 am

One question...

What good is a SURPLUS when this week proves ONCE AGAIN that the Government has no clue how to properly handle OUR money..

Just listen to our ex-FINANCE MINISTER (now P.M.) state that he has NO CLUE about all this "missing" money that went to shady companies in Quebec.

I have worked on contracts with the Canadian Government and the amount of waste totally boggles the mind!

I really wish that young people in Canada would start to get upset about how this country is managed..right now we are pretty much ignoring the reality and in 20 years when we are working our asses off to pay for all the sick Baby boomers will be too late to complain!

Until the Gen X crowd does anything let the pork barreling continue.
oink oink!

cheers!
Alek
 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 2:53 am

I'm all for lower taxes, but not if it means destabilizing the economy.

I have never known a tax decrease to destabilize any economy. Economies always grow after a tax cut....its very stimulative.

I still say, improve health care, the military, and pay off the debt as quickly as possible, then worry about decreasing the taxes. But continue cutting costs where they are not providing a meaningful service to Canadian citizens.

Improved health care can happen with a 2-tiered system. Let the private sector in.

As for the military....I say cut it further. The CAF is top heavy with officers. Canada doesn't need a military anyway....all we need is the ability to mobilize citizens when we are under threat. Im not sure I want my taxes going to support soldiers fighting other people's wars in Cyprus, Bosnia & Afghanistan...if those nations want to have civil wars, let them.


I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
captaingomes
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 3:24 am

You guys are taking my destabilizing coment out of context, but it's my fault the way I worded it. No, cutting taxes will not destabilize the economy, and yes it will help overall. It wont help government coffers of course, unless the private spending and commercial investment increases substantially to compensate. But it doesn't make sense to cut taxes one year, raise them another just to balance out surpluses or deficits. I'd still like to see the spending decrease, and Alek brings up a good point ... we need the debt under control so that we could pay for the babyboomers health and pensions.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
N6376M
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 3:40 am

Must be nice to be able to rely on someone to get your back and not have to spend real money on defense.

However, if the progressive rate structure described above is correct, could there be a better argument of across the board tax rate cuts in the US? Just goes to show you, balancing the budget has more to do with controlling spending than raising taxes.

-76M

[Edited 2004-02-12 19:40:54]
 
Qb001
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 6:14 am

Economies always grow after a tax cut....its very stimulative.

That's a myth.

Growth is not absolutely correlated with taxes, and both progressists and conservatives have problems in trying to make a case in one way or the other.

Far more serious factors affect growth, although, in truth, economists do not know exactly what they are. Nobel laureate Robert Lucas, one of the world's most famous conservative economists, has spent over a decade looking for the secret to economic growth, and has not found it.

Nobel-bound Paul Krugman, one of the world's most famous "liberal" economists, admits that the mystery of growth is "deep and poorly understood."

People who claim that tax rates affect growth are not serious economists; more often they are journalists, radio-talk show hosts, politicians and other types of snake oil salesmen with easy solutions to complex problems.

You can dismiss their bumper sticker slogans with perfect confidence.
Never let the facts get in the way of a good theory.
 
N6376M
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 6:43 am

Qb001 - so you deny that the Laffer Curve exists?

You need to be very careful with the word "always" because even proponents of supply side economics will concede that there is some point of diminishing marginal returns on tax rate cuts.

 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 7:11 am

Nobel laureate Robert Lucas, one of the world's most famous conservative economists, has spent over a decade looking for the secret to economic growth, and has not found it.

What a waste of a decade for him. I wonder how many of his neighbours started businesses and became millionaires while he was dithering with economic theory????

The fact is that the multiplier effect ensures that free flows of capital self-generate as investments and purchases are made. A $1 investment results in a further $5 in ongoing investment until it peters out.

A TAX on the other hand removes that efficient spending of capital and allocates it to an inefficient or poorly performing segment of the economy which reduces the overall pie.

Should we eliminate taxes altogether....in theory yes....the eventual pie would be much bigger. Yes there will be economic losers but we have them now anyway.



I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
Qb001
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 8:25 am

A TAX on the other hand removes that efficient spending of capital and allocates it to an inefficient or poorly performing segment of the economy which reduces the overall pie.

Not at all supported by any serious facts. But I don't have the time to make my point any further now; I've got to go.
Never let the facts get in the way of a good theory.
 
bobrayner
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 8:26 am

The fact is that the multiplier effect ensures that free flows of capital self-generate as investments and purchases are made. A $1 investment results in a further $5 in ongoing investment until it peters out.

How does a positive feedback loop peter out?  Big grin
Cunning linguist
 
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yyz717
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 9:00 am

How does a positive feedback loop peter out?

I recall from a Univ economic textbook that a $1 investment anywhere in the economy generates another $0.80 in spending...which then generates another 80% spending pattern ($0.64) and then another ($0.51)...which when peters out amounts to $5.

On the other hand, a tax of $1 not only removes this multiplier effect but also DELAYS the $1 return to the ecnomy....and when it is returned (in terms of govt services) rarely generates any near the private sector mutli effect.

I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
Qb001
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RE: [Canadian]Surplus Expected To Exceed $5-billion

Fri Feb 13, 2004 11:54 am

I recall from a Univ economic textbook that a $1 investment anywhere in the economy generates another $0.80 in spending...which then generates another 80% spending pattern ($0.64) and then another ($0.51)...which when peters out amounts to $5.

I remember that too. Which is why it is said that 1 direct job creates 5 other indirect jobs. I don't remember the exact demonstration, but I know it ended with the formula 1/(1-.8) = 5.

On the other hand, a tax of $1 not only removes this multiplier effect but also DELAYS the $1 return to the economy....and when it is returned (in terms of govt services) rarely generates any near the private sector mutli effect.

Partly true and false. Partly true if that $ goes to pay the debt, but if it's a debt, then it means it's already spent, hence it has already produced it's multiplier effect.

False because if it is spent by the govt, it produces the same multiplier effect.

Modern countries with high marginal income taxes, such as most Western European countries, do not squelch through the mud of economic despair. The EC is now more powerful, economically speaking, than the USA. And that was achieved will maintaining higher income taxes.

If you believe that lowering taxes always lead to an economic boom, then there's something I'd like to sell you...
Never let the facts get in the way of a good theory.

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