March 12th, 2008 by Potato

The GST cut was perhaps one of the worst ways to cut taxes for a large number of reasons. Consumption taxes are, to my thinking, better than income taxes, especially mild ones like our sales taxes (to try to fund the entire government budget from consumption taxes would get ridiculous). Plus, the GST was actually pretty progressive: essentials like rent, some groceries, and drugs don’t have GST applied to them. People with low incomes can file for a GST rebate to cover what GST they might pay on other items. And cutting the GST, especially in two separate small cuts, was a waste of effort as countless retail transactions and software had to be retuned.

A paltry gift to Canadians to begin with (especially in low-to-middle class), a recent report by CBC Marketplace shows that for many things we buy there is no savings to be had from the GST cut. At least, not for consumers. When the GST was cut, many retailers instead opted to keep the old prices and pocket the difference in the GST. Some of that was out of the convenience of round numbers: vending machines and parking meters don’t deal with pennies, and movie/concert tickets do tend to come out to round numbers (not that it really matters since so many of them go on plastic)…

All that talk about saving pennies though, and I’m reminded of recent discussions about the merit of continuing to mint the one-cent coins. I don’t even think many transactions would need to be rounded to the nearest nickel for quite a while — the half-life of pennies seems to be quite long, so we could probably count on a fairly healthy supply of them for another decade or two after they stop minting them (assuming the copper thieves don’t get them all).

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