Blessed by the 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).

Recently the opposition parties passed a bill from the Liberals making RESP (Registered Education Savings Plan) contributions tax-deductable, as RRSP contributions are. This was a huge gift to parents of kids who are college/university-bound, so much so that it threatened to overshadow the recent TFSA gift unveiled by the cons. In full-on “pay attention to meeeee” pre-election kitty mode, the cons couldn’t just seem to let that stand. So now they’ve threatened to turn it into yet another confidence motion. These kids are seriously itching for an election, and have been for some time now.

Under current rules, there is no immediate tax reduction for RESP contributions, which are allowed to compound free of capital-gains levies. Instead, the government matches a small percentage of parents’ contributions up to a maximum of $7,200 over the lifetime of the plan.

I’m actually a little torn on this issue. On the one hand, this is a really nice tax gift to parents and something that will help further the affordability of higher education for people that… well… could probably afford it anyway. On the other hand, this is getting to be too generous. The RESP already allows money put away for education to compound tax-free, and when withdrawn are taxed in the hands of the student (who is often in a lower tax bracket than the parent) and contributions get some matching money tossed in by the government to boot. Adding a tax deduction on top of that makes it hands-down the best place to put your money if you have a university-bound child.

I feel dirty for potentially agreeing with something the dirty, crooked, heartless cons might say, but I think that this tax break for RESPs might have gone too far. Of course, I’m not all that concerned with Flaherty putting the blame for losing the surplus on it — he’s blown far more money on far less worthy causes — but rather because I fear for the future of higher education, especially if the cons get another term. This improvement to the RESP (and lost tax revenue from the deductions) would give them just the sort of flimsy cause they need to proclaim that getting a university education is more affordable now, and cut back on government support, letting tuitions rise. This would of course hurt the low-income students who don’t have RESPs the most (for the rest, it may be zero-sum), and be a serious bummer to those who get advanced degrees and have to pay for extra years of tuition beyond what their parents might have saved for…

On the gripping hand, “Canada’s New Government” is being ridiculously juvenile by making yet another piece of legislation a matter of confidence. I can only hope that when the election eventually happens (we’ve had so many false starts in the last two years that I’ve stopped expecting anything) that the cons get soundly trounced.

Edit: What I’m trying to say here is that the tax relief for the RESP is really only going to help those families that already could save for their children’s education, it’s not really going to make higher education more affordable for everyone. Since this is going to cost the government in lost tax revenue, I think that money would be better spent in direct tuition relief or in a straightforward beefing up of the matching grants for RESP contributions.

The big news making the rounds from the budget announcement has been the tax free savings account, which does sound kind of neat, but has been covered in incredible detail elsewhere. Hidden behind that newsmaker was the announcement that the green car feebate program, barely a year old, was going to be scrapped. That seems like a dumb idea to me, especially since the program looked to have just started working. While there are (and were) issues with a discrete cut-off like this, it was enough to encourage some manufacturers to make just enough of a change to drop down a tier. It was enough to get people to think about fuel efficiency. And, for those buying a hybrid, it was enough of an incentive to buy it in Canada rather than cross the border to take advantage of the strong Loonie (or escape the fleecing of local auto pricing). After the initial pangs of administering a new program from scratch, it sounds like the rebates had just started to flow smoothly from the government coffers.

It’s doubly stupid to cancel it now because it was really the only piece of effective environmental action the Cons have put out there…

I haven’t had the time to properly read and write/rant about BC’s upcoming carbon tax, but I have to say that the idea sounds good to me: it’s a not-too-oppressive, revenue-neutral, slowly-incrementing carbon tax. Sounds like it could become the model for the other provinces (and possibly even the states!).

Canada has been at the forefront of nuclear research right from the very beginning. We also had some of the world’s first nuclear accidents at Chalk River in 1952 and 1958, and those early mis-steps lead to an incredible culture of safety in our nuclear power industry. No matter the cost over-runs, the delays in a project, or the engineering required, safety was always the highest priority, and our nuclear watchdog the CNSC was there to make sure that safety stayed priority number one. The CANDU, our series of Canadian-designed nuclear reactors were designed from the ground up to be as safe as possible: using natural uranium means the core can’t naturally go critical (and has non-proliferation bonuses), and heavy water as a moderator can be easily drained/evapourated in an emergency to shut the core down, etc. This reactor has also been sold with some success around the world (granted, we engaged in some fancy lending practices to sell it, and the design may owe as much to a concern about safety as it does to our position as a major producer of heavy water).

I’ve been a proponent of nuclear power for a while: sure, waste is an issue (though again, less so with the CANDU design) for the long term, but for the medium-term (10-50 years) nuclear power is really going to be our only cheap, GHG-free source of electricity, and I think we’re going to have to rely on it until other renewables can get off the ground. (I also think it’s better to plan to build one over the span of ten years and start now than to realize 8 years from now that oh shit, we need another nuclear power plant, like, now!).

Now, the Harper neocons have forced me to possibly reconsider that. First, they interfered with and politicized the issue of the NRU shutdown, and ordered it back up with a bill in parliament (yes, the other parties supported it, but they were also in a bit of a hard place with that). That move I thought was possibly the right thing for the moment: there was a big backlog of nuclear medicine tests because of the lack of isotopes. In the greater scheme of things, that might have been a time to forgo absolute nuclear safety, let the reactor run as it had been for a while, stockpile some more moly-99, and then shut it down again for the upgrades in another month or so. Beyond the moment though, it was a very dangerous move for the government to take. Once that step is taken of a government stepping in and overruling the nuclear watchdog, how hard is it to do again, for increasingly trivial reasons? Sure, this time the greater good may have been served by letting a downright ancient reactor run in a somewhat risky state (and note that this is one of the very few reactors in Canada with a design that will allow it to meltdown in a failure mode) to help thousands of patients. But what about next time? Will they overrule the CNSC again just to cut corners and get a steam-generating nuclear station set up for oil sands extraction? Maybe a bill to let another nuclear project run without safeties just because it’s too gosh-darn expensive to install them? (After all, they’ve got some taxes to cut!)

Out of the blue today, they fired Linda Keen, the president of the CNSC. This has gone way too far now. She was just doing her job as far as I can tell. No matter what Lunn might have to say about it, her job is to make sure that nuclear energy and isotopes in Canada are handled safely, and to regulate that. That’s it. Her job is not to balance safety with health concerns and isotope availability. If the ancient NRU somehow became the only source for Moly-99 on the continent, and hospitals all over are facing shortages, well, that’s above her pay grade, and the short-sightedness of people who should plan that sort of thing is not her fault. The reactor is not safe, so it doesn’t come back up. Even under pressure from the government, she kept her chin up. The government can (and did) do an end run around her in the case of a health crisis/isotope shortage, and that’s fine. It was a special set of circumstances beyond the scope of her agency. But there’s no reason I can see for firing her. In fact, reading her letter it looks like the CNSC was trying to work with AECL to get a modified license to bring the reactor up without the backup equipment, but the ball was dropped by AECL (whose chief resigned already).

There are a few choice quotes from the Globe & Mail’s article about Lunn defending his decision:

Bloc Québécois MP Claude DeBellefeuille accused the Minister of undermining public confidence in the CNSC.

“You have shaken the confidence that people should have in this independent watchdog for nuclear safety. You have sown doubt about this body,” she said.

The article doesn’t have an answer to that one from Lunn, and that is an exceptionally valid point. The parliamentary override, as controversial and short-sighted as it was, could have been done with a lot less name-calling and finger-pointing. Most importantly, it could have been done with a lot less politicizing, which might have given people some reassurance that this trouncing of the nuclear watchdog, just doing its job, was a one-off affair, and not a recurring madness in our government. Either way, this episode is going to strengthen the arguments from those opposed to nuclear power.

Asked by the NDP’s Catherine Bell if he would resign if censured by parliamentarians, Mr. Lunn replied, “No, I serve at the pleasure of the Prime Minister and I have his confidence.”

I predict that in a few days, Lunn is going to find out just how fleeting the “confidence” of the PM is. He’ll tear up a key campaign plank and break a promise, like taxing income trusts, and sow havoc in the markets about random, unjustified government intervention in the marketplace, on a complete whim. When he’s got as much political pressure as there is now to axe Lunn, and when Lunn has been as embarrassing to the PM as he has been, well… loyalty and confidence count for very little in the neocon party of Canada.