Economists dump on Harper's GST-lowering plan

Some economists have come out against Conservative Leader Stephen Harper's plan to cut GST by two percentage points.

Some economists have come out against Conservative Leader Stephen Harper's election campaign promise to lower the GST.

"From an economic point of view, it wouldn't be my first choice," Bill Robson, senior vice-president of the CD Howe Institute, told CBC Newsworld on Thursday.

"If you want tax cuts that are going to promote work, going to promote saving, help us invest more and raise living standards in the future, the GST is not the tax you would go after."

Robson said it would be better to cut personal income taxes.

Earlier in the day, Harper announced he would lower the seven per cent goods and services tax by one percentage point immediately and by another point within five years if he becomes prime minister after the Jan. 23 vote.

Jason Clemens, an economist with the Fraser Institute, said he also opposes reducing the GST.

Jim Davies, who teaches economics at the University of Western Ontario in London, also said he would prefer income tax cuts.

"Most serious work done by economists who specialize in public finance indicates that the GST is a more efficient tax source than the income tax," Davies told the Canadian Press. "If the income tax cut is designed properly, it can provide similar benefit to lower-income taxpayers."

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The Conservative leader said that for an average family of four with an income of $60,000 a year, the GST reduction would mean about $400 less in taxes.

Liberals said first-year savings would be closer to $250, based on Statistics Canada numbers indicating a typical family earning $60,000 makes taxable purchases worth about $25,000 a year.

But John Williamson, head of the Canadian Taxpayers Federation, came to Harper's defence.

"I think it's a fine idea," Williamson told CBC News Online. " A lot of economists are suggesting that is it an unacceptable tax cut and I don't think anything could be further from the truth."

He said economists are evaluating the Conservatives' tax plan differently than the Liberals' tax plan.

Williamson said that when the Liberal plan came out to reduce personal income taxes, there was no talk among economists about whether their specific proposals were the best ideas.

"They are looking at the Conservative plan at what is the best tax cut measure and they are not doing the same for the Liberal tax cut plan."

He agreed, though, that the preference is to cut income taxes, but added he is waiting to see more tax cut proposals from the Conservatives.