No one wants to pay taxes. But if you have to fork over your cash to the government, it’s probably best to do so in the form of consumption taxes.
That was the message from Carlton University economist Ian Lee during a Tuesday appearance on Gormley.
His comments came in response to a Facebook video released Monday by Saskatchewan Premier Brad Wall, in which he hinted at a move to more consumption taxes ahead of Wednesday’s provincial budget.
Lee said a review of 30-plus years of research by academics and central bank economists shows things like sales taxes and sin taxes are the least harmful to economic growth, as compared to traditional taxes on personal and corporate income.
“Because consumption taxes do not punish or tax innovation. They do not punish or tax entrepreneurship,” he said.
Lee said he’d be willing to give Wall high marks for a move away from income taxes – provided any increase in consumption taxes is revenue-neutral.
“As a general principle, as you shift towards consumption taxes, you decrease the tax brought in from income taxes,” he said.
Despite this, Lee cautioned he doesn’t view the provincial sales tax as a ‘good’ tax, because it only applies to people and firms operating within Saskatchewan.
“It falls on your own companies and it doesn’t fall on the companies exporting into your economy. So it gives exporters into your economy a free ride,” he said.
Lee said having provinces move to Harmonized Sales Tax (HST) combining federal and provincial sales taxes would be the best way to limit distortions to the economy. Currently, HST is used by Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island.
650 CKOM and 980 CJME is your source for full coverage of the provincial budget starting at 2 p.m. Wednesday.