GST cut; good or bad?!

Fully 29 per cent of voters surveyed in mid-January said they were more inclined to vote Conservative because of the GST (Good and Services Tax-Faramin) cut -- the single most powerful item tested, according to Decima Research.

I have a simple argument about and well, against the idea of GST cut: Let's first quickly look at a little background on this: In Canada, there is a 7 percent federal GST (Goods and Services Tax) on purchasing of many non-essential items (This is on top of the provincial sales tax which vary from province to province). The conservatives are offering to reduce this tax to 6 percent immediately after forming the government and by another one percent within five years thereafter. It is strange and disappointing to see 29 percent of the people are going to vote the conservatives for this single reason. First of all, it is understandable if a very high earner family likes the idea of reduction in the GST because they are the ones with the highest disposable income and highest purchasing power. They are the ones who are more likely to purchase expensive items and every one percent less tax could end of being a considerable saving on their purchases.

Now, let's see how this would affect a low income family:

There are tens of thousands of families in Canada who survive with less than $25,000 gross annual income. If we consider that a good chunk of what they make (Just over 2.4%) is deducted for Employment insurance (EI) and about 5% Canada Pension Plan (CPP), this would mean about $1800 of the income of the family is already deducted and paid towards EI and CPP. On top of this, obviously the family pays income taxes as well (which is also a combination of provincial and federal taxes). After all these deductions, the money left would be just barely enough to survive.

On the other hand, the conservative's claim that this reduction would be beneficial to everybody; regardless of their income, is nothing but a gross lie. A family with such a low income does not have a high purchasing power in first place and after all the deductions, the money that is left for them is almost just enough to buy food and groceries. However, food and groceries such as bread, fruits, milk, meat etc. Are already non-taxable items anyway. So this GST reduction makes no difference for a low income family at least as far as the groceries are concerned.

Also, low income families are generally renters and do not own their own houses or condominiums. And the other big chunk of their income is spent on rental payments, which are already not taxable. So, once again the GST makes no difference to them in regards to cost of renting.

So, just this quick look at the scenario reveals that the reduction in the GST leaves these families with only a few extra dollars in their pockets in course of a year and nothing more.

To different extent, this case can also be applied to the middle income families. And yes, based on that, they will be left with just a bit more in their pockets. And all this is happening while the rich and those who need the least, are ending up saving and benefiting the most.

Some might argue by saying that who cares how much the rich saves, even a few bucks in my pocket is better than nothing. But this idea ignores the fact that there is a much bigger case at stake: The combined result of this reduction (to the rich and poor) is less money in the hands of the government, and when the government has less money in its hands, that means there is less money to spend and that, in turn, means cuts in the public services and guess who needs those public services the most: The poor and the middle income. And when things get to this point, that's when the wave of fee-based services hit the shores and then is the time for many of these 29 percent who cannot be all rich and are those who are now favoring the GST cut, can realize how stupid and brainless they have been by allowing to be manipulated so easily by something which only sounded good but in fact was a disaster.