Tax cuts increase the participation in the labour force and lower the overall wage cost for employers. Tax cuts also encourage new businesses and entrepreneurs and help unearth the underground economy. And lower taxes can actually increase government revenue over the long haul because economic growth is spurred. There is historical and empirical proof to support each of these effects. There is the spin we hear in the budget speech, and then there's reality.
Lets look at each story in turn.
The books have largely been balanced on the backs of taxpayers. Story B. Taxes have actually gone down. At first glance, the last few rounds of federal and provincial budgets appear to have provided taxpayers with some modest tax relief. It's not that we're ungrateful for small favours, but the federal and provincial politicians who tell you they are putting more dollars back in your pocket are not telling the whole truth. First, the recent cut in Employment Insurance premiums will be more than offset by the increase in CPP premiums.