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  #1  
Old Posted Jun 9, 2020, 3:47 AM
swimmer_spe swimmer_spe is offline
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Future taxation

With the billions being spent by federal, provincial and municipal governments to weather the Covid crisis, is this the end of politicians using tax cuts as a way to get elected?

Our total debt is skyrocketing. Until the Covid crisis is over, and our economy is roaring again with everyone back to work, our debt and deficit will increase. Will we see taxation directed at the richer people? Will we see new user fees? Will the government privatize some services?
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  #2  
Old Posted Jun 9, 2020, 4:49 AM
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I've always been hoping that every country's so in debt that it doesn't matter.
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We'll soon begin work to extend Highway 417 to Renfrew, first replacing the intersection of Calabogie Road with an interchange!

On va prolonger l'Autoroute 417 jusqu'à Renfrew à bientôt, tout en remplaçant l'intersection du Chemin Calabogie à un échangeur d'abord!
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  #3  
Old Posted Jun 9, 2020, 4:57 AM
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We'll probably be worse off than we otherwise would have been but it's still so early to make predictions. The debt racked up so far is not large enough to have a material impact on long-term budgeting in Canada.

I think the best-case plausible scenario is that the economy comes roaring back. Maybe there's even some good reallocation of labour and capital that shakes things up and leads to a better equilibrium for a while (e.g. more businesses adopt working from home and it's good for people, more people shop online and it's more productive).

Then there's a worst-case that's some kind of long depression bleeds into some other economic calamity (covid round 2 starts killing a lot more people, debt crisis from governments defaulting) and drags on for years.

As of right now if I were forced to bet I'd bet on the best case scenario. While it's tragic that there has been death and illness, we haven't truly faced large scale destruction in Canada, and the risks imposed by covid (particularly for the most productive working-age people) are not large enough to justify mothballing the economy indefinitely. Some very prominent businesses (e.g. cruise industry) may die but they make up a comparatively small part of the economy while a bunch of boring behind-the-scenes companies carry on.
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Old Posted Jun 9, 2020, 12:42 PM
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Originally Posted by swimmer_spe View Post
Will the government privatize some services?
I might not oppose privatizing VIA Rail. With the flying industry likely to suffer for years to come, possibly never recovering if this type of pandemic returns more frequently, a private company could swoop in and invest in a proper rail system to serve Canada's major urban centres from coast-to-coast (third cost might not be economically viable, beyond Churchill Manitoba).
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Old Posted Jun 9, 2020, 2:31 PM
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Politicians will promise anything to get elected, so no, the end of 'tax cuts' is not nigh.

That being said several decades of the mantra tax cuts have left a significant fiscal room for increases. Or spending restraint. Or some combination of both.

You could probably increase the GST by a couple of points, eliminate some tax credits, raise the rates on income taxes and trim eligibility for some of our more expensive programs (see: OAS eligibility, Canada Child Benefit) and probably return to fiscal balance soon enough. If you had to delay some infrastructure spending, that could help too.
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Old Posted Jun 9, 2020, 2:46 PM
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Originally Posted by wave46 View Post
Politicians will promise anything to get elected, so no, the end of 'tax cuts' is not nigh.

That being said several decades of the mantra tax cuts have left a significant fiscal room for increases. Or spending restraint. Or some combination of both.

You could probably increase the GST by a couple of points, eliminate some tax credits, raise the rates on income taxes and trim eligibility for some of our more expensive programs (see: OAS eligibility, Canada Child Benefit) and probably return to fiscal balance soon enough. If you had to delay some infrastructure spending, that could help too.
I agree with this. I absolutely hate tax cuts. The Liberals cut taxes, increase services/programs then run deficits, while the Conservatives cut taxes and programs/services, and run slightly smaller deficits.

A couple hundred bucks won't do anything to help me financially but it sure will do a lot for the Government when multiplied by a few million.
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Old Posted Jun 9, 2020, 3:09 PM
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I wish this means the end of boutique tax credits that make the tax code far more complicated costly and difficult to manage. I would prefer an increased GST to 7 or 8% to reduce the 2020 deficit inured over a 10 year span and streamlined tax brackets to just 3 levels that would be cheaper to administer and possibly provide a kick start to the economy.
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  #8  
Old Posted Jun 9, 2020, 3:10 PM
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Originally Posted by J.OT13 View Post
I might not oppose privatizing VIA Rail. With the flying industry likely to suffer for years to come, possibly never recovering if this type of pandemic returns more frequently, a private company could swoop in and invest in a proper rail system to serve Canada's major urban centres from coast-to-coast (third cost might not be economically viable, beyond Churchill Manitoba).
Anybody who says this doesn't get how investors think. I support VIA as a public service. But if I were an investor, I would see almost no value outside of services the Toronto-Ottawa-Montreal triangle. I'm not even sure services west of Toronto and east of Montreal would make the cut.
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Old Posted Jun 9, 2020, 3:17 PM
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Originally Posted by wave46 View Post
Politicians will promise anything to get elected, so no, the end of 'tax cuts' is not nigh.

That being said several decades of the mantra tax cuts have left a significant fiscal room for increases. Or spending restraint. Or some combination of both.

You could probably increase the GST by a couple of points, eliminate some tax credits, raise the rates on income taxes and trim eligibility for some of our more expensive programs (see: OAS eligibility, Canada Child Benefit) and probably return to fiscal balance soon enough. If you had to delay some infrastructure spending, that could help too.
Infrastructure spending will be seen as a stimulus method to get the economy rolling. Bumping the GST up a couple of points will hurt the lower income people just getting back on their feet. Maybe a new wealth tax that'll apply to high end good might work better.


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Originally Posted by J.OT13 View Post
I agree with this. I absolutely hate tax cuts. The Liberals cut taxes, increase services/programs then run deficits, while the Conservatives cut taxes and programs/services, and run slightly smaller deficits.

A couple hundred bucks won't do anything to help me financially but it sure will do a lot for the Government when multiplied by a few million.
I agree! I always hate when a candidate says they will increase spending but not have a way to pay for it.
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  #10  
Old Posted Jun 9, 2020, 3:24 PM
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Politicians will promise anything to get elected, so no, the end of 'tax cuts' is not nigh.
Agreed. And really, it's about the only tool that conservatives can run on. There's no problem for conservatives at the federal and provincial level that can't be solved with a tax cut or rebate in their worldview. Business competitiveness? Corporate taxl cut. Daycare too expensive? Childcare rebate. Inadequate public transit? Transit rebate. So, that means tax cuts and rebates will always be part of the politocal debate.

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Originally Posted by wave46 View Post
You could probably increase the GST by a couple of points, eliminate some tax credits, raise the rates on income taxes and trim eligibility for some of our more expensive programs (see: OAS eligibility, Canada Child Benefit) and probably return to fiscal balance soon enough. If you had to delay some infrastructure spending, that could help too.
Disagree. Any government raising a highly visible tax would probably get turfed. I have no doubt the Trudeau would raise the GST/HST if he could. Likewise, making programs and rebates less universal dramatically reduces support for them. Could be mere tokenism, but even giving the upper middle class $50 per month in child benefits ensures support to then allow for hundreds of dollars per month in fiscal transfers to lower income families.

The bigger issue is the emerging narrative on wealth inequality first and income inequality second. Three crrux of it is that the middle class is being taken advantage of. As long as that narrative exists, it's going to be hard to both raise taxes and cut spending. With millennials falling further behind economically as their electoral power grows, this narrative will only become more prevalent.

To be honest, I'm not even sure the support for government spending is universal, as much as support for fiscal transfers is high. These millennials are clamouring for more spending on infrastructure. They want a higher CCB deposit in their account every month. The government recognizes this. It's why they've decided to effectively partially privatize infrastructure through the Canada Infrastructure Bank. Only way to realistically get the capital that is needed to build the long term (and expensive) infrastructure that gets deferred endlessly.
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  #11  
Old Posted Jun 9, 2020, 3:27 PM
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GST to 7%, perhaps tracking the increased revenue to COVID19 spending, perhaps not.

As long as Debt/GDP starts to trend down again, we'll be fine long term. The money being borrowed right now is at incredibly low interest rates.
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  #12  
Old Posted Jun 9, 2020, 3:32 PM
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Originally Posted by Truenorth00 View Post
Anybody who says this doesn't get how investors think. I support VIA as a public service. But if I were an investor, I would see almost no value outside of services the Toronto-Ottawa-Montreal triangle. I'm not even sure services west of Toronto and east of Montreal would make the cut.
I think high-speed rail would be more than worth it in the Quebec City-Windsor Corridor. It would require a large investment up-front, but would be far cheaper to operate than flights I would think.

An Edmonton-Calgary HFR or HSR would also likely bring it a handsome profit in the long run.

Even as a public service, HSR should be built in the Quebec City-Windsor corridor. This would be a huge step in fighting climate change. HFR is ok, but it won't compete with airlines as much as HSR (which is probably the point, but again, bad environmental policy).

Anything else might be a tougher sell, I agree.
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  #13  
Old Posted Jun 9, 2020, 3:35 PM
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An easy way to start raising revenues for Government would be to tax streaming services, social media, online shopping, ride sharing platforms and Airbnb. They have had an advantage over Canadian companies for far too long.
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  #14  
Old Posted Jun 9, 2020, 3:56 PM
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I think high-speed rail would be more than worth it in the Quebec City-Windsor Corridor. It would require a large investment up-front, but would be far cheaper to operate than flights I would think.
The Quebec-Windsor corridor and its rail dreams perfectly illustrate the problems for private investors in this space. Realistically, the actual financial rate of return is quite low
May not be a loss. But would not be investment grade either. And then there's portions of the Corridor where return is much higher and others where projections show a loss. So no investor will only want the portions that provide returns. Makes it hard to sell as a cohesive proposal.

This problem is universal. Which is why elsewhere government books the infrastructure and usually only fully privatizes the actual services. Tracks are usually government owned or managed by a non-profit trust.

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Even as a public service, HSR should be built in the Quebec City-Windsor corridor. This would be a huge step in fighting climate change. HFR is ok, but it won't compete with airlines as much as HSR (which is probably the point, but again, bad environmental policy).
We've been talking about HSR on the Quebec-Windsor Corridor for half a century now. As long as we insist HSR is the minimum improvement, we'll get no improvement. I strongly suspect a big part of that is airline lobbying behind the scenes. The TOM triangle, despite the competition, is extremely profitable for the airlines. HSR would kill Porter and substantially injure Air Canada. I've previously read that the airlines raised concerns about HFR. Imagine the fight they would launch against HSR.

The value in HFR is three fold. First it will show that a business case exists and that not all intercity rail is a money pit. Next it regularizes train travel for a lot of the population. May be not for business travel. But certainly for personal and tourist travel. Third, if done properly, there should be a path to slowly upgrade towards HSR. People forget that most HSR lines in Europe aren't totally brand new. They were upgraded to allow for faster speeds, with grade separations being the biggest expense. If done right, HFR could basically be Acela a decade after service launch.

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An Edmonton-Calgary HFR or HSR would also likely bring it a handsome profit in the long run.
Doubtful. And I say that as someone who really does support such an investment. I can't think of any city pair in the world, where two cities of about 1.5 million each have enough traffic between them to make a multi-billion dollar rail investment profitable. The justification for building something between Calgary and Edmonton is entirely about the economic and environmental benefits. Increased productivity from more efficient travel, avoided investment in road construction and reduced GHGs from air travel. I'm fairly sure WestJet and Air Canada would fight this hard though.
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Old Posted Jun 9, 2020, 4:16 PM
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Originally Posted by Truenorth00 View Post
The Quebec-Windsor corridor and its rail dreams perfectly illustrate the problems for private investors in this space. Realistically, the actual financial rate of return is quite low
May not be a loss. But would not be investment grade either. And then there's portions of the Corridor where return is much higher and others where projections show a loss. So no investor will only want the portions that provide returns. Makes it hard to sell as a cohesive proposal.

This problem is universal. Which is why elsewhere government books the infrastructure and usually only fully privatizes the actual services. Tracks are usually government owned or managed by a non-profit trust.



We've been talking about HSR on the Quebec-Windsor Corridor for half a century now. As long as we insist HSR is the minimum improvement, we'll get no improvement. I strongly suspect a big part of that is airline lobbying behind the scenes. The TOM triangle, despite the competition, is extremely profitable for the airlines. HSR would kill Porter and substantially injure Air Canada. I've previously read that the airlines raised concerns about HFR. Imagine the fight they would launch against HSR.

The value in HFR is three fold. First it will show that a business case exists and that not all intercity rail is a money pit. Next it regularizes train travel for a lot of the population. May be not for business travel. But certainly for personal and tourist travel. Third, if done properly, there should be a path to slowly upgrade towards HSR. People forget that most HSR lines in Europe aren't totally brand new. They were upgraded to allow for faster speeds, with grade separations being the biggest expense. If done right, HFR could basically be Acela a decade after service launch.



Doubtful. And I say that as someone who really does support such an investment. I can't think of any city pair in the world, where two cities of about 1.5 million each have enough traffic between them to make a multi-billion dollar rail investment profitable. The justification for building something between Calgary and Edmonton is entirely about the economic and environmental benefits. Increased productivity from more efficient travel, avoided investment in road construction and reduced GHGs from air travel. I'm fairly sure WestJet and Air Canada would fight this hard though.
We're getting a bit off topic. I responded to your post in the High Speed Rail in Canada thread.

https://skyscraperpage.com/forum/sho...postcount=1418
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  #16  
Old Posted Jun 9, 2020, 5:10 PM
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Infrastructure spending will be seen as a stimulus method to get the economy rolling.
While I get the idea of infrastructure spending to stimulate the economy, I don't think construction is the industry that's really been hurt by this.

If construction is going flat-out, what benefit does that confer on someone in retail who has been laid off? Or a waitress? Or a flight attendant? These aren't people who are going to parachute into construction.

I'd like to see how the economy recovers prior to blowing a wad of cash of infrastructure projects.
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Old Posted Jun 9, 2020, 5:19 PM
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Originally Posted by wave46 View Post
While I get the idea of infrastructure spending to stimulate the economy, I don't think construction is the industry that's really been hurt by this.

If construction is going flat-out, what benefit does that confer on someone in retail who has been laid off? Or a waitress? Or a flight attendant? These aren't people who are going to parachute into construction.

I'd like to see how the economy recovers prior to blowing a wad of cash of infrastructure projects.
I feel like with infrastructure spending should come programs to encourage enrollment in trades.
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Old Posted Jun 9, 2020, 5:32 PM
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While I get the idea of infrastructure spending to stimulate the economy, I don't think construction is the industry that's really been hurt by this.

If construction is going flat-out, what benefit does that confer on someone in retail who has been laid off? Or a waitress? Or a flight attendant? These aren't people who are going to parachute into construction.

I'd like to see how the economy recovers prior to blowing a wad of cash of infrastructure projects.
It is the trickle down from those projects that spur the economic rebound they are looking for.
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Old Posted Jun 9, 2020, 5:38 PM
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It is the trickle down from those projects that spur the economic rebound they are looking for.
If there's slack in the construction industry, sure, stimulus makes sense.

If there isn't, you're just bidding up costs for things. A construction company working flat-out and who can't get workers it needs (remember the labour mismatch) can't really take on more work.

If we're talking about funding for retraining, maybe it makes sense.

Otherwise, might as well pad EI or something like that - it'll help more than trickle down economics via already employed people.
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Old Posted Jun 9, 2020, 5:47 PM
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If there's slack in the construction industry, sure, stimulus makes sense.

If there isn't, you're just bidding up costs for things. A construction company working flat-out and who can't get workers it needs (remember the labour mismatch) can't really take on more work.
Construction is a decent industry for quickly hoovering up semi-skilled labour though. If you were a server in a restaurant you can't quickly switch over to working as a nurse but you could quickly learn to do a bunch of construction tasks.

We are going to see a reallocation of labour in 2020, and somewhat different demands for infrastructure in 2021 compared to what we had in 2019.

The pandemic has potential to provide the "activation energy" for a bunch of positive changes that might not have happened in a more static economy. We were not using our current technology to its full potential before; people were commuting and travelling a lot more than they needed to, for example. I would like to see a radical reimagining of how people and goods get around in cities. More drones, more small electric vehicles, more self-driving vehicles, and more people working near where they live.
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