Bail Out the Consumer
In order to respond to the economic crisis in Canada, the government's strategy is to: a) Provide major financial support to Banks and mega-companies, b) Spend $billions on construction projects, and c) Make a few miniscule changes in tax rate reductions and tax deferral gimmiks.
Banks & Mega-Companies
The Canadian government has begun to provide almost interest free loans to large Canadian banks and even global corporations to supposedly keep them from laying off people or closing down Canadian operations.
The Canadian banks have bankrupted over 350,000 canadian businesses since I left university to work in the business community forty years ago. During this time, the banks drove out or bought out, all their small competitors. They have padded their pockets at the cost of all these failed family businesses, never mind their bankrupting millions of Canadians with their usurous interest rates and frenzied credit card spending campaigns. Loans to banks will never help consumers get out of debt!
The multi-national corporate loans must be paid back, and all they really do is postpone accountability for these organizations to their employees and stock-holders. There is also extremely high risk that these loans will never be repaid. Foreign owned companies will just shut down Canadian operations as they have frequently done in the past. Thus, loans to these firms will not help consumers get out of debt.
Construction Projects
Of course, lots of highway, sewer, bridges, transit route construction will help our immigrant intensive construction workers earn paychecks. But, these government contracts are always under-bid and cost at least twice the approved amounts. Only a few companies have the expertise to do these projects and they all collaborate on which ones each one takes on. Only a few projects will really create new jobs and new organizations that will be around in ten years. None of these projects help Canadiuan consumers get out of debt or earn investment capital.
Tax Rates & Deferrals
Personal Income Taxes of $110 billion were 47% of government revenue in 2007, whilst corporate taxes paid were only $38 billion, or 16%. GST, which is mainly paid by consumers, was $31 billion, ie. 13%.
Any huge tax cuts to corporations will do nothing for consumers. Also, the new "tax free savings account" are no more than a worthless "guilt gift" that insinuates that Canadians wouldn't have lost so much retrement income during the stock market crash if their RRSP funds had been in these new $5,000 bank accounts that earn $50 per year interest tax free! Wow, is our government ever generous!
They promise the GST will slip to 5%, but that is not what consumers care about. So what, if our $50 dollar fill-up at the gas station plummets down to $49.50? Whoopee! I can get a half cup at Tim Hortons.
Help the Consumer!
Our government is forecasting a $30 billion deficit will be caused by all the extra spending they will do. Yet none of this spending is going to make a significant difference in our family take home pay or our debt reduction or our recovery of lost property value or our lost RRSP values.
Our government is truly missing the whole solution to our economic woes. It doesn't take a million economists or a million beavers to see the sense in driving our economic recovery through our families and consumers.
If consumers can't spend, it doesn't matter what loans you give to business. The businesses will all fail. It isn't the fact that someone has a job that drives the economy. It is the fact that consumers can make purchases that drives economic growth activities.
a) Take Home Pay
By slashing income taxes 30%, the governemnt will lose $30 billion and the consumer will be able to pay down their debts, reduce their interest expenses and increase their savings and discretionary expenditures. All of these improve our economic prospects.
To offset the lost tax revenues, the government can increase the GST to 10% and thus recover most of the $30 billion. The consumer much prefers to pay tax on discretionary purchases than on their pay stubs.
b) Debt Reduction
During the last century, lenders could be given jail terms for the interest rates Banks and Retail Corporations are charging on credit cards. Credit card fees and interest rates should be frozen at rates such as 5% over prime. This would enable faster paydown of these debts.
People who lose their jobs should be allowed suspended interest and payments on credit card debt, much like the way student loans are deferred.
Credit card interest and line-of credit interest should be non-taxable. Mortgage interest should be tax deductible.
RRSP redemptions should be tax free if applied to mortgage principal reductions.
Also, price freezes should be placed upon household essentials such as basic foods, gas, elecricity, car insurance, home insurance, etc.
c) Lost Property Values
Devaluation of home values directly impacts the net worth, or family's assets for retirement. With the number of seniors doubling in ten years, this will represent a major social catastrophe as senior's can't financially provide for themselves. Presently, less than 15% of seniors are financially self-sufficient.
Recent Market Value Assessment, MVA, increases must be fully offset by reduced Municipal tax Mill Rates. As MVA's decline, the capital value losses should be applied as tax credits that may be paid into mortgage principal.
Home improvement items relating to maintenance and updates, not upgrades, should have no GST or PST taxes.
d) Lost RRSP Values
The stock market crash wiped out over 30% of RRSP holdings for many Canadians. Clearly, as retirement savings or retirement asset investments, RRSP's are vulnerable to the financial sector's weaknesses.
Thus, Canadians should also be able to have tax breaks from investing in more secure assets such as their home or land. Redemptions of RRSP's should be tax free if the funds are paid into mortgage principal for their primary and/or secondary residences or recreational/ retirement properties.
Also, RRSP values as of January 31, 2007 should be frozen on account and once losses are taken, these should be applied as income tax credits carried forward. This would assert to Canadian consumers that they were not the cause of the present deflation and that our government is prepared to provide some protection from the full financial impact upon individuals and families.
All of the above proposals will positively impact the wealth of individual Canadians across the country and at all income levels.
Bring these ideas to the attention of our leaders and decision makers.
Jim Reid
Banks & Mega-Companies
The Canadian government has begun to provide almost interest free loans to large Canadian banks and even global corporations to supposedly keep them from laying off people or closing down Canadian operations.
The Canadian banks have bankrupted over 350,000 canadian businesses since I left university to work in the business community forty years ago. During this time, the banks drove out or bought out, all their small competitors. They have padded their pockets at the cost of all these failed family businesses, never mind their bankrupting millions of Canadians with their usurous interest rates and frenzied credit card spending campaigns. Loans to banks will never help consumers get out of debt!
The multi-national corporate loans must be paid back, and all they really do is postpone accountability for these organizations to their employees and stock-holders. There is also extremely high risk that these loans will never be repaid. Foreign owned companies will just shut down Canadian operations as they have frequently done in the past. Thus, loans to these firms will not help consumers get out of debt.
Construction Projects
Of course, lots of highway, sewer, bridges, transit route construction will help our immigrant intensive construction workers earn paychecks. But, these government contracts are always under-bid and cost at least twice the approved amounts. Only a few companies have the expertise to do these projects and they all collaborate on which ones each one takes on. Only a few projects will really create new jobs and new organizations that will be around in ten years. None of these projects help Canadiuan consumers get out of debt or earn investment capital.
Tax Rates & Deferrals
Personal Income Taxes of $110 billion were 47% of government revenue in 2007, whilst corporate taxes paid were only $38 billion, or 16%. GST, which is mainly paid by consumers, was $31 billion, ie. 13%.
Any huge tax cuts to corporations will do nothing for consumers. Also, the new "tax free savings account" are no more than a worthless "guilt gift" that insinuates that Canadians wouldn't have lost so much retrement income during the stock market crash if their RRSP funds had been in these new $5,000 bank accounts that earn $50 per year interest tax free! Wow, is our government ever generous!
They promise the GST will slip to 5%, but that is not what consumers care about. So what, if our $50 dollar fill-up at the gas station plummets down to $49.50? Whoopee! I can get a half cup at Tim Hortons.
Help the Consumer!
Our government is forecasting a $30 billion deficit will be caused by all the extra spending they will do. Yet none of this spending is going to make a significant difference in our family take home pay or our debt reduction or our recovery of lost property value or our lost RRSP values.
Our government is truly missing the whole solution to our economic woes. It doesn't take a million economists or a million beavers to see the sense in driving our economic recovery through our families and consumers.
If consumers can't spend, it doesn't matter what loans you give to business. The businesses will all fail. It isn't the fact that someone has a job that drives the economy. It is the fact that consumers can make purchases that drives economic growth activities.
a) Take Home Pay
By slashing income taxes 30%, the governemnt will lose $30 billion and the consumer will be able to pay down their debts, reduce their interest expenses and increase their savings and discretionary expenditures. All of these improve our economic prospects.
To offset the lost tax revenues, the government can increase the GST to 10% and thus recover most of the $30 billion. The consumer much prefers to pay tax on discretionary purchases than on their pay stubs.
b) Debt Reduction
During the last century, lenders could be given jail terms for the interest rates Banks and Retail Corporations are charging on credit cards. Credit card fees and interest rates should be frozen at rates such as 5% over prime. This would enable faster paydown of these debts.
People who lose their jobs should be allowed suspended interest and payments on credit card debt, much like the way student loans are deferred.
Credit card interest and line-of credit interest should be non-taxable. Mortgage interest should be tax deductible.
RRSP redemptions should be tax free if applied to mortgage principal reductions.
Also, price freezes should be placed upon household essentials such as basic foods, gas, elecricity, car insurance, home insurance, etc.
c) Lost Property Values
Devaluation of home values directly impacts the net worth, or family's assets for retirement. With the number of seniors doubling in ten years, this will represent a major social catastrophe as senior's can't financially provide for themselves. Presently, less than 15% of seniors are financially self-sufficient.
Recent Market Value Assessment, MVA, increases must be fully offset by reduced Municipal tax Mill Rates. As MVA's decline, the capital value losses should be applied as tax credits that may be paid into mortgage principal.
Home improvement items relating to maintenance and updates, not upgrades, should have no GST or PST taxes.
d) Lost RRSP Values
The stock market crash wiped out over 30% of RRSP holdings for many Canadians. Clearly, as retirement savings or retirement asset investments, RRSP's are vulnerable to the financial sector's weaknesses.
Thus, Canadians should also be able to have tax breaks from investing in more secure assets such as their home or land. Redemptions of RRSP's should be tax free if the funds are paid into mortgage principal for their primary and/or secondary residences or recreational/ retirement properties.
Also, RRSP values as of January 31, 2007 should be frozen on account and once losses are taken, these should be applied as income tax credits carried forward. This would assert to Canadian consumers that they were not the cause of the present deflation and that our government is prepared to provide some protection from the full financial impact upon individuals and families.
All of the above proposals will positively impact the wealth of individual Canadians across the country and at all income levels.
Bring these ideas to the attention of our leaders and decision makers.
Jim Reid
Labels: Canadian financial solutions, economic crises, economic issues and solutions, Economic solutions, financial crises, financial solutions
posted by Bob the Beaver at
3:11 PM
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