Whenever a federal or state/provincial government announces that it will be cutting taxes, there is always a vocal group out there that asks the question: how will the government pay for this?
This sends the wrong message.
First, governments shouldn’t have to rely on high taxes in order to fund the state. Second, the government is giving the people their money back in the form of lower taxes. Third, this type of thinking suggests that the government owns all of your money and property and is the one that creates wealth.
Although this argument is prevalent across the United States, it can be located in other countries, like Canada or Great Britain. Remember British Prime Minister David Cameron’s comments of “we can’t afford tax cuts”?
Canada’s TFSA Limit Increase
In April, Canadian Prime Minister Stephen Harper’s Conservative government announced that it would increase the tax-free savings account (TFSA) to a limit of $10,000. The program allows people to save their money without having to tax their interest earnings. It’s a helpful program that encourages people to save more, though the interest is still rather low, but we can thank Bank of Canada Governor Stephen Poloz for that.
Soon after the increase was announced, there were many think-tanks and left-wing voters that, once again, asked the question: how will the government pay for this? In fact, the Globe and Mail wrote: “Higher TFSA contribution limits could cost us all” and “Message to the federal government: Please don’t, because we can’t afford it.”
In 2013, a report released suggested that the $5,500 TFSA limit cost the government $410 million per year. With the TFSA boost, Parliamentary Budget Office (PBO) avers that it will cost the government approximately $14 billion per year until the year 206. Let’s remember the fact that the people were already taxed on the money that they’re placing into TFSAs.
What Does the Public Really Mean Then?
Before we get to this sub-section, let’s get one thing out of the way: a tax cut, a tax deduction, a tax credit do not cost anything. Nothing. Nada. A fist full of bupkiss. We get to keep the fruit of our labor without the threat of punishment by a tax-collecting agency hanging over our head.
The question that is often asked should really be translated into: how will we make up for this lost source of revenue? Instead of cutting government spending, these groups and individuals want the government to have more of your money. Essentially, they’ll want other forms of taxes to be raised instead of actually cutting spending.
For some reason, there is still a false sense of security in the ideology of redistributing wealth.
If we continue to oppose any effort to lower taxes because the government will be losing revenue then we’re heading down a slippery slope. The entire debate reinforces the concept that all of the income generated in this country belongs wholeheartedly to Washington, Ottawa, London or Beijing and any sort of tax break is government spending. This is inaccurate.
Every time we earn income, it’s ours. It’s the government that leeches on to us and steals that money. Why do you think the IRS or CRA are attempting desperately to extract money from the underground economy or fight the tax evaders? Because bureaucrats really hold on to the idea that all income is theirs for the taking.
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