Marc on Economics

Marc Dumouchel wades into our little economics debate.

First off Marc argues that I'm jumping to the assumption of there being a tax increase.

What we know is, government revenue increases underperformed GDP growth by 22% (67-45) and personal income increases underperformed GDP growth by 36% (67-31).  What we don’t know is if the two are linked.  Where did the missing 22% and 36% go?  There must be another form of national income involved in this analysis. Frum doesn’t talk about this, even in passing. 

Instead, Frum draws a direct link between the 31%/45% distinction and taxes, implying that the difference must be due to higher taxes.  That is a possibility, but it is not proven by these numbers.  Again, you’d need a fuller accounting of where the missing percentages went.

Fair Enough. There were many cases of small tax increases from 1994-2000 or so. Knowing this, I assumed Frum was right being an economist and all. But, yes, I am making the assumption that there is a link between the tax increases that were made and the inconsistency in rise of personal incomes with government revenues.

As for CPP not being a tax, I don't think you're right. For starters, not everyone is eligible to recollect their CPP. Moreover, CPP premiums collected today are used to pay for today's CPP recipients. It isn't stored away for our use. So in the mid-1990s, the increase in CPP premiums wasn't for us so much as to bolster the system for the impending baby boomer retirement. Though I should note, I'm vague on what I've read about CPP over the years. It has been a while.

And finally, on the subject of your lower tax bill, Frum's numbers were pulled over the 1993-2003 period. It's quite possible that his argument doesn't hold over the 2001-2003 peroid. Though it is possible that the Janaury 2001 tax cut didn't make up for the tax increases over the 1990s. Though I really have no idea. As well, remember that your lower tax bill could be the result of Provincial tax cuts.