Monday, May 12, 2014

Putting Hudak's Policies In Easy To Explain Sound Bytes

One of the most fundamental issues facing politicians is being able to easily explain their policies in a way that is easily understandable by the audience, and do so in a quick sound byte that will work in the media. Case in point, Tim Hudak's plans to both lower the deficit and business taxes at the same time, and add 1 million jobs to the economy. Cutting taxes and lowering the deficit can confuse voters, as they see a reduction in the tax rate as a reduction in revenues.

 So here is how I explain it to people. Let's say Ontario has 100 businesses paying $1 in taxes each year for tax revenues of $100. Lowering the tax rate 25% brings in 50 more businesses to the province, with each business paying .75 cents in taxes, meaning tax revenues of  $112.50.

 Now factor in each business employs 10 people, paying $1 a year in taxes as well. This gives employee tax revenues of $1000 under the old business tax rate. Under the 25% reduced tax rate you now have 500 more employees paying that $1 a year in tax, resulting in employee tax revenues of $1500. So you've gone from $1100 in tax revenues to $1612.50. And that doesn't factor in the boost to the economy by increased spending via consumer demand for products and services.

 Keeping it simple gets the message across.

1 comment:

Sandy Crux said...

So true. More people working means more taxes being paid overall. Sticking to your example, 1000 employees paying $1.00 is $1,000. But, 10,000 employees means $10,000.

And, that is exactly what happened between 1995 and 2002/3. Plus, those 10,000 people bought goods and services, which in turn meant businesses thrived and more businesses opened up. And, on and on.