A Modest (Economic) Proposal

I was pretty disgruntled on the weekend owing to the fact that not only did I spend most of it filing tax returns, I discovered that I actually owed the government money instead of getting a refund after all that hassle! As I complained to my mom and contemplated how our PM couldn't possibly know how much I stimulate the economy when I have the money to shop, an idea came to me: What if the government granted Canadians a tax credit for shopping as part of their economic stimulus plan?

The more I thought about it, the more brilliant it seemed. I went for a walk and the obsessive-compulsive cogs of my brain kept turning until I came up with the following specs:
  1. The tax credit only applies to durable goods purchased in Canada--"durable" meaning goods meant to be consumed for an indefinite amount of time lasting at least one year or more. This excludes stuff like food, tobacco, prescription drugs, toilet paper, tampons, etc. Goods that would fall under this category include clothes, accessories, electronics, etc.
  2. Taxpayers can claim this tax credit by submitting purchase receipts and highlighting the eligible items on the receipts. The eligible amount will be the sum total of these items before taxes.
  3. In its first year (the 2009 tax year), the tax credit will be equal to 5%; in the second year it will be 4%; in subsequent years it drops to 3%.

I came up with all sorts of wonderful reasons for why it's a win-win for everyone:
  • This measure is much broader in scope than the home renovations tax credit and thus has a higher likelihood of succeeding! Think about it: How many young twenty-somethings fresh out of university and just embarking on their careers own their own homes? Not very many that I know of, but as we're saving up for that dream home, we have a bit of disposable income to spend shopping for clothes and electronic gadgets. And it's not just young folks who would benefit from such a measure--think of families outfitting their kids for back-to-school. The point is, the number of people who shop far exceeds the number of homeowners who just happen to want to renovate.
  • The blow to retailers would lessen slightly if they can reassure customers that they can recoup part of the money they spend come next tax season. This could prove particularly helpful to small, independently owned businesses and new ventures.
  • Think about what a huge political boon this would be! There's been talk for years of eradicating the GST (for American readers, that's the Goods and Services Tax, which is currently 5%). The Conservatives can argue that they as good as eliminated the GST during a time of economic difficulty with their tax credit--a huge plus for any political platform. Think of how many votes they'd win among consumers (i.e. everyone) and business owners. The really ingenious part? Most people probably won't be as vigilant with receipt-tracking as they could be, which means revenues from the GST won't necessarily drop down to 0 for 2009. Also, because the percentages are staggered and eventually decrease, there will still be some GST revenue in the long run.

Anyways, just a fun idea I was tossing around in my head. What does everyone think--yay or nay? If you're really enthusiastic about it, please write a letter to your local MP and refer them to this blog. I would do it except I'm busy clocking overtime to pay my taxes.


  1. Very creative, darling - yay!


  2. A great idea, well argued. Think anyone would listen? A government rep of some sort? I'd send your ideas along ... I mean, why not?

  3. I think the tax credit is a brilliant idea.

    But... (and here's your big but!) I think the problem with the Canadian (or American) economy is really about excessive spending. People desperately need to re-learn how to save their money and buy within their means. I don't know if encouraging folks to shop would necessarily help that situation, even if they do get a tax break from it. Of course, that doesn't mean we should stop shopping altogether - just perhaps be a little bit more thoughtful of our purchases.

    That's just what I think, though. :) You should definitely talk to government officials about that! It's a much better system than what they have in place now - too bad there aren't more practical women in government!

  4. I don't know much about Canadian economics/politics, butttt i'm pretty sure they should hire you to revise their economic stimulus plan:)

  5. Oh Lady E, that's a very good point! I'm by no means advocating excessive consumption and spending, but a tax credit for stuff you were going to shop for anyways is a nice perk. :)

    Ooh, another point: The other cool thing about a tax credit as opposed to just sending people a cheque is that people can just deposit the cheques in their savings and not do anything to stimulate the economy (I've done that in the past with tax refunds), whereas to earn the shopping tax credit you would actually have to spend money.

  6. Lisa, you're a genius. Also I love the Swift inspired title (and the lack of eating Irish babies.) Enjoy the sunshine!!

    Trisch xo

  7. This is why it makes sense for people up there to listen to what the GP has to say! Great idea Lisa!

  8. Definitely a wonderful idea Lisa! I've been in your shoes many times. In fact it was when I worked two jobs ( bank and restaurant) that I had to pay back government about $1500. How silly is that, right? Obviously if I'm working two jobs , it means that I need money and I don't have any extra. Lol....
    Since my career situation has changed, I don't have to pay anymore and I'm pretty damn happy about it! :)

  9. Oh, gotcha! Some of the states have a similar program for "tax credit" by offering a tax-free week to shoppers. It's usually right before the school year starts, so people can save on big-ticket items like laptops and other things their kids might need. And from what I understand, the tax break only applies to things like school supplies, clothing, etc. Not luxury or household items.

    I think it's always been fairly effective, though I don't know any actual numbers! :)

  10. Wow that's an idea I never thought about really! =) But the more I think of the the more it's really creative and it just might work! But would the government really be in favor of both abolishing the GST and giving out tax credit to consumers? They'd probably still want some form of revenue either way. Interesting idea though. I love that it'll give people the incentive to shop. I wish that sort of thing would work in Singapore though. =( We're just too small an economy for local consumption to make much of a difference to the economy.

    Btw, thanks for your suggestion! I've never actually heard much Latin music but it always makes me feel really hyper when I hear it in restaurants. Do you have any favorite Latin music artistes/bands you listen too? MAybe I'll try downloading some music. =) Ahh I totally agree about the toothpaste thing though. Good idea thanks!

    (btw, my uncle and aunt received your package on thursday! thanks so much. =) now there's just one more package from UO that's going to their house (bad bad me) but then after that they'll be sending the stuff over to S'pore. Can't wait to receive it!)

  11. Tis Serendipity, that's exactly it--it's not abolishing the GST because the GST is applied to goods and services, and I'm suggesting that only durable goods will receive the tax credit. Also, I'm saying the Conservatives can argue they as good as abolished the GST to encourage consumers to spend on durable goods, instead of actually getting rid of it entirely. Sneaky, no? :)

  12. La Mimi, isn't there something where if you let the various workplaces know that you worked at this other place and they already deducted you, then you don't have to essentially be doublecharged again by the 2nd place?

  13. MizzJ, in answer to your question to LaMimi: During the tax year you can choose to have income tax deducted from one job, but at the end of the year if your total income is a lot more than they calculated your income tax deduction for, you have to pay income tax on the rest. That's why I had to pay income tax this year. As LaMimi said, it makes no sense as the entire reason you took the second job was because your first job's income wasn't enough!

  14. briliant argument! If only Obama would listen to this... ;P

  15. Lovely ideas, I worry about how many of the items available to consumers are not made in Canada. Which I guess your tax credit would make us change are ways.

  16. Would there be a cap, or would the credit be unlimited?

    Would it be refundable? That is, can you use it to reduce your tax beyond zero?


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