By David Clinton

It won’t happening. And perhaps it shouldn’t happen. But we can talk.

By reputation, income tax is an immutable fact of life. But perhaps we can push back against that popular assumption. Or, to put it a different way, thinking about how different things can be is actually loads of fun.

That’s not to suggest that accurately anticipating the full impact of blowing up central economic pillars is simple. But it’s worth a conversation.

First off, because they’ve been around so long, we can easily lose sight of the fact that income taxes cause real economic pain. The median Canadian household earns around $85,000 in a year. Of that, some 13 percent ($11,000) is lost to federal income tax. Provincial income tax and sales taxes, of course, drive that number a lot higher. If owning a house is out of reach for so many Canadians, that’s one of the biggest reasons why.

Having said that, the $200 billion or so in personal income taxes that Canada collects each year represents around 40 percent of federal spending. In fact, in the absence of other policy changes, eliminating federal personal income tax would probably lead to significant drops in business tax revenues too. (I could see many small businesses choosing to maximize employee salaries to reduce their corporate tax liability.)

So if we wanted to cut taxes without piling on even more debt, we’d need to replace that amount either by finding alternate revenue sources or by cutting spending. If you’ve been keeping up with The Audit, you’ve already seen where and how we might find some serious budget savings in previous posts.

But for fascinating reasons, some of that $200 billion (or, including corporate taxes, $300 billion) shortfall could be made up by wiping out income tax itself. How’s that?

For one thing, many government entitlements and payouts essentially exist to make up for income lost through taxes. For example, the federal government will spend around $26 billion on child tax credits (CCB) in 2025. Since those payments are indexed to income, eliminating federal income tax would, de facto, raise everyone’s income. That increase would drop CCB spending by as much as $15 billion. Naturally, we’d want to reset the program eligibility thresholds to ensure that low-income working families aren’t being hurt by the change, but the savings would still be significant.

There are more payment programs of that sort than you might imagine. Without income taxes to worry about:

• The $6.2 billion GST/HST credit would cost us around $3 billion less each year.
• The Canada Workers Benefit (CWB) could cost $1.5 billion dollars less.
• The Old Age Security (OAS) Clawback would likely generate an extra billion dollars each year in taxes.
• The Guaranteed Income Supplement for low-income OAS recipients could save $4 billion a year.

Even when factoring in for threshold recalculations to protect vulnerable families from unintended consequences, all those indirect consequences of a tax cut could easily add up to $20 billion in federal spending cuts. And don’t forget how the cost of administering and enforcing the income tax system would disappear. That’ll save us most of the $11 billion CRA costs us each year.

Nevertheless, last I heard, $30 billion (in savings) was a long, long way from $300 billion (in tax revenue shortfalls). No matter how hard we look, we’re not going to find $270 billion in government waste, fraud, and marginal programs to eliminate. And adding more government debt will benefit exactly no one (besides bond holders).

Ok then, let’s say we can find $100 billion in reasonable cuts (see The Audit for details). That would get us close to half way there. But it would also generate some serious economic turbulence.

On the one hand, such cuts would require dropping hundreds of thousands of workers off the federal payroll¹. It would also exert powerful downward pressure on our gross domestic product (GDP).

On the plus side however, a drop in government borrowing of this scale would likely reduce interest rates. That, in turn, could spark private investment activities that partially offset the GDP hit. If you add the personal wealth freed up by our income tax cuts to that mix, you’d likely see another nice GDP bump from sharp increases in household spending and investments.

Precisely predicting how a proposed change might affect all these moving parts is hard. Perhaps the ideal scenario would involve 20 percent or 50 percent cuts to taxes rather than 100 percent. Or maybe we’d be better off by playing around with sales tax rates. But I’m not convinced that anyone is even seriously and objectively thinking about our options right now.

One way or the other, the impact of such radical economic changes would be historic. I think it would be fascinating to develop data models to calculate and rank the macro economic consequences of applying various combinations of variables to the problem.

But taxation is a problem. And it’d be an important first step to recognize it as such.

From the Daily Caller News Foundation

By David Blackmon

Unlike his predecessors, President Donald Trump always seems to have energy and its impacts to the lives of all Americans at the top of his mind. Following his stemwinding acceptance speech at the Republican National Convention last August, I was able to highlight the more than 1,000 words specific to energy included in it.

The president’s high prioritization of energy and energy policy came into sharp focus again Tuesday night in his speech to a joint session of congress. None of what he said about energy received applause from the Democrats present in the House Chamber, but that was no surprise. Trump noted early in the speech there was literally nothing he could say to evoke such a response from minority party.

But ordinary Americans struggling to make ends meet after years of Biden/Harris-era inflation likely had a different reaction given that Trump’s focus on energy policy both in the speech and in action across the first six weeks of his second presidency has been focused on reforms designed to cut energy costs for everyone.

“Upon taking office, I imposed an immediate freeze on all federal hiring, a freeze on all new federal regulations,” Trump said early on. “I terminated the ridiculous green new scam. I withdrew from the unfair Paris Climate Accord, which was costing us trillions of dollars that other countries were not paying … We ended all of Biden’s environmental restrictions that were making our country far less safe and totally unaffordable. And importantly, we ended the last administration’s insane electric vehicle mandate, saving our auto workers and companies from economic destruction.”

Mr. Trump concluded that portion of the speech by pointing to his Day 1 executive order that all federal agencies must eliminate 10 old regulations for every new regulation they wish to implement. Again, this focused effort to tear down the entrenched bureaucratic state is designed boost the economy, create thousands of high paying jobs and lower prices by cutting the cost of regulatory overhead for which consumers inevitably pay.

Congress is also doing its part, having already eliminated some of the costliest Biden regulations via the Congressional Review Act.

Every action described there will, if made permanent, boost the economy and reduce the cost of energy for all Americans. Yes, even for the Democrats, some of whom audibly hissed during that portion of the speech. Amazing.

Where energy minerals are concerned, President Trump reiterated his desire to establish a U.S. presence in or control of Greenland and its enormous known reserves of rare earth minerals and other critical energy minerals.

“I also have a message tonight for the incredible people of Greenland,” Trump said. “We strongly support your right to determine your own future, and if you choose, we welcome you into the United States of America.”

Trump said Greenland is not just about energy, noting its control is also crucial for national security and even international security. “One way or the other, we’re going to get it,” he said, adding, “We will keep you safe. We will make you rich. And together we will take Greenland to heights like you have never thought possible before.”

The president also spoke about his administration’s efforts to re-establish U.S. control over the Panama Canal, noting that “a large American company (which turns out to be a BlackRock-led consortium) announced they are buying both ports around the Panama Canal and lots of other things having to do with the Panama Canal and a couple of other canals. The Panama Canal was built by Americans for Americans, not for others. But others could use it.”

Preserving the free flow of shipping through the Panama Canal during times of peace and potential war is critical to U.S. energy security given that crude oil is the most internationally traded commodity and LNG is rapidly rising on that list. The maintenance of strong energy security is among the most crucial aspects of ensuring strong national security and economic prosperity.

In reference to the amazing progress his administration has made in securing the southern border without any help from congress, Trump mocked Biden-era claims by the “media and our friends in the Democrat Party that…we must have legislation to secure the border.”

“But it turned out that all we really needed was a new president,” he concluded.

It has become starkly obvious over the last 6 weeks that the same principle applies to energy policy. The whole world has changed since Jan. 20.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.