Reference no: EM132600208

Some years ago, the Federal government cut the GST (the federal sales tax on goods and services which Ontario later blended into the PST to create the HST) by two percentage points. The federal government could have transferred this cut to income taxes instead, i.e. it could have decreased taxes on income instead of on the GST. Sources of income that taxes are paid on include labour (work) as well as investment earnings. Assuming that taxes are to be cut, which tax cut do you believe is more beneficial for long run economic growth, a GST/HST reduction or an income tax reduction? Assume that either of the reductions would be revenue neutral, i.e., the federal government would forfeit the same amount of revenue with either tax that is cut. Assume that either of the tax cuts will result in the same decrease in revenues for the government.