Double Blind

Shiela Copps, the former Liberal deputy prime minister that resigned (and was re-elected shortly after) after the 1993 election after the Liberals failed to scrap the GST, said the most accurate commentary out of the major headlines regarding the tax cuts:

Sheila Copps: Nothing makes my blood boil more than to see a parade of so-called experts trashing reductions to the Goods and Services Tax. Having endured the scars of that hated tax, I welcome any move by any government to listen to the people. The finance minister’s decision to ignore the naysayers was brilliant politics. A cynical observer might question his timing, overshadowing a critical auditor-general report and the income trust reversal anniversary. Communications aside, the document could have been a dream launch for a desired Tory election. Finance Minister Jim Flaherty pulled off a masterstroke yesterday. Mr. Flaherty gave half a loaf to those looking for across the board personal and corporate cuts. But he ignored their railing about the GST. He listened instead to the taxi driver and the small retailer hanging on by a thread.

Cutting the GST is good politics, but it will also give Canadians a 1% incremental savings on the price of all GST-able items they purchase next year. 1% doesn’t sound like a lot, but over the period of a year, or even a decade, it adds up.

The other brilliant commentary (out of the 20 or so I’ve read on the issue) is from Deirdre McCurdy:

Deirdre McMurdy: With the release of the autumn economic statement yesterday, Stephen Harper and Co. have proven once again that a minority government can be at least as effective in achieving its goals as any majority. Once again, the Tories have got their way. And the beauty of their political reality is that they can be as bossy as they like about corporate tax cuts or crime legislation, without getting the rap for being arrogant — all the while further weakening the public image of their opponents. For the Tories, it is actually better than just a win-win. If a freshly-minted majority government were to put forward some of the legislation this government now has on the table — one obvious example is the GST cut that virtually every economist decries and the other parties oppose — it would be accused of abusing both democracy and common sense with its actions. But in the present context, they can make two very justifiable claims: the cut is consistent with their election promises (“promise made, promise kept”, as they like to say), and, to their delight, they effectively achieve buy-in from the opposition by making them support or at least abstain from voting on the issue

This is just brilliant. Having a minority government (in this case) seems to be a perfect recipe for making yourself look good if you can introduce good policy, backed with public support in the polls. The Conservatives can govern as if they have a majority, which is very unlike Paul Martin’s government in 2005 when Parliament was a death trap for him.

By taking the GST cut out of the political equation, you can be sure that the Conservatives will not be lobbying for a lower GST in the next election. The Liberals, if they are to follow through on their position would be campaigning for a higher GST and lower income taxes. The Conservatives, on the other hand, can just lobby for lower income taxes. Who would you vote for then? I knew Harper was a smart cookie, but we haven’t seen this sort of political brilliance since Chretien was in office.

Just going back to the previous post with the wonderful optical illusion:

A person that writes on a weblog called the Reference Frame (probably too right-winged for most people’s tastes) provided an analysis of this particular picture.

What I find odd is that the very first time I saw the thing, I thought it went clockwise. After a few seconds, I saw it counter-clockwise. Now when I try looking at it I can only see counter-clockwise, but I’m sure when I look at it again tomorrow or something it will be clockwise. I’m not sure how clinically valid this picture is, but it’s a pretty good animation.

You can easily tell which people love having their hands in your wallet:

GST cut would buy about one pizza a month for most buyers: economist
at 17:11 on October 30, 2007, EDT.
Sue Bailey, THE CANADIAN PRESS

OTTAWA – A pizza per month – that’s about what most consumers could buy with another percentage-point reduction on the goods and services tax proposed Tuesday by the Conservatives.

Along with personal income-tax cuts, Finance Minister Jim Flaherty proposed cutting the GST to five from six per cent starting Jan. 1.

Economist Dale Orr of Global Insight Canada tracked spending patterns and forecasts to calculate average GST savings of $13 per month when the rate fell to six from seven per cent last year.

So let me pose this question to the reader: Would you want to pay the government a pizza a month more in 2008? Or would you rather want to have that pizza?

I’ll take that pizza, every time. I can make a very fine meal with $13 at a grocery store. Yes, I know the irony is that most grocery items are zero-rated supplies.

Today’s mini-budget update is short and sweet. It is also very easy to interpret. Canadians are going to end up paying less for things in the future, and will have more income to purchase such things.

This includes (biggest ticket items to smallest):

The only people in the country that will not be able to benefit from this, assuming it passes parliament, will be those that don’t spend anything on GST taxable items and make less than $8929 a year.

The effect of the decrease in business income taxes is going to be huge – it also will cause the most opposition, but the Liberals will be forced to swallow this one since they are in no shape to fight an election. I will take tax decreases any way I can so I’m fairly pleased about this. Large businesses in competitive industries will be passing a significant portion of this tax decrease into the prices of their offerings. It’s an invisible price cut, very unlike the GST cut.

The only disappointment is that small business tax rates should be decreased even further to stimulate more smaller business activity – the difference between 19% for large businesses and 11% for small businesses in the 2009 year is significant, but by 2012 large business taxes will have closed the gap to 15% vs. 11%. Presumably the government might legislate something in the future to decrease small business taxes.

Blair Wilson is the (former) Liberal MP for West Vancouver-Sunshine Coast-Sea to Sky Country. He was recently “outed” by the Vancouver Province with the following allegations, courtesy of Wikipedia:

In an 4 page article on October 28, 2007, the Vancouver Province alleged that:

* Wilson did not report campaign expenses to Elections Canada and paid for supplies off the books, in cash, a breach of the act.
* Wilson and his wife, Kelly, borrowed roughly $1.9 million from his in-laws to purchase six properties, and much remains unpaid despite the fact they have sold some homes.
* Wilson and his wife were subject to Social Services Tax Act liens on three properties and owe $2.1 million in bank mortgages.
* Wilson misled the media about the true extent of his business success, exaggerating the number of restaurants he founded and claiming to have sold an accountancy business his in-laws claim closed, among other discrepancies.
* Wilson lost hundreds of thousands of family investors’ money in the stock market and yet billed them for management fees.
* Wilson’s two restaurants, Mahoneys and Wilson’s Steakhouse, closed. He was taken twice to the B.C. Employment Standards Tribunal for refusing to pay employees, was sued twice for failing to pay contractors, was twice compelled by the courts to pay GST owing, and was also taken to court by a supplier over $33,839 that was owed (this amount was later paid).
* Wilson bought extravagant gifts for a girlfriend in Poland while working for a restaurant chain called Pan Smak Pizza Inc.

So to sum up, he’s accused of being a fraud, a thief and morally reprehensible. Sounds like he’s perfect for politics.

Just for experimental purposes, I put a side-banner ad on the right hand side (underneath the ‘recent comments’ portion). You don’t have to see the thing (on this site or anywhere else on the internet) if you use Firefox and download the following extensions:

Adblock Plus – the main ad blocking engine
Filterset G – the list of filters that prevent the ads from coming up, plus an updater which automatically updates for them.

Essentially the experiment that I am running is that previously I only had ads on the top of the page when somebody explicitly clicked on an article. The side banner is on the front page and I want to see the differential in ad impressions.

While taking pictures last August of the Blaine House on the border, I also took pictures of a different type of monument on 0 Ave, around 272 St. There was a major car crash in May 2007 when the driver (with four passengers) took his car over a speed bump westbound at triple digit speeds and not surprisingly, lost control (story 1, story 2). One of the passengers was ejected and suffered critical injuries. She later died. At the location of the crash they put up a small monument of flowers and the following picture of her:

I’ll transcribe the poem in the picture:

Do not stand at my grave and weep;
I am not there; I do not sleep.
I am a thousand winds that blow.
I am the diamond glints on snow.
I am the sunlight on ripened grain.
I am the gentle autumn rain.

When you awaken in the morning’s hush
I am the swift uplifting rush
Or quiet birds in circled flight.
I am the soft stars that shine at night.
Do not stand at my grave and cry;
I am not there; I did not die.

– Mary Fyre

It’s time to make a capital budget decision concerning my car.

My car is old, but it still runs well. It got to Alberta and back last August. It also has a V6 engine, which I really appreciate when going on the highway. Its fuel economy is comparable with more modern cars with V6 engines. The decision to get rid of the car and not get a new(er) vehicle is out of the option – I absolutely need a vehicle and cannot rely on public transit.

So when doing some routine maintenance on the vehicle (changing the oil), I discover some ordinary wear-and-tear issues that would require about $500-600 worth of work to be performed – the serpentine belt is cracking (it’s not bad, I could wait 6 months to replace it but I’d prefer not to take the risk), the rear brakes (which haven’t been replaced in nearly 6 years) are at 10%, and two tires have tread depth that is less than satisfactory for rain driving. Since these problems are not immediate I have the luxury of making the decision: Do I repair the car, or do I get a new (used?) one?

The 4-year history of the vehicle suggests that I will be spending about $1200/year in maintenance. Cars are expensive, but not having one is even more expensive.

Let’s say I get a used car. I look at Craigslist and $10k buys me something equivalent to a 1997 Toyota Camry V6, with about 110,000km on it. The maintenance bill would likely be somewhat less (estimate $800/year), the insurance would be about $300 more, so is it worth spending $10k to save $100 in cash flow? Not at all.

Let’s say I get a new car. The cheapest (and most environmentally sound car) I can get is a Toyota Yaris. I’ll probably save around $500 in gasoline a year, and probably an extra $1000/year on maintenance. The insurance bill would be about $400/year extra. However, I would have to spend about $16,700 after taxes (deducting the federal $1000 credit) on a worse vehicle that would save me about $1100/year in cash? Still not worth it, although the decision is closer. I really like having a more powerful engine when on the highway and the Yaris is everything but powerful. For the city, however, it is very efficient.

Finally, I can splurge and get the most environmentally correct vehicle, a hybrid car. Then I’m looking at at least $30,000 after taxes and the whole entire economic equation goes out the window.

What is apparently clear to me is the following: the most environmentally sensitive choice I can make as a consumer is not to dump my less efficient vehicle for a new one, but rather to keep the one that I have. This is what the price mechanism is telling me, now will the politicians quit punishing me for making an obviously correct decision?

Via Richard, who linked to an article on the Tyee called Vancouver Eats its Young:

There’s no way I can afford to buy any time soon. Even though Vancouver is Richard-sized, house and condo prices and a tight rental market have led me to consider moving back to Vancouver Island.

I don’t think most people with ordinary (or even “professional”) type jobs can afford most prices in the Vancouver area. Financially if you needed $15,000/year in after-tax money for ordinary expenses (food, transportation, some vacation time, etc.), you’d need another $17,000/year in after-tax money just to afford the interest alone on a $300,000 mortgage (looking at MLS, $300,000 would buy you a 755 sqft 2 bedroom apartment in eastern Vancouver that’s 17 years old). So if we’re up to $32,000 in after-tax money. This requires a job paying about $42,000/year pre-tax and this assumes a razor-thin margin of error. When you factor in the payment of principal on a 25-year amortization schedule, you’re up another $5,000/year after-tax money, which requires a $50,000/year pre-tax income. Keep this up for 25 years and you now own your own 755 square foot concrete box that will be 42 years old.

This income level does not include savings for things such as an RRSP, nor contingency funds in case if your car breaks or if you have some sort of emergency that requires a cash injection. This also doesn’t include any interest rate risk that might result over the normal economic cycle.

So if you must own your own place, you are left with the following propositions:

1. Marry somebody and split the cost of the place with them. This will compromise your ability to incur additional financial burdens (e.g. children) since it’s financially difficult to keep working while raising kids. No wonder same-sex marriage is so attractive!
2. Take a financial risk that the price will continue to appreciate and pay the principal on the mortgage as slow as possible and hope your cash flow (income) increases over time to give you ‘breathing room’.
3. Earn more money. It’s very difficult to do this as an employee in a company – the only way to get to the income levels required to own a decent place in Vancouver is by starting your own business and making 6-digit income figures by filling some market niche.

The intelligent people that need to stick around Vancouver are likely renting. Even if you had a million dollars in your wallet that you’re burning to plough into the real estate market, would you want to buy a fancy house, or just rent the thing for less than half the income you could get from a stable market investment? The choice is obvious.

If you have two million in your wallet, then you might get the house, just as somebody would buy a “sports car” if they wanted to splurge. I highly suspect that this sort of activity is going on – a lot of capital is floating around the Vancouver Real Estate market from all parts of the world.

Finally, my advice is not to fight the market – if you think housing is too expensive, don’t buy. If the city is discouraging young people from living in it, perhaps the right response is not to live in the city.

Just getting the latest scan of the headlines:

Finance Minister Carole Taylor is merrily pursuing a carbon tax, eyeing a plan that could see the province levy substantial fees on economic choices that spew greenhouse gases, but that would slash other kinds of taxes, including income taxes. (Globe and Mail)

The only way I would support any so-called “revenue neutral” carbon tax is if the government would never increase the initial rate charged on the tax (e.g. $xx per tonne of CO2 emitted). This will never happen as the government will merely ratchet up the rate as the total revenue take decreases – all it takes is the legislature to approve the rate increase and it is done. A promise to not increase the rate is meaningless.

I also think such a scheme is giving the middle finger to the rural parts of the province.

I know the government is internally forcing its agencies to purchase “carbon credits” (which go into an internal pool of funds into tree-planting and other marginal projects), but to compel the rest of the province to contribute to this scheme is absolute garbage.