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Which are the Most Beneficial Cut between the GST/HST and Income Tax?

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Which are the Most Beneficial Cut between the GST/HST and Income Tax?

Which are the Most Beneficial Cut between the GST/HST and Income Tax? The federal government decided to cut the generation skipping transfer tax (GST) in the recent years. GST is the tax imposed on gift, bequest and inheritance transfer. Ontario later decided to blend in with the ProShares Ultrashort (PST) and created the Harmonized Sales Tax (HST) by two percent. Different individuals believe that the government should have transferred the cut to income tax such that the income tax costs would be reduced. This means that people will enjoy their hard-earned money because their labor pay and investment earnings would have increased. This scenario has raised the question on which taxation between the reduction of GST/HST and the reduction of income tax is more beneficial for long growth of the economy when the taxes are cut. An income tax cut would be more beneficial than the GST and HST cut because of various reasons. According to theory, personal income tax is a reasonably inefficient tax, which penalizes savings (Pratt, Kulsrud & Carnes, 2011). This means that the earners receive less pay because the GST cut results to double taxation. The first taxation is when they receive the income and secondly when the interest is being paid back. Thus, the GST would be more efficient because it taxes expenditure only once. However, in real practice, the income tax does not penalize the savings. This is because of the widespread and prevalent use of tax-deductible investment plans such as RPPs and RRSPs. Moreover, the new plan, Tax-Free Savings Plan (TFSP) has provided an extra shelter to income tax. Hence, when more income tax is saved, individuals would come up with new plans that result to economic growth as compared to GST cut. Businesses do not pay the GST/HST (Pratt, Kulsrud & Carnes, 2011). The money earned from businesses is subsidized and added to...