mnot’s blog

Design depends largely on constraints.” — Charles Eames

Saturday, 14 February 2004

Redefining the Ability to Pay

Filed under: Economics

I know little about the politics or economy of Canada, but a proposal by Tony Clement (Conservative) is interesting. Mike Moffatt explains;

The innovative “JumpStart” program he’s proposed would tie the income tax rate that someone pays to their lifetime earnings. A person, let’s call him “Mike”, who has just entered the workforce is likely to have very little savings. If JumpStart were enacted, Mike would not pay any income taxes until he reaches $250,000 of lifetime earnings. This would allow Mike to set aside more money for a rainy day, for him to pay off his student loans faster, and to save to buy a house and start a family. Once he’s earned $250,000, which would take him 8 years at an income of $31,250 a year, he will then pay 14% of each dollar he earns to the federal government.

How fascinating; it wouldn’t benefit me (the proposal is to phase it in for people as they enter the tax system), but it would benefit the next generation pretty profoundly, I suspect, considering how difficult it is becoming to buy a first home.

I’d very much like to see serious economic study of this; I haven’t seen anything in the Economist yet, but hopefully it’ll pop up soon, along with the benefit of their insight.


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