IM-Sheikh_2024_0130.pub

Carter also developed a progressive personal income tax structure grounded in the view that non-discretionary expenditures were related to the level of income and family responsibilities and estimated functional relationships in that regard. [...] The 1971 reforms five years after the Carter report, which also used inputs from parliamentary committees and Canadians (through comments on the 1969 White Paper), further moved the needle away from the textbook understanding of an ideal tax system to a world of realism. [...] Many old tax issues haven’t gone away such as the double taxation of some forms of investment income, tax treatment of international income, which is a permanent challenge, and the taxation of capital gains. [...] I would argue for two things: First, it is time for another round of tax reform; but, in contrast to Carter, we need to focus on the tax system’s negative impact on Canadian economic performance rather than strive for an ideal tax system. [...] Some candidates for an examination of key tax issues should include: • The Tax mix: The carbon tax design for revenue neutrality should be changed to reduce the most distortionary taxes, unlike the current federal system.