Coherent Identifier About this item: 20.500.12592/n67278

A Turning Point or More of the Same?

2019

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Summary

In short, to address the large deficits that emerged from the recession and stimulus efforts of 2008/09, the McGuinty/Wynne approach to deficit reduction was to exercise modest spending restraint with the hope that, over time, revenue growth would eliminate the deficit. [...] In fact, Laurin shows that the resulting reductions to the size of the tax base from the rate increase substantially undermined the revenue-generating effect of the tax. [...] In 2007/08, on the eve of the recession, Ontario’s debt stood at 26 per- cent of GDP.1 During and in the years following the recession, the debt burden climbed to a peak of 40.6 percent of GDP in 2014/15. [...] The decision to introduce the current top rate (along with a decision not to proceed with planned reductions to the corpor- ate income tax rate) was taken in the wake of the 2008/09 recession in an effort to combat the deficit, despite the aforementioned evidence that defi- cit reduction initiatives focused on tax increases are economically harmful (Alesina et al., 2017). [...] The authors of that study estimated the cost (making the conservative assumption of no behavioural changes) at $11 billion if enacted in the current fiscal year.3 3. This includes the cost of supplemental tax policy changes to ensure no low- or middle- income Ontarians experienced a net income tax increase because of the changes.

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government politics economics economy finance fiscal policy recession budget deficits debt economic growth economic policy earnings budget deficit government budget stimulus fiscal deficit deficit reduction deficit spending acrobat reader deficit reduction in the united states dalton mcguinty the recession

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