Wednesday, June 29, 2011

Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- Yes, plenty of attention is being paid to Canada's weak ranking when it comes to innovation. But it's well worth noting that the failure isn't for lack of billions of dollars being tossed down a sinkhole due to the Cons' distaste for active and effective government:
Other countries prefer to just give tax money to companies that perform a lot of research. We’re allergic to that kind of thinking in Canada, so the chart for direct national-government spending on private-sector research looks like this:

But since the point of supporting private-sector research is to produce more private-sector research, and not just to show up in a flattering place on a chart, it’s pretty clear that Canada’s preference for tax incentives over direct subsidy doesn’t work.
- Meanwhile, there may be room to quibble with a few of Serge Coulombe's points. But this much looks dead on in describing what we should be doing with our resource revenues (which in turn need to be high enough to support the cause):
Newfoundland and Labrador saw the largest improvement in production per worker because the province moved away from a low-productivity natural resource business, fishing, to a higher-productivity natural resource activity, oil extraction, and it recorded the largest improvement in education.

This boom in production per worker growth on the back of higher resource prices is inherently temporary. When Newfoundland and Labrador’s oil runs low, just as the fish stocks did, or resource prices falter, the province will need to rely on savings stuffed away now to invest in better education, infrastructure and technology.

Alberta has had among the lowest growth rates of educational achievement and production per worker, partly reflecting young workers not investing in higher education because of the easy money in the oil sands.

For provinces booming now because of high resource prices, saving non-renewable resource revenues in rainy-day funds is crucial to keeping the good times rolling.
- Marc Lee expands on the CCPA's finding that B.C.'s tax system is now outright regressive by tracing what's happened under the province's Lib government over the past decade:
Unsurprisingly, total BC taxes as a share of income declined for every income group. This has undermined funding for public services, but has also led to a shift in who pays how much. The average tax cut was 2.3% of income, though there were larger gains as income increased. Tax reductions were only worth about 1% of income for the lower-middle deciles, increase to 1.8% of income for the upper-middle, then rise to 3.6% for the top 10%. However, the top 1% got tax cuts worth 5.1% of their income. In dollar terms, that is a gain of $41,000 for the top 1%, while those in the bottom deciles average a tax cut of a couple hundred bucks.

By contrast, in 2000 BC had a relatively flat tax system, with a modest bump in tax rate for the top 1%. By 2010, the tax system as a whole had shifted to become regressive. Income tax cuts, unsurprisingly, were the principal driver of lower taxes. The value of income tax cuts averaged about 0.2% of income for the bottom decile, rising to 5.2% for the top 1%. The provincial income tax system continues to be progressive, but has flattened out over the course of the decade.

Gains from income tax cuts were somewhat offset by increases in MSP premiums for middle-income groups, as much as half of a percent of income. But as “head tax” MSP premiums inevitably shrink as a share of income as income rises. So much so that for the top 1% the difference between 2000 and 2010 is negligible (and rounds to zero).
- Finally, it may seem like somewhat of a "dog bites man" story. But Glen McGregor catches Sun Media fabricating outrage against the CBC.

[Edit: fixed sizing on chart.]

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