Still High: Marginal Effective Tax Rates on Low-Income Families

Most federal and provincial government benefits for families with children are sharply income-tested. Reductions in these benefits, as family income rises, mean that low-income families face much higher effective tax rates than most others do, and deny such families the full benefit of the broad-based tax rate relief other Canadians have enjoyed in recent years.social policy, Marginal Effective Tax Rates, tax relief initiatives

The Time is Still Right for BC’s HST

British Columbia is on the right track with its controversial move to a harmonized sales tax (HST), according to this report. The authors say the shift to a value-added tax mirrors patterns in most of the developed world, and helped move the province from being a high tax, investment-unfriendly jurisdiction, to one which is domestically and internationally competitive – a more attractive home for investment and jobs. Consumption taxes like the HST in BC impose smaller burdens on the economy, per dollar of government revenue, than alternatives such as old-style retail sales taxes or taxes on personal and business incomes. For this and other reasons, conclude the authors, BC residents are well served by the new HST.Fiscal and Tax Competitiveness, British Columbia (Province), harmonized sales tax (HST)

Systemic risk in a network model of interbank markets with central bank activity

The breakdown of the interbank money markets in the face of the recent financial crisis has forced central banks and governments to take extraordinary measures to sustain financial stability. In this paper we investigate which influence central bank activity has on interbank markets. In our model, banks optimize a portfolio of risky investments and riskless excess reserves according to their risk and liquidity preferences. They are linked via interbank loans and face a stochastic supply of household deposits. We then introduce a central bank into the model and show that central bank activity enhances financial stability. We model the default of a large bank and analyse the resulting contagion effects. This is compared to a common shock that hits banks who have invested in similiar assets. Our results indicate that common shocks are not subordinate to contagion effects, but are instead the greater threat to systemic stability.systemic risk, interbank markets, monetary policy, contagion, common shocks

International Policy Responses to the Financial Crisis: A Canadian Perspective

The relative soundness of the Canadian domestic financial system throughout the crisis suggests that Canada’s regulatory framework does not require a major overhaul. But Canada could benefit if other countries introduced reforms to improve their macroeconomic stability. Other reforms are needed.international policy, monetary policy, Bank of Canada

Fiscal Tonic for an Aging Nation: A Shadow Federal Budget for 2007

Saving and investment are critical to Canada's economy. They underpin today's prosperity and will be critical to raising living standards in the future. Growth in Canada's workforce is slowing, and a larger population of older Canadians will soon need pensions and social services. Federal fiscal policy must ensure that the environment in which Canadians work, save and invest encourages them to set aside resources for the future, and to invest in ways that will raise living standards for individual families, and for the country as a whole.fiscal policy, demographics

Back to Balance: A Shadow Federal Budget for 2010

Spending restraint is key to achieving a balanced federal budget over the next five years and should form part of Ottawa’s March Budget. This Backgrounder demonstrates how to limit the rise in the federal debt by prudently reining in spending growth rather than raising taxes, so that past and pending improvements to the nation’s tax competitiveness are not erased.Fiscal and Tax Competitiveness, shadow budget, federal budget, federal deficit

Steering Through Turbulence: The Shadow Federal Budget for 2008

Near-term turbulence should not distract Ottawa budget-makers from critical long-term tasks. This 2008 shadow federal budget will move Canada a key step forward by providing improved incentives and rewards for Canadians' work and saving, and a more congenial environment for investment and innovation.fiscal policy, Canadian government budget