Take a page from town tax collection

Perhaps the federal government can draw a few parallels between itself and the Town of Innisfil.

Federal Finance Minister Jim Flaherty delivered the 2010 budget to Parliament last week. The budget is the start of a multi-year plan to lower the federal deficit from an anticipated $53.8 billion in 2009-2010 to $1.8 billion by 2014-2015. It includes $19 billion in new federal stimulus, including $3.2 billion in personal tax relief, over $4 billion in additional Employment Insurance benefits, and $2.2 billion to support industries and communities. About $7.7 billion will also be spent on job creation through infrastructure projects, while $1.9 billion will be used towards 'future' economic growth.

In total, the budget proposes $237.8 billion in spending in the 2009-2010 fiscal year. Of that, $600 million will be allocated towards recruitment in research and development fields, $108 million will be used to support skill development in young workers, and $100 million will help protect jobs by extending work-sharing agreements.

The budget also includes plans to eliminate machinery and equipment import tariffs, the establishment of a Red Tape Commission to reduce paperwork for businesses, and measures to support clean energy generation. The government also plans to reduce spending through the budget, proposing $17.6 billion in savings over the next five years. It's a smart and sensible approach to spending; but perhaps it's time to rethink the way the government collects its money, to help get Canada out of debt at a faster rate.

Although it's a separate level of government, the Town of Innisfil faces the same predicament as its federal counterpart. The town is a government mired in debt, which relied too heavily on development and other signs of a 'booming' economy for income. When the global economic downturn struck, revenues for both governments declined. The federal government was also crippled by an increase in spending, thanks mostly to benefit and employment insurance claims. But both governments are now stuck trying to reduce spending, to help manage their deficits. So maybe a change to money collection should be given some thought, at least until the economic tide has turned.

Right now, the global economy is still fairly uncertain. While there are signs of improvement, the major economic powers have their problems. If the American, European or other markets begin to tumble again, Canada will certainly face difficulties.

It might be time for the federal government to fast-track its recovery, by temporarily raising the GST in areas of consumer spending. The government could generate billions of dollars in revenue, while giving Canadians a purchasing choice. If that's too dramatic a path, slightly offsetting the hike with personal or business tax benefits could still encourage job growth and spending.

The town is already heading down that path, with a large swath of increases to municipal fees, which more accurately reflect the town's expenses. And if councillor Lynn Dollin's water and wastewater fee proposal is implemented, the town could place a larger emphasis on consumer based spending. Dollin essentially called for water and wastewater rates to reflect cubic metre consumption, while lowering the base charge. This change would promote conservation, but also place more tax burden on consumer choice.

Emphasis on choice may not be flawless. Nor is it a long-term solution in itself. But Canada should be taking advantage of its position as a relatively stable and wealthy country, as its economy shows signs of recovery.