Angry in the Great White North

I don't buy into the Grand Conspiracy Theory that says that the Canadian media is actively working to put the Liberals in power.

Sometimes, though, it's hard to explain the way things are reported in this country except as a Liberal-friendly spin.

Take the income tax cut that Liberal Party leader Stephane Dion is proposing as part of the carbon tax.  According to the Globe and Mail, the proposed income cuts are significant:

Sources said yesterday that the tax reductions will be applied to the three lowest income-tax brackets. For example, Canadians who earn up to $37,885 per year will see their tax rates cut by 10 per cent by the time the plan is fully implemented four years after the election of a Liberal government. Middle-income Canadians in the next two tax brackets - $37,885 to $75,769 and $75,769 to $123,1184 - will see reductions of five per cent and four per cent, respectively.

Cuts of 10%, and 5%, and 4%?!

That's incredible.  I mean, the GST cut was pretty nice, but it was a 2% cut, so for every dollar I spent, the government let me keep two pennies more.

But that 5% income tax cut?  That means for every dollar that I make, the government lets me keep another nickel.  That can add up.  I mean, when you factor in...

What?

Not the same thing?  But the paper said that my taxes would be reduced by 5%...

The Toronto Star explains it a bit more clearly.  The proposed cut to the income tax rate is not 10% and 5% and 4%, at least not the way most people would interpret those numbers:

Among the tax measures, insiders say Dion's plan would reduce the tax rate for Canadians in the lowest tax bracket to 13.5 per cent from 15 per cent. That amounts to a 10 per cent tax reduction.

The tax rate for the two middle tax brackets would be cut by one percentage point, to 21 per cent and 25 per cent. That would amount to a tax reduction of five and four per cent respectively.

So it's a 1% cut for middle class Canadians.

For every dollar I make, the government will let me keep one extra penny under Stephane Dion's carbon tax scheme.

So where did those big numbers come from?  Take the first tax bracket as an example.  The rate was 15%.  Knock off 1.5%.  Well, 1.5% is 10% of 15%, so it's a 10% decrease.  The same calculation makes a 1% cut for someone in a 26% tax bracket sound like a 4% cut.

Now it's bad enough that this goofing with the numbers is going to fool a lot of people.  But what really gets me cranked is that when the Conservatives actually implemented real tax cuts by dropping the GST by 2% from 7% to 5%, no one was talking about a 28% cut in the GST.

Everyone reported the two 1%-cuts as 1% cuts.  It was honest reporting, and it gave Canadians a sense of the scale of the change.

But the funny thing is, if the media had reported the first 1% cut (from 7% to 6%) as a 14% drop in the GST, no one would have been fooled.  Everyone knew the GST was 7%, so clearly 14% referred to the drop in the size of the tax relative to its original value, and not to the absolute value of the tax itself.

But when you are talking about a 26% tax bracket, talking about a 4% tax reduction will make a lot of people think, reasonably, that the tax rate was dropping to 21%.  No one, and I mean not one person, is going to calculate what 4% of 26% is and then subtract that value (1.04%) from 26% to get 25%.

No, they'll look at 4% as being the absolute size of the cut.  It's twice the rate of inflation and so that could mean some extra money in your pocket.

Let's say the media wasn't spinning the numbers and reported that the cut as just 1%.  Most Canadians would realize that inflation, at its current rate, would erase that decrease within a year.

And inflation exacerbated by a universal carbon tax would wipe that 1% decrease out even faster.

Here's hoping people have time to understand what the actual numbers are.

Addendum: The goofy way of calculating a drop in tax rate from 15% to 13.5% and calling it a 10% reduction is right out of the Liberal Party's carbon tax handbook.  So maybe the media isn't guilty of playing with the numbers, but they seem only too eager to promote the "10% tax reduction" line.