The Tories, in their 1993 election campaign, were saying over and over again that tax cuts stimulate the economy and therefore will not reduce government revenue but, in fact, will increase it. This statement appeals to both the tax-cutters and to those concerned about funding for social programs. They say we can have both.

It is true that in times of high economic growth revenue can increase in spite of tax cuts. But there is no evidence that net revenue increases because of tax cuts. The notion that tax cuts will stimulate so much economic growth that they will pay for themselves is a delusion.

Yes, tax cuts may offer a small economic stimulus but most of my readings maintain that tax cuts can only recoup 20 to 50 percent of their cost through the revenues generated by this fiscal boost. Even the BC Summit, in its 1999 Report, acknowledged that its desired tax cut of $1.5 billion could only recoup one third of its value - the rest would have to paid for by cuts in government spending

It is fashionable to hold up Ontario and Alberta as models of the virtue of tax cuts but such examples confuse cause and effect. In Ontario much of the economic growth in the past years has been due to the U.S. expansion. In Alberta, low taxes were not the cause of its prosperity but rather the consequence of Alberta being uniquely endowed with natural resources, i.e. oil and gas.

Following the Reagan tax cuts in the U.S., they experienced the weakest rate of investment in plants and equipment of any post-World War ll recovery. Meanwhile, investment in the infrastructure, education, public health, and research and development was cut. Reducing marginal tax rates did not stimulate productive, job-creating investment.

In reverse, the Clinton government increased taxes on the wealthy early in its mandate and as we now know, the Clinton tax increases preceded a period of unprecedented economic growth. This is not to say that the tax increase caused the growth, merely that other things are more important than tax rates.