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Manning and Harris Call for Downsizing of Government; Reduced Taxes and Spending Key to Economic Freedom

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Release Date: November 20, 2006
As Ottawa readies its economic update for release this week, now is the ideal time to move forward on reducing spending, cutting taxes and eliminating provincial trade barriers, Preston Manning and Mike Harris say in a new policy paper released today, Building Prosperity in a Canada Strong and Free.

"The government plays too large a role in the Canadian economy and that's hindering our growth. We call on Canadian governments to cut government's share of the economy to 33 per cent from its current 39 per cent over the next five years. That alone will save Canadian taxpayers almost $400 billion over five years and spur increased prosperity," Manning said.

In addition to the impact of government spending, Manning and Harris, both senior fellows at The Fraser Institute, show in this fourth volume of the Canada Strong and Free series of policy papers how excessive taxation is reducing Canadians' income and transferring economic decision making into the hands of bureaucrats and politicians.

"Canadians don't want government bureaucrats and politicians making economic decisions for them. Let's give the people of this great country more choice and more freedom to make their own decisions. Studies around the world clearly show that families and individuals are better at looking after themselves rather than relying on government," Harris added.

The paper examines how interprovincial trade barriers and excessive regulation of business are creating a drag on the economy and need to be removed. Manning and Harris call for a restoration of balance between the public and private sectors' consumption of national wealth and they recommend a series of proposals to help build Canadian prosperity and economic freedom:

Reduce the size of the government by cutting spending

Canada's public sector is too large in proportion to the wealth-producing private sector and currently consumes 39 per cent of the nation's economy. Manning and Harris point out that research shows the optimal size of government should be one that consumes 20 to 35 per cent of a nation's economy. They suggest Canada's governments should reduce spending until government's share of the economy falls to 33 per cent.

Reduce taxation

Manning and Harris propose a measured program of expenditure reductions that allow fiscally responsible tax reform designed to stimulate economic growth and leave more wealth in the hands of Canadians. Included in their recommendations are reductions in corporate income tax rates, elimination of corporate capital taxes, a move to a single-rate personal income tax, elimination of capital gains taxes, and removal of limits on RRSP and RPP contributions.

Eliminate excessive regulation

Over-regulation imposes heavy costs on consumers and businesses, Manning and Harris note. They say the federal government should follow up on the Smart Regulation Initiative launched in 2005 to harmonize government regulations and eliminate overlap and outdated regulations. They also suggest that any group proposing new regulation be required to provide a detailed cost/benefit analysis.

Eliminate interprovincial trade barriers

Barriers to free trade between provinces cost the Canadian economy billions of dollars per year, Manning and Harris say. But provinces defend these barriers, essentially to protect powerful special interests at the expense of all Canadians, including their own citizens. Manning and Harris propose that all provinces and territories need to accept the principal of an open domestic market and they argue that the federal government needs to use its power to strike down interprovincial trade barriers.

"Our goal is a simple one: to make Canada the very best place on the planet to live. This goal is not overly ambitious. As Canadians we have already accomplished much. Yet the talents of our people and the bounty of our land equip us to do more, to create nothing less than the world's best governed and most prosperous nation, enjoying the highest quality of life," Manning and Harris said.


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