Chapter 4 -- Government in Canada

http://www.vancouversun.com/Sports/Olympic+security+costs+soar+high/1314715/story.html

http://www.vancouversun.com/Sports/Olympic+security+costs+soar+high/1314715/story.html

An Increase in Olympic Security Cost

Summary
An estimation cost of $900 million to provide Olympic security will be spent for 2010 Winter Games in Vancouver. This amount has surpassed all sports venue construction and as well as operating budgets to host the 1988 Winter Olympics in Calgary. Before the games end, the 2010 security bill will likely place an increase in inflation. It includes a future estimation of $175 million with two-thirds approached from Canadian taxpayers. Police officials say that they will do whatever it takes to provide the Olympics safe with security.

Connection
Taxes are imposed in order to provide revenue for government and also to influence economic conditions. The effect of the taxation level has implications for the economy. Canadian taxpayers are placed the burden of paying more money through taxes to makeup the cost of the Olympics. Therefore as a response, inflation –defined as an increase in overall level of prices, will occur as a result to help increase the revenue collected by the government. When price increase, consumers pay in taxes also increase and along with that, an individual’s income will increase as well. In Canada the personal income tax is a progressive tax, as wages and income increase, individuals move into a higher tax brackets and pay a greater percentage of their income in taxes. If wage increase only keep up with inflation, the individual would be worse off than before, since a greater percentage of the individual’s income is now paid in taxes.

Reflection
With the enormous expenses due to the Olympics, the economy will the likely face recession. Under public pressure, I think that indexing would be a good time to come in because it can reduce the high tax amount in the rate of inflation. In order to adjust for price increases, personal exemptions will increase annually in line with inflation. Although, it would benefit the individuals in indexing of personal income, the government will result a loss of revenue. If indexing were removed from the tax system, government tax revenues would increase right along with rising prices. Hopefully, indexing can control the government against the possibility of profiting from high inflation.