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  • Imagine a Winnipeg...2018 Alternative Municipal Budget June 18, 2018
    Climate change; stagnant global economic growth; political polarization; growing inequality.  Our city finds itself dealing with all these issues, and more at once. The 2018 Alternative Municipal Budget (AMB) is a community response that shows how the city can deal with all these issues and balance the budget.
    Canadian Centre for Policy Alternatives
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    When we think of a “boomtown,” we often imagine a formerly sleepy rural town suddenly awash in wealth and economic expansion. It might surprise some to learn that for many municipalities in oil-producing regions in Saskatchewan, the costs of servicing the oil boom can outweigh the benefits. A Prairie Patchwork: Reliance on Oil Industry Philanthropy […]
    Canadian Centre for Policy Alternatives
  • CCPA's National Office has moved! May 11, 2018
      The week of May 1st, the Canadian Centre for Policy Alternatives' National Office moved to 141 Laurier Ave W, Suite 1000, Ottawa ON, K1P 5J2. Please note that our phone, fax and general e-mail will remain the same: Telephone: 613-563-1341 | Fax: 613-233-1458 | Email: ccpa@policyalternatives.ca  
    Canadian Centre for Policy Alternatives
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    Canada faces some very difficult choices in maintaining energy security while meeting emissions reduction targets.  A new study by veteran earth scientist David Hughes—published through the Corporate Mapping Project, the Canadian Centre for Policy Alternatives and the Parkland Institute—is a comprehensive assessment of Canada’s energy systems in light of the need to maintain energy security and […]
    Canadian Centre for Policy Alternatives
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    The cost of raising a family in British Columbia increased slightly from 2017 to 2018. A $20.91 hourly wage is needed to cover the costs of raising a family in Metro Vancouver, up from $20.61 per hour in 2017 due to soaring housing costs. This is the hourly wage that two working parents with two young children […]
    Canadian Centre for Policy Alternatives
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Erin’s Budget Notes

Excellent analysis by Marc and Andrew leaves me with relatively little to add. The Steelworkers and NDP made many of the same points.

Budget 2008’s minor new investments in public programs will amount to only one-sixth the value of recent corporate tax cuts during the next fiscal year. Budget 2008 (Table 1.1, page 10) proposes $1.4 billion of new spending in 2009-10, whereas the Economic Statement (Table 3.1, page 73) pegged the cost of post-2006 corporate tax cuts at $7.9 billion in that year.

The main new tax break, Tax-Free Savings Accounts, is poor policy for reasons outlined by Andrew and Marc. The budget presented these Accounts as being affordable for the public treasury by projecting their cost for only the first few years, but lucrative for individuals by projecting potential tax savings over two decades of compound interest.

The up-front cost is low because any income contributed is taxable. Tellingly, the C. D. Howe Institute introduced them as “Tax-Prepaid Savings Plans” before the Conservatives promoted them as being “Tax-Free”. However, because the interest will avoid tax as it accumulates and when it is withdrawn, this measure could burn a significant hole in future government revenues.

I like the accelerated capital cost allowance for manufacturing because it is tied to tangible investment in Canada. However, Budget 2008 extended this measure on a “declining basis” rather than continuing it at a straight-line rate. Although the manufacturing crisis has dramatically worsened over the past year, the targeted tax incentive in today’s budget is worth less than the one in last year’s budget.

Through 2013, no-strings-attached corporate tax cuts will cost twenty times as much as both versions of the manufacturing capital cost allowance (CCA) combined. As manufacturers receive the 50% CCA, the oil sands will retain its 100% CCA through 2010.

Finally, CCAs do not help manufacturers that no longer have profits against which to write-off their capital investments. A refundable tax credit would provide a much stronger investment incentive, particularly for manufacturers that have become unprofitable.

Enjoy and share:

Comments

Comment from Andrew Jackson
Time: February 27, 2008, 8:28 am

Erin, I note that spouses can fully share the new tax free accounts – another modest step along the road to the eventual goal of income splitting.

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