Some coverage has suggested that the NDP’s platform costing was based on excessively optimistic projections. The Globe and Mail reported, “Like the Liberals, the NDP is basing its fiscal plan on the Conservative government’s 2008 budget projected surpluses, which are more than six months old and are widely believed to be too rosy in light of the economic slowdown in recent months.”
Using the government’s own fiscal projections focuses the debate on different policy choices, rather than on different forecasting assumptions/methodologies. Furthermore, it is far from clear that these projections are “too rosy”.
Budget 2008 forecast a $2.3-billion surplus for all twelve months of 2008-09. Finance Canada’s most recent Fiscal Monitor indicates that the government ran a $2.9-billion surplus in just the first four months. At that pace, the government would accumulate an $8.7-billion surplus in 2008-09.
A slowing economy during the balance of the fiscal year will presumably lower this amount, but the original $2.3-billion forecast looks fairly safe. Budget 2008 and the NDP platform anticipate an even smaller surplus, $1.3 billion, in 2009-10.
Another suggestion is that deteriorating corporate profits would undercut projected revenues from maintaining a 22.12% corporate tax rate. In particular, Terry Milewski’s CBC “Reality Check” on the NDP platform emphasized this possibility.
The projected cost of the corporate tax cuts, and hence the savings from not implementing them, are from the 2007 Economic Statement. Notwithstanding a slowing economy and panicked stock market, the corporate tax base has expanded substantially since then.
Federal corporate tax revenues were up by 16% in July 2008 (the most recent month available) compared to July 2007. On an annualized basis, pre-tax profits in the second quarter of 2008 were 12% higher than in 2007. In other words, corporate profits could fall some distance from their mid-2008 peak and remain consistent with 2007 expectations.
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- PEF Session at the House of Commons Finance Committee (December 2nd, 2013)
- A Nuclear Error: Uranium Royalty Cuts (December 1st, 2013)
- The NSA Scandal is all about Economics (November 2nd, 2013)
- The Blackberry mess and what Canada needs (September 24th, 2013)