Caledon Institute Budget Commentary

http://www.caledoninst.org/Publications/PDF/622ENG.pdf “There are several positive measures, most notably the Working Income Tax Benefit, the Registered Disability Savings Plan and the proposed changes to the Equalization program.  Other provisions, like the child tax credit, are a large cup of wasteful spending.  The funds could have been far better spent on an increased Canada Child Tax Benefit, additional child care spaces or […]

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The Political Right on Budget 2007

In contrast to my last post, much of the business press and many conservative commentators have characterized Budget 2007 as “big spending” with “no broad-based tax cuts.” These claims reflect two (usually unstated) contentions: that spending should be measured in absolute terms rather than in relation to the economy and that tax credits are not tax cuts. Andrew Coyne is probably the […]

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Budget 2007

Overview Budget 2007 erodes the federal government’s capacity to improve the lives of working people. Tax cuts will benefit profitable corporations without increasing investment in the Canadian economy. The federal government will continue subsidizing oil-sands extraction for nearly a decade. Increased transfers to provincial governments may serve important public purposes, but the Budget’s general thrust is to reduce the proportion […]

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Child-Care Flip: A Flop in the Right Direction?

One problem with the new Conservative child-care transfer appears to be that it would provide less money to provincial governments than the NDP-Liberal plan would have. Another problem is that it may entail even fewer guidelines about how the money is used. Nevertheless, this new approach seems much better than the Conservatives’ previous policy of providing tax cuts to employers. […]

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The High Cost of Low Corporate Taxes

Monday’s federal budget will certainly reaffirm the corporate-tax reductions already scheduled through 2011 and may announce further reductions. Between 2001 and 2004, the federal government reduced its corporate-income-tax rate from 28% to 21% and began phasing out its corporate-capital tax.  It has committed to eliminate the corporate surtax and reduce the corporate-income-tax rate to 18.5% between 2008 and 2011. These latter reductions […]

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Income splitting redux

With a surplus that has swelled in recent months to around $13 billion, the Conservatives may be once again contemplating income splitting for next week’s federal budget. The annual cost is high at $5 billion, but this is a perfect wedge issue for Canada’s New Harperment, reducing the size of government while giving most of the tax benefit to its […]

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Stop cutting taxes and start solving problems

Our politicians are obsessed with tax cuts. The next election will now feature the battle of the tax cuts, with the Canada’s New Harperment pushing for more GST cuts (and who knows what other plans to reduce the size of the federal government) versus Dion’s plan for more personal and corporate income tax cuts. Meanwhile, poverty and homelessness will continue […]

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Tax Expenditures and Evaluations

Yesterday, Finance Canada released “Tax Expenditures and Evaluations 2006.” The tax-expenditure figures confirm Andrew’s suggestion that the partial inclusion of capital gains now costs the federal government about $3 billion per year of forgone personal taxes: the 2006 projection is $3.1 billion. This partial inclusion cost an additional $3.4 billion of forgone corporate taxes that year. By comparison, the research-and-development […]

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A tax benefit for the working poor?

This story in the Star points at (another) re-announcement of the Working Income Tax Benefit (WITB), a Canadian version of the US Earned Income Tax Credit first announced by then-finance minister Ralph Goodale in his economic and fiscal update prior to the last election. In the 2006 federal budget, the Tories announced they were continuing with the WITB, due to […]

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Research and Development

This afternoon, I attended Kenneth McKenzie’s presentation at Industry Canada on “Taxes, R&D and Enterprise Formation.” To a large extent, it was based on his C. D. Howe Institute Commentary. His main message is that governments seeking to promote R&D can “push” by reducing its cost through incentives (i.e. subsidies) or “pull” by increasing its benefit through lower taxes on […]

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Liberal Tory Same Old Story

Former Conservative Garth Turner’s decision to join the Liberal caucus is one of several recent news items that highlight the extensive similarity between these two parties on economic policy. 1.) In response to the Conservative proposal to require that all interest savings from debt repayment be devoted to tax cuts, the former Liberal Finance Minister says, “The fact of the […]

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Unpaid Taxes

One wonders how much the Government of Canada could recover by offering an amnesty to tax evaders who come forward and pay up, followed by a serious effort to identify and prosecute those who do not. The Times December 30, 2006 Mystery billionaire pays $200m in back tax – and keeps a state afloat Chris Ayres in Los Angeles $200m […]

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The “net debt” sleight-of-hand

The Vancouver Sun’s Harvey Enchin comments on Finance Minister Jim Flaherty’s net debt elimination plan, pointing out some nuances in changed accounting practice around the concept of “net debt”:   When Finance Minister Jim Flaherty vowed to wipe out Canada’s net debt by 2021, many people heard something else. They thought he had made a pledge to pay off the […]

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Income Splitting Redux

On October 31, Finance Minister Flaherty announced that pension income could be divided between spouses for tax purposes. More recently, he mused about allowing spouses to divide all income for tax purposes. This latter proposal would benefit an affluent minority at the expense of important public programs and create a disincentive for women to engage in paid employment. Income splitting […]

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An election platform awaiting an election

Once again the Tories opportunistically use for their own gain what should be an honest update to the public about the country’s finances. OK, the Liberals did that too, but that does not make it right. Along with the Economic and Fiscal Update 2006 comes Advantage Canada, the Tories’ blueprint for prosperity. If the metaphor is tennis, this document makes […]

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More Conservative Spending Cuts to Come

A good piece from today’s Toronto Star by CCPA economist Ellen Russell on the erosion of federal fiscal capacity by recent tax cuts. Pressures to cut social spending are growing, compounded by a marked federal government shift to “security expenditure.” It’s a bit harder to figure out the best left response given that itt’s trickier politically to impose a tax […]

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Politics and the “fiscal imbalance”

Having read the electoral tea leaves, Stephen Harper decides to take the “fiscal imbalance” issue off the table, to be replaced, it would appear with the new “green plan”, an issue unmentioned in the Tory platform, but one that they apparently think will get them better milage than the minefield of federal-provincial relations. When Harper first embraced this issue it […]

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Climate change actions

I watched an interesting show on climate change last night. This one was hosted by Avi Lewis as part of The Big Picture series on Newsworld. He had an audience of viewers watch a video by David Attenborough about the challenge of climate change and solutions, then had the last hour for a “town hall” debate that featured interesting folks […]

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Fiscal update and “fiscal imbalance”

Yesterday’s release of the Fiscal Reference Tables also provides data at the provincial level. I reckon that the latest federal surplus of $13.2 billion might start some new cries of “fiscal imbalance” among the provinces in the lead-up to some federal-provincial negotiations this Fall (apart from a wide-ranging discussion paper released at budget time, we still have no real idea […]

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Surprise! Ottawa’s $13 billion surplus

The Annual Financial Report for the Government of Canada, fiscal year 2005/06, was released today, along with the updated Fiscal Reference Tables. Before getting to the numbers, let me rant for a moment on how astonishing it is to see the cover of the Annual Financial Report, freshly downloaded from the Department of Finance, sporting Tory blue, along with the […]

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Who Benefits from Earned Income Tax Credits?

The last federal Liberal Budget promised to introduce a tax credit to supplement the incomes of the working poor, and this commitment was re-iterated in the first Conservative Budget. The recent Toronto-based task force on Modernizing Income Security for Working Age Adults advocated such a supplement, and this widely-publicized proposal has been taken up by several of the leading federal […]

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What’s New on the “Fiscal Imbalance”?

The Institute for Research on Public Policy (IRPP) organized a breakfast forum in Ottawa today (September 12), to launch a special issue of Policy Options on the so-called “fiscal imbalance” issue. A moderately decentralist (France St Hillaire) to distinctly pro province/ right of centre (Tom Courchene and Gilles Paquet) panel of economic experts lamented the collapse of provincial unity around […]

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Cheques in the mail

A few weeks ago, the Canada Revenue Agency sent my family our 2006 Canada Child Tax Benefit (CCTB) paperwork. At the time, what struck me was no mention whatsoever of the new Harper government’s “child care” allowance. This seemed a major omission and I wondered if we would have to fill out some more paperwork to get our $100 a […]

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Demographic apocolypse 2020?

Pierre Fortin, who I usually find to be an interesting economic commentator on public policy issues, makes the case for demographic apocolypse. i used to share that fear, but I’ve done some number crunching on this issue in the BC context (i.e. more seniors than the national average) and am not convinced that the problem is as large as Fortin […]

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Is there a “Fiscal Imbalance”?

 One of the main arguments that there is a fiscal imbalance between the federal government and provincial governments (a vertical fiscal imbalance) is ongoing federal surpluses in the face of more constrained provincial finances. The latest Financial Management System data from Statistics Canada would seem to reinforce that view:  In 2005/2006, the consolidated surplus for all Canadian governments, including the […]

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