Flaherty poised to shell out tax cuts

There is little likelihood that the Liberals will vote against the mini-budget even though they continually oppose a cut in the GST. The last budget the Conservatives actually raised the lowest tax rate! Maybe they will give that back plus add on a lot more cuts for those already well off and of course those big corporations that always need to be "competitive".
The sales tax is a regressive tax. Economists don't seem to care about that but surely a politician such as Dione should. It makes perfect sense to cut the GST as the Conservatives are doing except that the whole tax cut policy ignores the opportunity costs of spending surplus all on tax cuts. Layton is right in that investment in infrastructure is very important. The conservative ploy however is to cut taxes so as to buy votes. When there are deficits and pressing infrastructure needs can no longer be ignored this is a great opportunity to cut social programmes.

Flaherty poised to shell out tax cuts
Income, corporate and sales taxes on table in mini-budget today

Oct 30, 2007 04:30 AM
Les Whittington
Ottawa Bureau

OTTAWA–Canadians could see hefty income tax breaks announced this afternoon in a federal mini-budget that will capitalize on a rising tide of government cash.

Last-minute planning has been shrouded in secrecy but sources say the government has been preparing to surprise Canadians with personal income tax cuts that would save the average taxpayer about $700 annually.

The government was also weighing when to proceed with its promise to reduce the the goods and services tax by another percentage point, to 5 per cent.

Cuts in corporate taxes have also been in the works in recent weeks as Prime Minister Stephen Harper's government prepared to turn the annual fall economic statement into an actual budget complete with tax measures.

This year's surplus now looks to be headed higher than last year's $13.8 billion figure.

"We certainly feel that Canadians pay too much tax," Flaherty replied yesterday when asked if the government would trim the GST again. The Tories reduced the GST to 6 per cent from 7 per cent in 2006 and have promised a further one percentage-point cut.

Flaherty will roll out the economic package about 4 p.m. today in Ottawa. It comes on the eve of the first anniversary of his still-controversial Halloween decision to phase out income trusts.

Recent plans for tax cuts have been under discussion for weeks at the highest levels of the government. Including tax measures in his announcement would up the political ante because they would be subject to a vote of confidence in the House of Commons within days.

The Liberals are adamantly opposed to another GST cut on the grounds that it does little to boost Canada's long-term economic health. But defeating the government on a confidence vote would force an election that the weakened Liberals want to avoid right now.

It would also allow Harper to campaign late this year on an upbeat platform of attractive tax cuts.

The spring budget is normally when Ottawa unveils tax changes and spending measures. But Harper's minority government – flush with excess cash – appears eager to make good on its oft-repeated promises to reduce the tax burden on individuals and businesses.

Also, a budget that fulfills tax-cut pledges today would help blunt reminders of the broken promise in the 2006 campaign not to impose new taxes on income trusts. The decision ate into the portfolios of millions of investors and alienated many traditional Conservative supporters, some of whom plan to protest on Parliament Hill tomorrow.

Liberal MP Garth Turner (Halton) called the mini-budget's timing "very convenient," and part of a communications strategy.

"People who felt that they lost billions of dollars, collectively, still feel that way a year after Flaherty's income trust move. In fact, the situation has gotten worse for them. They're all a year older and they're just as angry as they were last year."

The Conservatives are under pressure from their core supporters to reduce the amount of cash Canadians send to Ottawa. Despite promising to do that in the last election campaign, Flaherty actually raised the lowest personal income-tax rate by a half percentage point, to 15.5 per cent, in his 2006 budget.

Also, continuing wealth gains among the richest Canadians and soaring corporate profits, particularly in petroleum and financial services, are leaving huge budget surpluses – something the Conservatives branded unacceptable while in opposition.

"I don't think it's any secret that this government is going to want to see further tax reductions," Harper said shortly after announcing that Ottawa collected $13.8 billion more than it spent last year.

But tax breaks – or even promises of tax breaks in next spring's budget – will raise urgent questions about the government's priorities when Canadians are recognizing they face an environmental crisis in global warming and cities are clamouring for help with urban transit and decaying roads and bridges.

NDP Leader Jack Layton said broad-based tax cuts, as promised by the Conservatives in the throne speech, threaten to worsen the income gap "between those who have and those who don't.

"We think that corporate tax cuts to big banks, big oil companies, are the wrong direction for Canada. We need right now to support communities. We need investment in infrastructure. We need assistance in a whole series of areas," Layton said yesterday.

"We have a surplus. It's a golden opportunity to take this kind of action."

Municipal leaders, including Toronto Mayor David Miller, have also called for a greater share of the federal pie to cope with huge bills to repair urban infrastructure.

In a speech in London, Ont., Liberal Leader Stéphane Dion came out strongly against another cut in the GST. He argued that economists agree that cuts to income tax give the economy a bigger boost.

"It seems there is only one person who studied economics that wants to cut the GST. And his name is Stephen Harper," Dion said.

Dion promised that a Liberal government would cut corporate and personal taxes but also do more to eliminate inequities in Canada.

He also said a plan to fight poverty is urgent, citing figures that half a million seniors and more than one million children live below the poverty line.