February 17, 2006
Mr. Prime Minister, Don’t Raise Taxes!
With cabinet appointments complete, and the move to 24 Sussex done, Prime Minister Harper’s next big task will be to introduce the new government’s first budget. The prime minister has pledged to deliver a budget this spring and there is a chance it may include… gulp … tax increases?
Both major parties, the Liberals and Conservatives talked tax relief during the election campaign. The Liberal tax plan focused on reducing personal income taxes while the Conservatives pledged to cut the GST. Both plans are beneficial to taxpaying Canadians.
In November 2005, then-finance minister Ralph Goodale introduced what was nothing short of a mini-budget. He increased the basic personal exemption (BPE) by $500 (from $8,148 to $8,648), and lowered the bottom personal income tax bracket from 16 per cent to 15 per cent. Both measures kicked in retroactively to January 1st, 2005. Together, they will save all taxpayers earning $35,595 or more $323 a year, starting in 2005. (The BPE change results in a $75 savings and the lower tax rate translates into a $248 savings).
The Conservatives, meanwhile, promised to reduce the GST from its current 7 percent, to 6 percent immediately, and to 5 percent over five years. This measure will right away put $4.5-billion back in the pockets of all Canadians. Of 23-million tax filers in Canada, only 15.5-million actually pay income taxes, so a reduction in the GST will help those who make less than the basic personal exemption. Additionally, the Conservatives announced various targeted tax breaks benefiting trades-people, families, small business owners, seniors, etc. All things considered, both plans give money back to Canadians and any reduction in the high tax burden faced by taxpayers is long overdue.
Yet, to finance their tax cut package (highlighted by the GST reduction) the Conservatives have said they’ll raise the bottom income tax rate back up to 16 percent from 15 percent. They’ll also cancel the $500 increase in the BPE. This increase would kick in for 2006 and not affect the income tax cut granted for 2005. Nonetheless, should Mr. Harper go this route, he will correctly be labeled a tax-hiker, and rightfully incur the wrath of taxpayers.
While cutting the GST is a politically popular move, it does not need to come at the expense of increasing personal income taxes. There is ample room in the federal coffers to afford both measures.
For the last several years, Ottawa has been swimming in excess money. Today’s massive surpluses are the result of one thing: A structural over-taxation levied on Canadians by the federal government. Since Ottawa’s books were first balanced in 1997/98, the average annual surplus has been $7.8-billion.
According to independent forecasts contained in the economic update, Ottawa’s cumulative surpluses – including the annual $3-billion contingency reserve – will total $72.5-billion over the next six years. Conclusion: There is more than enough money to cut the GST and keep the income tax reductions announced in November, intact. Moreover, the economic boost these cuts will spark will – if anything - increase government revenues.
As government coffers have overflowed, Canadians have suffered from high taxes and income stagnation. Studies have shown that over the past twenty-five years after-tax household incomes have increased only 3.8 per cent while federal government revenues have ballooned 372 per cent. To take away the lifeline thrown to taxpayers only a few short months ago, would be a disastrous first step for the new government and a poke in the eye to middle-income Canadians.
For further information contact:
Adam Taylor, Research Director, CTF - Ottawa
Ph: 1-613-234-6554
Mr. Prime Minister, Don’t Raise Taxes!
With cabinet appointments complete, and the move to 24 Sussex done, Prime Minister Harper’s next big task will be to introduce the new government’s first budget. The prime minister has pledged to deliver a budget this spring and there is a chance it may include… gulp … tax increases?
Both major parties, the Liberals and Conservatives talked tax relief during the election campaign. The Liberal tax plan focused on reducing personal income taxes while the Conservatives pledged to cut the GST. Both plans are beneficial to taxpaying Canadians.
In November 2005, then-finance minister Ralph Goodale introduced what was nothing short of a mini-budget. He increased the basic personal exemption (BPE) by $500 (from $8,148 to $8,648), and lowered the bottom personal income tax bracket from 16 per cent to 15 per cent. Both measures kicked in retroactively to January 1st, 2005. Together, they will save all taxpayers earning $35,595 or more $323 a year, starting in 2005. (The BPE change results in a $75 savings and the lower tax rate translates into a $248 savings).
The Conservatives, meanwhile, promised to reduce the GST from its current 7 percent, to 6 percent immediately, and to 5 percent over five years. This measure will right away put $4.5-billion back in the pockets of all Canadians. Of 23-million tax filers in Canada, only 15.5-million actually pay income taxes, so a reduction in the GST will help those who make less than the basic personal exemption. Additionally, the Conservatives announced various targeted tax breaks benefiting trades-people, families, small business owners, seniors, etc. All things considered, both plans give money back to Canadians and any reduction in the high tax burden faced by taxpayers is long overdue.
Yet, to finance their tax cut package (highlighted by the GST reduction) the Conservatives have said they’ll raise the bottom income tax rate back up to 16 percent from 15 percent. They’ll also cancel the $500 increase in the BPE. This increase would kick in for 2006 and not affect the income tax cut granted for 2005. Nonetheless, should Mr. Harper go this route, he will correctly be labeled a tax-hiker, and rightfully incur the wrath of taxpayers.
While cutting the GST is a politically popular move, it does not need to come at the expense of increasing personal income taxes. There is ample room in the federal coffers to afford both measures.
For the last several years, Ottawa has been swimming in excess money. Today’s massive surpluses are the result of one thing: A structural over-taxation levied on Canadians by the federal government. Since Ottawa’s books were first balanced in 1997/98, the average annual surplus has been $7.8-billion.
According to independent forecasts contained in the economic update, Ottawa’s cumulative surpluses – including the annual $3-billion contingency reserve – will total $72.5-billion over the next six years. Conclusion: There is more than enough money to cut the GST and keep the income tax reductions announced in November, intact. Moreover, the economic boost these cuts will spark will – if anything - increase government revenues.
As government coffers have overflowed, Canadians have suffered from high taxes and income stagnation. Studies have shown that over the past twenty-five years after-tax household incomes have increased only 3.8 per cent while federal government revenues have ballooned 372 per cent. To take away the lifeline thrown to taxpayers only a few short months ago, would be a disastrous first step for the new government and a poke in the eye to middle-income Canadians.
For further information contact:
Adam Taylor, Research Director, CTF - Ottawa
Ph: 1-613-234-6554