Finance Minister Joe Oliver delivered the Harper government's budget on Tuesday. There were few surprises -- many of the key measures had been announced well before budget day, as the Tories build their platform for the October election. Truth to tell, there was also very little substance, despite the documents running to well over 500 pages.
The Harperites have been insisting since the last election that they would achieve a balanced budget this year, and on the face of it, they seem to have achieved that -- but only just, and only through some accounting trickery. The surplus for the year is expected to be C$ 1.4 billion, compared to a year-ago expectation of $ 6 billion. But even this tiny surplus is only being achieved by booking the profits on the sale of the government's GM shares (taken on as part of the bailout at the height of the financial crisis) and reducing the contingency allowance in the budget from $ 3 billion to $ 1 billion. Those contingencies started to appear in budgets all the way back in the days of Paul Martin's tenure at Finance, two decades ago. The annual amount has always been kept at $ 3 billion, so the fact that Oliver has been compelled to go for a much smaller amount is a significant admission of failure.
Oliver announced before budget day that the government would introduce balanced budget legislation, a remarkable act of chutzpah for a government that's run deficits for seven years in a row. Fiscal projections for the out years show a succession of balanced budgets, but this is only achieved by maintaining the annual contingency at $ 1 billion. The budget leaves the government (or its successor after the election) with almost no wriggle room in the event that revenue growth falls short of expectations -- and there are no more GM shares to be disposed of.
On the personal tax front, the Tories have gone ahead with two previously-announced measures that have been widely condemned as benefiting only the better-off. A so-called family tax credit will allow income splitting between couples, where one of the partners is in a higher tax bracket than the other. If you're a hedge fund manager and your partner is flipping patties at Mickey D's, you'll make out like a bandit; otherwise, not so much.
The Government will also almost double the allowable contribution to tax free savings accounts (TFSAs), to $10,000 per annum. In one sense this seems almost pointless: almost 90 percent of the theoretical maximum capacity for individuals to contribute to TFSAs is unutilized anyway. Needless to say, however, wealthier Canadians will be quick to take advantage of the increased tax shelter. The less well-off can only look on.
There's an interesting sideline here, by the way, and it casts some light on the fecklessness of the Harper government. One argument against increasing the TFSA limits has been that it will hit Federal and provincial tax revenues down the road; interest or dividends earned on any money put into a TFSA is not taxed, and withdrawals from the accounts are also tax-free. Asked about this today, Joe Oliver said that problem should be left to Stephen Harper's grand-daughter to solve! Well, at least we now have confirmation of how far ahead the government can be bothered to think.
As far as measures not previously leaked are concerned, there were plenty of announcements and some grand-sounding numbers, but mostly with one common characteristic: no actual money will start to flow for several years. For example, the government will set up a fund to partner with the private sector in developing transit systems, but the amount is picayune in comparison to what's needed -- never rising to more than $ 1 billion a year -- and there will be no money at all until 2017. A long-anticipated tax cut for small business is included in the budget, but it will be phased in over four years.
It hardly need to be pointed out that promises of spending or tax cuts several years out are essentially meaningless. They're not binding even on this government, let alone any government of a different stripe that might take over after the election. Liberal leader Justin Trudeau has already said he will reverse the TFSA hike if he wins in October. (Note to self: get over to the bank right away!) In a sense, this is just the kind of reaction Harper and Oliver are hoping for. Put all kinds of goodies, real and promised, out there, and defy the opposition to say they'd take them back. There's a lot of visceral dislike for Harper in the land, but if he can persuade enough people to put that aside and vote their pocketbooks, he just might manage to squeak back into office.
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