WAKEFIELD, QUE. - The federal government is promising income tax cuts — and not just for families.
“I’m talking about reducing taxes for Canadian families and individuals,” Finance Minister Joe Oliver said in a preview of the 2015 federal budget.
Prime Minister Stephen Harper has pledged since 2011 to trim income taxes for families with young children by bringing in an income- splitting measure. But sources say the backlash against that narrowly targeted proposal has led the government to rethink its policy and look at other tax breaks for Canadians who don’t qualify to take advantage of income-splitting.
Flush with an estimated $6.4-billion budget surplus, the Harper government plans to use its next budget to dangle tax cuts in front of voters in advance of an election expected in the fall of 2015.
Harper has said the Conservatives will go ahead with income-splitting, which was promised in the last election once the budget was balanced — something that is only happening now. If implemented, income-splitting would allow couples with children under 18 to split up to $50,000 of their income for tax purposes. This would reduce the household’s overall tax bill.
But the proposal, which would cost Ottawa $3 billion annually in foregone revenue, would benefit only about 1.8 million households and be most valuable to those where one spouse stays home while the other brings in above-average income.
The fairness of the plan has been widely questioned, including by former finance minister Jim Flaherty. As a result, the government has been considering other tax breaks that could balance its approach by helping other taxpayers such as single-parent families, individual taxpayers or those with lower incomes, sources say.
Oliver, who met with reporters before a two-day brainstorming session with 16 Canadians from various walks of life, also said the federal government can see why Ontario Premier Kathleen Wynne would ask Ottawa to increase spending on roads, transit and other infrastructure in Ontario to $12 billion a year.
“We understand the importance of dealing with ageing infrastructure and with the need for more infrastructure,” Oliver said. “We understand, for example, in the GTA that traffic congestion is a huge issue.”
But he said it would be irresponsible to meet Wynne’s request for $12 billion annually. If carried out proportionately across the country, that would cost Ottawa $30 billion in infrastructure expenses annually and drive the federal government into a “massive” deficit, he said, adding that Wynne’s request is therefore out of the question. Oliver noted that Ottawa had recently announced $8.2 billion from the gas tax fund for Ontario municipalities.
Asked about the employment picture, Oliver didn’t specifically address the job-creation numbers for July that Statistics Canada announced last week — an estimate the federal agency now says was erroneous.
The Aug. 8 job report said Canada added 200 jobs in July and the unemployment rate declined to 7 per cent. New figures will be released Aug. 15, Statistics Canada said.
But Oliver said that, overall, job-creation has slowed over the past 18 months, mainly because the weaker-than-expected global economic picture has held back Canada’s vital export sector. Although Europe’s economy is for the most part sputtering, he said there is reason to hope a recent uptick in the U.S. economy will spur Canadian export growth and, consequently, prompt more hiring.
Oliver was also asked about a think-tank report saying Canadians are paying 41.8 per cent of their income in taxes. He said Ottawa has reduced the federal tax burden and has urged other levels of government to reduce expenses and taxes.
It’s healthy for Canadians to understand the facts when it comes to taxes so the public can decide what’s fair and necessary, Oliver said. While higher taxes are a concern, the public needs to understand that “things don’t arrive for nothing.”
The 2015 federal budget, besides heralding an end to years of budget deficits under the Conservatives, may also include “prudent” spending and a reduction in the federal government’s total $618-billion debt, Oliver said.
His two days of closed-door pre-budget discussions with business people, economists and others from the private sector — an annual tradition begun by Flaherty — is taking place at a resort in Wakefield, Que., just north of Ottawa.