GLOBE EDITORIAL
This budget was designed to win an election, and it could work
The Globe and Mail
Published Tuesday, Apr. 21 2015
It’s a budget. It’s an electoral agenda. It’s a debate over the nature of government, its proper role and size – a debate the opposition Liberals and NDP need to engage the Conservative government in, rather than shy away from. And, finally, it’s a mishmash of inconsistencies.
Joe Oliver’s budget, a.k.a. Economic Action Plan 2015, aims to leave you with two big takeaways: that revenues and expenditures are, as you may have heard, in balance; and that your tax burden has steadily marched downward, with more to come. Both of these claims are largely true. But the full story is considerably more complicated.
“Canadian families and individuals,” trumpets the budget, “will receive $37-billion in tax relief and increased benefits in 2015-16 as a result of actions taken since 2006.”
These are not, however, across-the-board tax cuts. Some key electoral constituencies benefit more, and others benefit far less.
Once upon a time, small-c conservatives wanted to make the tax code leaner, cleaner and simpler. That’s not exactly what Ottawa’s been up to these past few years.
For example, this budget continues the government’s long-standing focus on seniors. The annual contribution limit for tax free savings accounts (TFSAs) is being nearly doubled, to $10,000 a year, and the government is more than happy to admit that the chief immediate beneficiaries will be seniors, who will henceforth be able to transfer more savings from taxable to tax-free accounts.
Seniors will also benefit from a relaxation of RRIF withdrawal rules. That’s an idea we recommended last month – but as a substitute for raising TFSA limits, not in addition to it. There’s also a new tax credit to help make seniors’ homes more accessible. All of this comes on the heels of a variety of other senior-friendly tax benefits since 2006, from income splitting for seniors, to doubling the pension income seniors can receive tax-free, to increasing the basic income-tax deduction for seniors.
The other targeted group: families with children. The big benefits for them were pre-announced last fall. There’s the Universal Child Care Benefit, which rises from $100 a month to $160 for families with children under the age of 6, and a new $60 a month benefit for families with children aged 6 to 17. There’s the so-called Family Tax Cut, a tax credit of up to $2,000 for couples with children under age 18. There’s an increase in the amount that can be claimed under the Child Care Expense Deduction.
And who can forget the Children’s Fitness Tax Credit? The government has even promised to consider an Adult Fitness Tax Credit, and will strike an “expert panel” to design it. This may be the funniest thing since Ontario’s Beer Ombudsman.
Then there are business taxes. They will be lowered – at least for the favoured small-businesses constituency. Over the next five years, the small-business tax rate will be gradually reduced from 11 per cent to 9 per cent.
Helping to pay for it all, one category of taxes remain far higher than it should: Employment Insurance premiums. These premiums are, basically, a tax on jobs. For years, Ottawa has quietly been taking in several billion dollars more than it pays out. The budget promises a long-term plan to lower premiums – but it doesn’t kick in until 2017.
Which brings us back to the top news story in this budget, promised and anticipated since the last election: It’s in balance. You’ll hear lots of talk about how this involved a bit of mathematical sleight of hand, with a diminished contingency fund making this year’s tiny surplus possible. There’s some truth to that – but in the grand scheme of things, it just doesn’t matter.
Bringing the budget into precise balance, this year, was never an economic agenda. It is a purely political imperative. If the Conservatives had planned to run a small deficit this year, it would have done no economic damage to the country. Indeed, it would have mildly benefited a weak economy. And the budget’s big infrastructure announcement, a plan to chip $1-billion into transit in Canada’s big cities, could have been launched immediately, instead of being put off for more than two years.
But politics demanded balance now. So balance we have, followed by small projected surpluses in the years to come. If the economy does better than expected, those surpluses will grow.
All of which presents opportunities for the opposition in this election year – and big challenges.
The Harper government is making government smaller. But even more importantly, it is changing its shape. It spends less in the traditional manner – through actual outlays of cash on projects and programs – and more through what are known as tax expenditures: targeted tax credits to people, businesses or activities. Many voters rather like this approach. The Liberals and NDP will have to lay out a compelling vision of how to do things differently, or face four more years of Conservative government.