OTTAWA—The federal government’s fiscal update morphed into a bruising preview of the coming election, with Finance Minister Joe Oliver saying Liberal Leader Justin Trudeau would deprive families of the tax breaks and increased federal support being dangled by the Conservatives.
Oliver expects a $2.9-billion budget deficit this year and a slim, $1.9-billion surplus in 2015. But the latest look at the books showed Ottawa would have been much better off financially if the government had not recently announced a package of tax-and-spending breaks for families. The package will cost Ottawa $4.6 billion a year, with the biggest item being the Family Tax Cut, a form of income-splitting for couples with children.
“This is a policy that anyone who claims to care about the middle class should support,” Oliver told a Toronto business audience Wednesday.
“Yet Justin Trudeau has already announced he would repeal some of our family tax cuts and may repeal the others. Taking money out of the pockets of middle-class and lower-income Canadians does not sound like a winning platform to me.”
The income-splitting plan unveiled by Prime Minister Stephen Harper on Oct. 30 has attracted widespread criticism because it would provide a tax break for only about 15 per cent of households, with the highest benefits going to families with kids where one earner makes a very high income and the other spouse earns a low income or doesn’t work.
Trudeau says the Family Tax Cut is unfair and should be scrapped.
It’s a situation, he said, “where you have middle-class Canadians having worked very hard and sacrificed over many years to get us, as a government, back into a surplus state, and this government is choosing to spend that on 15 per cent of Canadians, among the wealthiest. It’s not fair that 85 per cent get absolutely nothing.”
NDP Leader Tom Mulcair said Wednesday his party will make a stand in Parliament against income-splitting, suggesting the NDP will try to force the government to modify it to help more taxpayers.
“It makes no social sense to have a proposal that would help people pay for their second BMW instead of helping public transit in this country,” Mulcair said.
What to do with looming budget surpluses will feature prominently in the election expected next year.
In the NDP’s most prominent pre-election commitment, Mulcair has pledged to create a national child-care plan at a federal cost of $1.87 billion annually by 2018-19 one hour payday loan.
But the Conservatives, who eliminated a Liberal plan for a national child-care program when they took power in 2006, prefer to give money directly to parents that can be used for daycare costs. The government is increasing what it spends on the Universal Child Care Benefit and the Child Care Expense Deduction.
In an apparent swipe at Mulcair, Oliver said, “We trust Canadians to save and spend their hard-earned money better than all-knowing bureaucrats or social engineers. Granted, there are some people who don’t agree, but that is what elections are about.
In his economic and fiscal update, Oliver noted that the Family Tax Cut and the recently-announced reduction in small business’ Employment Insurance premiums will together cost the government $3.2 billion in 2014. Without those commitments, Ottawa would have eliminated its budget shortfall this year and instead run a $300 million surplus.
Because of the tax cuts and increased support for families, the surplus in 2015 is now forecast at $1.9 billion, well down from the $6.4 billion surplus predicted in the federal budget in February.
The government also said the recent sharp drop in world oil prices is expected to have a negative effect on its revenues and fiscal prospects.
Oliver said Ottawa’s budgetary position will be negatively impacted by $500 million this year and by $2.5 billion a year in the following four years.
Despite the slow world economy, Oliver cites private sector forecasts of modest but steady growth in Canada. The current year is expected to show 2.4 per cent growth, according to the update. Growth is expected to rise to 2.6 per cent next year.
The unemployment rate for 2014 is forecast to come in at 7 per cent, slightly above the 6.8 per cent jobless rate predicted in the 2014 budget in the spring. For next year, the forecast for unemployment is 6.8 per cent.
Reacting to Oliver’s statement that the Conservatives balanced the books without slashing financial transfers to the provinces, Ontario Finance Minister Charles Sousa said the Harper government continues to shortchange the people of Ontario.
“The federal government collects almost $100 billion in taxes from the people of Ontario but shortchanges our province by $11 billion — that gap amounts to $850 for every person in Ontario,” Sousa said.
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